Until last week, I did not realize the extent to which it’s possible to tell the truth while at the same time mislead the public and the press. However, as a Pacific Grove resident following the city’s handling of Project Bella issues, I got a good lesson in omitting material facts during the hearing in which the City Council decided not to pursue reimbursement of costs from Project Bella’s developer.
Project Bella is the upscale hotel proposed to replace the current American Tin Cannery and parking lot — ATC for short — a block from the aquarium. The 4.88-acre parcel was to become a 160-suite “world-class destination and innovative leader in conservation and sustainability,” with “state-of-the art design recycling vast amounts of water and energy,” including a “museum celebrating Pacific Grove’s extraordinary culture,” and providing “three hundred permanent high quality hotel jobs.” At least, that’s what the official Voter Guide said last spring in its “Argument In Favor of Measure X,” signed by two past mayors and the current PG mayor. Along with others who voted for Measure X, I was enthusiastic about this project and the revenue it would generate.
On April 19, 2016, PG residents voted 3,016 to 2,111 for Measure X, thereby rezoning the ATC property to allow hotel use. A city-commissioned fiscal report estimates an additional $3 million to $4 million revenue annually to city coffers. The ATC site is owned by an entity related to the Cannery Row Co. and is under an option to be leased for 99 years to a limited liability company with “Domaine” as part of its name.
The obfuscation begins with three limited liability companies (LLC), each with “Domaine” as part of their name.
- Domaine Hospitality Partners, LLC, is the Delaware company that proposed Project Bella and which sponsors the fancy Project Bella website. Domaine Hospitality Partners enchanted me, others, and the City Council with its promises for an upscale hotel. On February 17, 2016, the City Council voted unanimously to authorize the city manager to negotiate a master reimbursement agreement with Domaine Hospitality Partners, LLC to cover the city’s cost for more consultants, to accelerate completion of the city’s Local Coastal Plan (hereafter “the February agreement”). The February agreement was authorized but never signed.
- Domaine Pacific Grove, LLC, is also a Delaware company, reportedly owned by Domaine Hospitality Partners, LLC. Domaine Pacific Grove, LLC signed a reimbursement agreement with the city in June (hereafter “the June agreement”) but the City Council never authorized it and the only way to get a copy is to make a public records request. The June agreement differs from the February agreement in two material ways: [a] it does not require Domaine to pay for LCP acceleration costs, and [b] it is an agreement with Domaine Pacific Grove, LLC, instead of Domaine Hospitality Partners, LLC.
- Domaine Hospitality Partners, LLC is a recently formed California company. Except for having the same name, it appears unrelated to the Delaware Domaine Hospitality Partners, LLC and irrelevant to ongoing Project Bella issues.
Now let’s look at “omitting material facts.” The City Council agenda report for Feb. 1, 2017 states: “While City staff twice amended its agreement with EMC Planning [a private land use planning consulting business] to reflect the additional professional services required for the LCP effort, a reimbursement agreement for LCP costs was never reached with Domaine Hospitality.” That’s completely true. What the agenda report doesn’t disclose is that PG’s mayor signed the June agreement instead of the February agreement, although the City Council never authorized him to do so. The February agreement was authorized by the City Council, was with Domaine Hospitality Partners, LLC, and would have required Domaine to reimburse the city for LCP acceleration costs.
The June agreement was not authorized by the City Council, does not require reimbursement of LCP acceleration costs, and is with Domaine Pacific Grove, LLC. Because only the June agreement got signed, the agenda report can accurately state, “a reimbursement agreement for LCP costs was never reached with Domaine Hospitality.” Accurate, but omitting significant material facts.
The Feb. 1 agenda report recommends the council “direct staff not to pursue reimbursement from Domaine Hospitality for costs associated with the Local Coastal Plan.” Four reasons are given:
- “A reimbursement agreement for LCP costs was never reached with Domaine Hospitality.” As discussed above, this reason for not pursuing costs is misleading because the unauthorized June agreement was substituted for the authorized February agreement. The June agreement omitted the reimbursement requirement, and it was an agreement with Domaine Pacific Grove instead of Domaine Hospitality.
- Public policy: “Consideration should be given to the prudence of accepting 3rd-party contributions, particularly those from project applicants, to fund City efforts that create regulatory review policies/procedures such as the LCP.” This public policy reason for not pursuing reimbursement is contradicted by the February 17, 2016, agenda report, which states: “The proposed agreement is structured to ensure City independence throughout the effort, as the City alone decides on the scope of activities to be undertaken and the discretion to be exercised. The City shall be reimbursed for its effort, but has not delegated or impaired its judgment.” Last week’s agenda report does not explain why pursuing reimbursement from the project applicant didn’t pose a public policy issue in February 2016, but now it does.
- Consultant EMC did not accelerate the LCP and therefore should not be compensated for acceleration. The agenda report itself seems to contradict that rationale by stating the work EMC did in 2016 “would have occurred over a longer period of time spreading the expense over two fiscal years.” Consultant work that would otherwise take two years is clearly “accelerated” if completed in a few months. Moreover, the city paid EMC $163,000 for acceleration costs. This rationale for not seeking reimbursement is illogical.
- “A project application for Project Bella has not been submitted to the City.” That statement is true only if it refers to a “complete” project application. An incomplete project application was submitted in 2015. The city sent Domaine Pacific Grove, LLC a notice of incomplete application dated November 9, 2015. It informs Domaine that if the city “does not receive revised plans within 180 days from the date of this letter, the project will be considered withdrawn.” The language used, “will be considered withdrawn,” is mandatory language under legal construction theories. No revised plans were submitted, so the city deemed the project withdrawn in May 2016 (180 days after November 9). Therefore, it appears the June agreement was moot when signed.
Next, let’s look at implications for the city of Pacific Grove. Domaine Hospitality, Partners, LLC, the Delaware company, is said to hold the option for a 99-year lease on the ATC site. However, because it is not registered to do business in California, the city needs legal review to determine whether Domaine’s option for the 99-year lease is valid. If it’s not, Cannery Row or whoever owns the site and granted the lease, by virtue of Measure X passing, now enjoys a great increase in its commercial value. It can be leased to any hotel developer. We have no guarantee at all of a LEED Platinum hotel or even one in good taste.
There is also the matter of fairness to PG voters. City leaders signed the Voter Guide argument for Measure X describing a “world-class destination and innovative leader in conservation and sustainability.” It’s not the city leaders’ fault that such a project now seems unlikely, but I think voters should be given a second chance to vote now that the rezoning could result in a very different type of hotel. The voters could force a new election by gathering a sufficient number of signatures. Measure X was put on the ballot with 1,326 signatures. A subsequent ballot measure will require a similar number of signatures.
Last week’s 7-0 vote by the Pacific Grove City Council to accept the city manager’s recommendation “not to pursue reimbursement from Domaine Hospitality for costs associated with the Local Coastal Plan” makes no sense to me. It eliminates any possibility the city might recover those costs through future negotiation, even though it can’t recover the costs through the June agreement. More basically, the motion was not to pursue reimbursement from “Domaine Hospitality.” The costs were incurred for Domaine Pacific Grove, LLC, which is the applicant for Project Bella, not Domaine Hospitality
I believe all seven Pacific Grove City Council members are honest and none expects to benefit financially from the city paying $163,000 of public funds for expenses the public was told would be reimbursed by Domaine. However, it appears to me that city leaders are not getting accurate direction and advice from the city attorney. With the confusion over which entity the city has been dealing with, the altered and unauthorized June agreement that the mayor signed (with the city attorney’s approval for form), and the circumstances that have changed since the voters approved the rezoning, I recommend the city retain independent legal counsel. We need to sort out the various Domaine entities, the status of the lease on the now rezoned ATC parcel, the city’s obligation to voters who were misled, and ways to remedy the situation the city now finds itself in.
Jane Haines is a retired lawyer who lives in Pacific Grove.