NEWS ANALYSIS : Anti-Development Message Is Clear : Santa Monica: Voters thwarted projects that the city had solicited. Developers are expected to shy away from future ventures.

The developers have gotten the message.

In the past 10 months, Santa Monica and its residents have pulled the rug out from under two high-profile commercial projects in which developers had already invested more than $7 million.

In both cases, the developers had been invited by the city to build the projects on parcels of public land and were given reason to expect clear sailing through the city approval process.

“People will think long and hard before they get involved in attempting projects in Santa Monica,” said Henry A. Lambert, president of Reliance Development Corp., the New York company whose earlier approval for a large office complex at Santa Monica Municipal Airport was revoked by the City Council early this year. The council reversed its course after residents opposed to the project had gathered enough petition signatures to force a referendum on the project.

“I don’t know who is going to step up to the plate, given the city’s track record of the last few years. It would be suicide,” said a source who was involved with the second rejected project, restaurateur Michael McCarty’s proposed $65-million beach hotel. That project’s fate was sealed on Election Day, when voters strongly supported Proposition Z, thereby repealing tentative approval already granted by the City Council.

The anti-development activists who fought the projects say that bringing development to such a screeching halt is exactly what is needed. And, exhilarated by their success of the last 10 months, they are turning to what they say is the next big fight: a proposed major expansion by the RAND Corp.

The renowned nonprofit research firm, which has been based in Santa Monica since its founding in 1946, has tentative plans to nearly triple the size of its complex, which is right across from City Hall on Main Street.

RAND representatives and city officials have already negotiated extensively, because RAND’s expansion is regarded as a key component of a master plan for the entire Civic Center district, which stretches from Colorado Avenue south to Pico Boulevard, and from Ocean Avenue east to 4th Street. In addition to RAND, the district encompasses City Hall, a county courthouse and the city’s Civic Auditorium.

The city has set up a citizen advisory group to help prepare the master blueprint for development, and some of the advisers are bracing for a fight.

“I told our members that if they thought the McCarty hotel project was a war, the controversy over the RAND site will make that look like a street-corner brawl,” said panel member Merritt Coleman, who says he opposes such a large project unless the city can come up with a way to deal with the increase in traffic and other impacts.

Several prominent members of the city’s slow-growth coalition also made clear at a news conference shortly after the election that they expect RAND to be the next major battlefront in the development war.

“It is completely inappropriate, without master-planning the whole Civic Center area, to even consider what they are proposing,” activist and unsuccessful City Council candidate Sharon Gilpin said of RAND.

Noting that several large-scale development projects approved by the city have not yet been completed, Gilpin said the last thing Santa Monica needs is more office space or retail shops such as RAND proposes.

Until recently, Santa Monica has been a mecca for commercial developers because of its receptiveness to big projects and its unbeatable locale--on the beach in the heart of an affluent market, with good freeway access to Los Angeles International Airport, downtown Los Angeles, Beverly Hills and Century City.

The prevailing view among city officials was that commercial development, if accompanied by stiff development fees, was a fairly painless way to finance the city’s ambitious array of social service programs.

But no more. If there were any lingering doubts, the election put an end to them. The anti-development message contained in the strong votes for Proposition S, banning nearly all commercial development on or near the beach, and Proposition Z, killing the McCarty hotel, was unmistakable.

Councilman Kenneth Genser, an outspoken anti-growth activist, said the passage of the two propositions amounted to a direct attack on the “cozy relationship between developers and politicians.”

About the only form of new development likely to find favor with the anti-development coalition, Gilpin said, are projects that will create affordable housing.

But others say that by putting the brakes on development, voters and slow-growth advocates may be inadvertently shutting down the engine that has made the city hum.

“I believe this city needs to have a healthy business sector to continue to provide the high level of services our citizens demand,” said Christine E. Reed, a veteran City Council member who lost her bid for reelection, in part because of attacks that branded her as being too pro-development.

Reed, reached by telephone while traveling in Europe this week, said that commercial, industrial and other business enterprises account for two-thirds of the city’s revenues.

“I think they are being unrealistic,” Reed said of those calling for a halt to all new projects. “To stop every bit of development, the city will stagnate.”

If the city forgoes development revenues, Mayor Dennis Zane said, it will be forced to either find new sources of revenue--presumably by increasing fees and taxes--or cut services.

“It doesn’t take a rocket scientist to see that we can either do less and spend less, or do more, spend more, and figure out where the money will come from,” said Zane, who in recent years has supported some development projects and voted against others.

Gilpin, a leader of the efforts to defeat the airport and hotel projects, said the city will get more than enough revenues in upcoming years from the many commercial projects that have yet to be finished.

Some developers and political observers interviewed since the Nov. 6 election predict that even if the city decides it needs more development revenues, it will be years before any developer in his right mind will venture into Santa Monica.

“As a developer, (the election result) tells you not to buy any property in that city, which is exactly what they wanted,” said Jerome H. Snyder, developer of the massive Water Gardens project, a 1.3-million-square-foot commercial complex now under construction at Olympic and Cloverfield boulevards.

Other developers got the picture as well.

“I think that the city of Santa Monica will have a hard time getting anyone to respond for an RFP (request for proposal) on their property,” said one developer, who requested anonymity. “I don’t think anybody out there is buying property in Santa Monica and considering going through the City Hall approval process.”

Some developers and city officials said the city also needs to take a serious look at the way it deals with developers, to ensure that Reliance and McCarty are the last two developers to feel as if they had been left at the altar by a fickle bride.

“I never heard of anything like this before,” said Reliance President Lambert. “People being asked to submit projects at the request of the City Council over a period of years and then have the voters have a metamorphosis and reject the result.

“We spent $4.5 million and Mr. McCarty spent more than $3 million pursuing projects we were asked to develop by the city,” Lambert added. “We were financially done a tremendous disservice.”

McCarty has refused to comment on the election or his loss. His aides say that he is dismayed at not having been forewarned by city officials of the obstacles that he encountered.

There are several wild cards in Santa Monica’s development future, including who the new council will choose as mayor and what the three new members elected to the City Council will do.

Although one of the new members, Kelly Olsen, has been an outspoken slow-growth advocate, the others--Robert Holbrook and Tony Vazquez--managed to avoid taking a position on the issue during the election campaign. The new council will meet for the first time on Tuesday.

Zane had said earlier that he planned to step down, but this week said he is considering seeking a second term.

“Development issues are a central question in my considerations,” Zane said. “There is a desire to have people with experience in growth-management issues in a leadership role.”

But in any event, Zane said, the next two years will be “largely a policy period,” in which city officials will do a lot of thinking about how to regulate commercial growth in the future and promote residential growth.

To that end, one of the first things the city Planning Commission did after the election was to propose that the moratorium on applications for new commercial developments that took effect 18 months ago be extended for another 18 months. The City Council, which must approve such a moratorium, has not yet placed the proposal on its agenda.

Moratorium or not, Zane and Genser predicted that Santa Monica officials will be attempting to assess the impact of the projects they already have approved, down-zone some commercial areas to reduce the allowable density and completely rezone other commercial areas to permit a mix of residential and other uses.

Zane said the RAND project could epitomize the city’s dilemma regarding its desire to halt development and its reliance on revenues the developers bring.

Zane, who strongly supported the Reliance airport project but voted against the beach hotel, says he opposes RAND’s current development proposal.

RAND wants to add 200,000 square feet of office space to its existing 300,000 square feet, as well as build 300,000 square feet of commercial space and the same amount of residential space for 350 rental apartment units.

The RAND project has met with opposition from several fronts, even though the current plan already has a smaller commercial component and contains many more apartments than RAND had initially envisioned.

Coleman, who represents the Mid-City Neighbors group on the Civic Center Advisory Committee, said the election results have strengthened the resolve of those who want RAND to mitigate traffic and environmental impacts, and build even more residential housing.

Some have given RAND good marks for cooperation, and RAND has pledged to be as receptive as possible, particularly in light of the anti-development sentiment. RAND officials stress that the plans are informal until the city releases a preliminary environmental impact report in January.

“We continue to believe that the public participation process already under way will produce a plan that is sensitive to the needs of both the community and RAND,” said RAND spokeswoman Iao Katagiri.

Despite some concerns that it may move if it does not get its way, Katagiri said RAND wants to stay in Santa Monica. It is an ideal location, she said, and many employees have longtime ties to the area.

But Katagiri, also a member of the advisory committee, refused to rule out the possibility of a move if its expansion needs cannot be met by Santa Monica.

“Obviously, in the future we have to look at what our needs are,” Katagiri said. “Moving is not an option at this point--we really do believe the city wants us to stay and will accommodate our needs while looking out for the city as a whole.

“It will take a lot of work and a lot of good will,” she said, “but I think it is possible.”