Treasure Seekers

Long before residents were evicted and mobile homes were abandoned in favor of more grandiose plans, Lucy and Desi found Treasure Island.

America’s first sitcom couple filmed their 1954 movie, “The Long, Long Trailer,” inside the white and green coach parked on spot 113 of the South Laguna mobile home park.

The trailer, like the rest of Treasure Island, is empty now. The ice plants, bougainvillea vines and hibiscus hedges are the only other remnants of life on the park’s 30 acres, which have been shuttered for about six months.

But the property’s western edge reveals what enchanted Hollywood: a stretch of coastline that is described only with superlatives.

“You’d be hard-pressed to find a better-looking site in Southern California,” said John E. Montgomery, the assistant director of community development in Laguna Beach. “It’s breathtaking.”

Hollywood used the panoramic ocean views to film movies for decades, including the 1937 version of Robert Louis Stevenson’s classic book that gave the mobile home park its name. Now, Wall Street is charmed by Treasure Island.

Merrill Lynch Hubbard Inc., the New York investment firm’s real estate subsidiary that bought the mobile home park in 1989, wants to transform it into a $100-million luxury resort with a five-star hotel and villas, and million-dollar home sites.

The Laguna Beach Planning Commission is reviewing the proposal, and the City Council is expected to vote on it within weeks.

Although the project would add about $1.8 million annually to the city’s $20-million general fund, it isn’t gliding through the approval process. City officials have leaned on Merrill Lynch to increase the resort’s size and reduce the number of homes. Even after several years of wrangling, some council members said recently that the potential tax windfall won’t sway them.

“We support a project,” Council member Wayne Peterson said. “Whether it’s this one, we’ll see.”

Environmental groups and other opponents charge that the resort is too dense and too commercial for the postcard setting.

About 10 acres of the site would be used for the resort, which would include a 100-room hotel and 25 villas. The privately owned villas would be rented as additional hotel rooms when the owners were away. Other parts of the resort open to the public would include a restaurant, bar, spa, banquet rooms and a bluff-top park. The likely hotel operator is Dallas-based Rosewood Hotels and Resorts, which runs The Mansion on Turtle Creek in Dallas and The Lanesborough in London, among eight other luxury hotels.

The remaining 10 acres of development space is allocated to 37 lots, some of them on the bluff with prime views.

Another luxury oceanfront resort is under consideration just a few miles north, at Crystal Cove State Park, between Laguna Beach and Newport Beach. A group of shoreline cottages, some of which were built in the 1920s and ‘30s, would be refurbished and rented for overnight stays for as much as $400 a night.

State parks officials recently signed a 60-year lease with a private developer, but the project still needs environmental approvals.

The history of Treasure Island’s redevelopment, meanwhile, resembles a Hollywood-style drama.

Residents of the mobile home park battled bitterly with the city for three years over relocation benefits. In 1994, the City Council authorized an average of $130,000 for 60 coach owners. Merrill Lynch sued, claiming the benefits exaggerated the value of the trailers. The court sided with the company, and the next set of council members sliced the benefits to a minimum of $20,000, although many coach owners received far more.

By August 1997, most of the close-knit group of tenants were gone.

The original proposal foresaw a gated, high-priced housing development, which was rejected by the city, residents and the California Coastal Commission. The city pushed for a hotel because of its revenue potential and because it wouldn’t tax other city services, such as schools.

“We appreciate that [houses] provide economic return for the development, but it has no real benefit to the public,” City Manager Kenneth C. Frank said.

With hotel room rates estimated at $300 a night and the city’s bed tax at 10%, Laguna Beach could collect nearly $1.5 million a year from Treasure Island, and more if occupancy rates climb above 75%.

Some of the project’s details remain unacceptable to a few city officials and elected leaders. They would like to see the hotel built before the houses, and additional acres of the site reserved for the resort.

And some council members are concerned that a developer has not been selected for the project. Once Merrill Lynch sells the project to a development firm, it might want to change the plan that city officials have spent years finessing.

“That is a major bone of contention for all the council members,” Mayor Steve Dicterow said. “I don’t want to do this dance again.”

Jack Cuneo, the chairman and chief executive officer of Merrill Lynch Hubbard, said he will select and announce a development firm before the council’s Feb. 10 meeting.

These issues are more than details to Paul Freeman, the council member who has shown the most interest in shaping the resort. Last March, when Freeman was mayor, he and Frank, the city manager, flew to New York to urge Cuneo and others at Merrill Lynch to scale back the residential portion of the project, among other issues. At that time, 268 homes were being pitched by the property owner.

Freeman said he is interested in Treasure Island’s potential to make money for the city and enhance its reputation.

“We don’t have a truly world-class destination, even though we truly are a world-class destination,” he said.

There are other concerns. Some residents of the Blue Lagoon townhouses at Treasure Island’s northern border would lose their ocean views. And representatives of the Village Laguna environmental group and the South Laguna Civic Assn. want the redevelopment to take advantage of the seaside setting by including an arboretum and conference center. But that would not generate nearly as much tax revenue as a resort.

Backing them is Robert Gentry, a former mayor and council member, whose criticism was applauded at a public hearing on Tuesday.

“Every council leaves a legacy,” Gentry said. “If you want to be the development council, then by all means proceed full speed ahead.”

The council will not have the final say. The Coastal Commission, which also must approve the project, could hear Treasure Island’s application as early as April, but more likely in June, officials said.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Resort Planning

The Laguna Beach City Council is considering construction of a five-star resort with hotel and villas, alongside new million-dollar homes. Plans for Treasure Island include:

1. Public access to beach

2. 37 homes

3. Bluff-top park

4. 25 resort villas

5. 100-room hotel

Treasure Trove

Some fast facts on the development:

* 30 acres set aside for project with 21 acres used for development

* Resort on about 10 acres, houses on another 10 acres, another acre for bluff-top park

* 37 lots for single-family homes

* Hotel room rates estimated at $300; villa rates will be higher

* Public amenities include spa, restaurant, bar, banquet rooms and park

* Tax revenue to the city is estimated at $1.8 million a year, including close to $1.5 million from bed taxes

Source: City of Laguna Beach; Researched by LIZ SEYMOUR/For The Times