Laguna Beach to recover all of its costs related to processing a slew of major developments

Laguna Beach City Council
The Laguna Beach City Council voted Tuesday to charge the Laguna Beach Co. for 100% of city costs related to processing the real estate investment firm’s proposed developments.
(Faith E. Pinho)

Processing a real estate investment company’s proposal to bring millions of dollars worth of new development to Laguna Beach won’t cost the city a penny following a unanimous council vote Tuesday.

The City Council decided to institute a special fee so that the Laguna Beach Co., which recently announced plans for six major local developments, will cover 100% of city costs related to the projects.

Recently raised building and development fees cover 70% to 75% of the city’s costs for large projects, according to City Manager John Pietig. Tuesday’s vote adds another 25% “cost recovery fee” on top of that for the Laguna Beach Co. proposals.

“We want to recover 100% of our costs on this,” said Mayor Bob Whalen. “I think that’s a legitimate concern and something we should do.”

Out of all its projects, Laguna Beach Co. has so far prioritized restoring the historic Hotel Laguna on the corner of South Coast Highway and Laguna Avenue. That proposal also entails redoing several other buildings on Coast Highway between Laguna Avenue and Legion Street.

Other company-pitched projects include replacing the Holiday Inn on the corner of Cleo Street and South Coast Highway with the Cleo Hotel, developing a boutique hotel and retail and gallery space along North Coast Highway between Jasmine Street and Cliff Drive, reconfiguring the Hive property on Laguna Canyon Road and developing housing on an empty lot at the corner of Laguna Canyon and Canyon Acres Drive.

All those projects are still in the initial concept review stage, according to the company. So far, the city has only received conceptual plans for the Museum Hotel and Cleo Hotel projects.

Tuesday’s decision is the latest move by the city aimed at ensuring it receives maximum benefit from the Laguna Beach Co. and its owner, Mo Honarkar. In April, the council approved forming an ad hoc committee to negotiate possible public benefits while analyzing the company’s projects.

The vote also prompted a discussion about measuring city staff time, since Pietig mentioned an alternative to the additional cost recovery fee would be to bill the Laguna Beach Co. for all staff hours devoted to the projects. However, Pietig said the city has no system to track and bill those hours and it would be more expensive to set that up than to implement the fee.

Several council members responded that it is common practice in many industries for employees to track their hours and activities.

“I’ve been doing it for 40 years,” said Mayor Pro Tem Steve Dicterow. “It’s just good to have knowledge on what people are working on.”

Councilwoman Toni Iseman said the city is heading into “unchartered territory” with so many large-scale developments proposed at once, and billing hours would be a sensible way to ensure a fair process.

“One thing we don’t want to do is have staff be so consumed by these massive projects that other people who are waiting in line patiently don’t get their stuff done,” she said. “They shouldn’t have to go to the back of the line. We should be able to multitask on this.”

The council directed city staff to study the matter further and bring back suggestions at a later date.

Other business

Dicterow’s proposal for the council to conduct all appeals of Design Review Board decisions as de novo hearings — without taking into consideration earlier action by other governing bodies — died without support from his colleagues.

Instead, the council unanimously approved a compromise. When taking up an appeal of a close DRB vote, one where only three of the five-member panel supported the decision in question, the council will review the case de novo. If four or more DRB members are on board with a decision, then the council will review the case on a substantial evidence standard, as is its current practice.

The council also directed staff to move ahead with drafting plans to further streamline the often-contentious design review process and return with more concrete changes in coming weeks.

Earlier Tuesday afternoon, the council and DRB met to share other suggestions for improving the review process, such as having an attorney representing the city present at some especially contentious meetings.

Councilwoman Sue Kempf emphasized that the goal is to clean up the entire process from start to finish.

“When you look at something, the process, you look at it from end to end,” she said. “I think that’s what happening now, but it’s not an indictment on [the] board.”