Experts: Odds favor Caruso

Just days before a clash between private-property rights and Glendale’s redevelopment power is expected to come to a head over whether to back plans to shutter the Golden Key Hotel on Colorado Street and make it part of the Americana at Brand shopping center, experts say there may not be much of a fight.

Golden Key owner Ray Patel has battled the plan at every step, rejecting Americana at Brand developer Rick Caruso’s $6-million buyout offer and unveiling his own plan to revamp his hotel.

As city leaders prepare for a Tuesday hearing on the dueling proposals, the threat of eminent domain looms over Patel’s inn. The property is in a redevelopment zone the city established nearly 40 years ago.

If in the coming weeks the city decides to go to court to take Patel’s land and turn it over to Caruso, as it did with nearby properties seven years ago, experts say Patel has long odds of successfully challenging the move.

On Friday, city officials recommended Caruso’s expansion plan in a report to the Redevelopment Agency, noting that a larger Americana stands the best chance of improving the downtown area and expanding the city’s retail base.

“It is extremely hard to overcome this if it is already in a redevelopment area,” said Nowland Hong, a land-use attorney who has worked for Los Angeles County. “The powers of redevelopment are pretty encompassing.”

Caruso is proposing to invest up to $50 million to build 135,000 square feet of new retail space on two properties — Patel’s 55-room hotel site and an adjacent vacant building Caruso acquired last month. Caruso would also widen Colorado Street and create a landscaped pedestrian entry at the western edge of what is now a 15.5-acre mixed-use shopping and residential center.

Caruso, who built the Grove in West Los Angeles and several other regional shopping centers, said his plan will generate an estimated $800,000 a year in new sales tax receipts for Glendale. The city estimates it will generate closer to $700,000.

Caruso spokesman Matt Middlebrook said the plan is consistent with the Glendale Redevelopment Agency’s longstanding goals of increasing pedestrian activity, generating new revenues and giving the city’s central core a face lift.

He pointed to the more than $3 million in sales tax revenue generated by the Americana since it opened in 2008, becoming a gathering place and economic linchpin of the city.

“This is an area that [city officials] have been looking at as a center for business, revenue and for turning around downtown. Who has the track record for really improving the area?” Middlebrook said.

Patel’s $2.5-million to $3-million plan calls for building a four-story structure facing Colorado Street, with 14 new guest rooms, a street-level café and a rooftop pool and deck. He would add parking, yet leave his existing buildings intact except for cosmetic changes intended to blend in better with the Americana.

In his proposal, Patel said he believes the upgrade will generate $3 million to $4 million in gross revenue in its first year, which would generate roughly $240,000 in annual net tax revenues, according to a city report.

In 2008, Patel filed a lawsuit against the city and Caruso, claiming that construction of the shopping mall undermined hotel business. The trial is tentatively scheduled for June. Meanwhile, Patel contends he should have the right to stay in business on his own land.

“This is a case of a billionaire and a few city council members taking from the small guy to give to the big billionaire,” Patel said.

Patel has found support from organizations outside of Glendale, including the National Federation of Independent Business, which has written a letter on his behalf, and the libertarian legal advocacy group the Institute for Justice.

The city has set the hearing for reviewing the competing proposals for 9 a.m. Tuesday in City Council Chambers.

Experts say the odds favor Caruso.

Hong, the eminent domain attorney, said the city has a legitimate interest in gaining the greatest tax benefit, but said there is often a “political dimension” to land-use decisions because the political and economic might of developers often come together.

“That’s not to say that it is wrong,” Hong said. “That’s the fact of life.”

The Americana gave Councilman Dave Weaver $17,500 of the $61,500 in campaign contributions he collected in the first half of 2007. The Caruso Family Foundation also donated $2,500 to Glendale Mayor Ara Najarian’s campaign in 2008, according to city campaign records.

Patel’s Golden Key Hotel gave Weaver $201 in 2004, according to city records.

Caruso and the city first began to work together a decade ago, when the city chose his Americana project for redevelopment of what was then called the Town Center site. The city spent more than $77 million to acquire underutilized properties and then turned them over to Caruso for the Americana.

In his expansion proposal, Caruso touts the economic impact and buzz the Americana has created for the city, noting everything from tax revenues to the sponsorship of a free trolley running a downtown Glendale route.

Arnold Graham, an eminent domain attorney in Glendale who like Hong is not involved in the dispute, said cities have the high cards in cases where eminent domain is a possibility.

Judges often grant cities the right to take a disputed property at the outset of an eminent domain dispute, effectively eliminating a source of revenue for embattled business owners.

Even if the property owner wins, he said, the redevelopment agency can often start anew, fix any procedural errors it made and prevail after years of fighting.

“If you get a victory at all, it may be a Pyrrhic victory,” Graham said.