SR-410-006 (6)
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JAN 1 2 1986
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Santa Monica, California
C/ED:CPD:DKW:JWR
Council Meeting: January 12, 1988
TO: Mayor and City Council
FROM: city staff
SUBJECT: Recommendation to Authorize Staff to Enter Into
Agreement to Apply Letter of Credit Towards Development
of Youth Hostel Facility
INTRODUCTION
Consistent with City Council conditions of approval in 1985 for
the 1700 Ocean Avenue hotel project, this report recommends that
the Council authorize the city Manager to negotiate and execute
an agreement with American Youth Hostels, Inc. to apply the
hotel developer's letter of credit towards the development of an
already-approved hostel facility at 1438 Second street.
BACKGROUND
In 1985 the City approved a new hotel proj ect at 1700 Ocean
Avenue that would replace an existing 97-room motel.
The new
hotel facility is currently under construction.
In order to
ITa tigate the potentially adverse impact on the availabil i ty of
affordable overnight visitor accommodations in the City's Coastal
Zone caused by the loss of the then-existing motel, the Cl ty
Council required the hotel developer to enter into a contract to
provide the City with a letter of credit for $500,000 to be
applied toward the construction of a youth hostel facility (see
Exhibit 1).
This hostel facility was requlred to meet Amerlcan
Youth Hostel, Inc. Superior Grade Standards or similar standards.
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According to the contract between the City and the hotel
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developer, the use of these funds is specifically restricted to
youth hostel or similar facilities. The city may not use these
funds for other activities or other types of housing projects,
since, as reflected in the contract between the developer and the
City, it was the intent of the Council in approving the hotel
project that affordable overnight visitor accomodations be
provided to replace the motel formerly on the 1700 Ocean Avenue
site. The youth hostel facility meets this criterion.
On August 31, 1987, staff issued a Request for Qualifications
(RFQ) from organizations with the relevant experience and
financial resources to develop a youth hostel facility (Exhibit
2). The city received one proposal in response to the RFQ from
American Youth Hostels, Inc.
EVALUATION OF THE PROPOSAL
The proposal submitted by American Youth Hostels, Inc., meets all
the requirements set forth in the RFQ. The project matches all
the physical and operational standards for Superior Grade Hostels
outl ined in Attachment A to Exhib it 1: and, it will provide
inexpensive overnight lodging at an estimated rate of $11 per
night.
As required by the RFQ, American Youth Hostels, Inc., possesses
considerable experience in developing and managing hostel
facilities.
The project principals have equally extensive
experience in developing and managing youth hostels.
American
Youth Hostels, Inc. owns the proposed site at 1438 Second street.
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Both the Planning commission ?nd ~he city council have approved
the Development Review application for the hostel project, and
the California Coastal Commission has also approved the project.
In addition to the letter of credit, other funding sources for
the proj ect include a confirmed California Coastal Commission
grant ($730,000) as well as a confirmed California Conservancy
Loan ($300,000); a commercial loan
($2,160,000) ;
and,
an
anticipated sum of $500,000 from a national fund-raising drive.
The total project cost, including property acquisition, would be
$4,190,000.
Approval in concept for the project by the Santa Monica
Architectural Review Board and Santa Monica Landmarks Commission
has been obtained; final approval of construction details by
these two entities as well as a building permit are pending.
The hostel developer anticipates that construction will begin by
the spring of 1988 and that the hostel will open for use by the
spring of 1989.
The attached copy of American Youth Hostel, Inc.'s proposal (see
exhibi t 3) contains architectural renderings of the proposed
hostel facility.
This report makes the recommendation that the city council
authorize the City Manager to negotiate and execute an agreement
wi th American Youth Hostels which provides that the letter of
credit funds be utilized towards development of the youth hostel
facility at 1438 2nd street.
This agreement would include
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specific provisions protecting .the City's
interests,
and
restricting use of the funds solely to the hostel project.
This proj ect would provide affordable overnight accomodations
for visitors to Santa Monica. Given the economic and development
trends in coastal areas of Los Angeles, the youth hostel project
will likely be one of the few facilities in the Santa Monica area
affordable to low- and moderate income travelers.
Given these
benefits, as well as American Youth Hostels' status as a
non-profit entity, it is staff's intent to allocate the funds
created through the letter of credit in the form of a no- or
low-interest residual receipts loan, where loan payments would be
made only when funds are available after all normal expenses have
been met.
If, upon additional examination, staff finds that
making the allocation in the form of a loan rather than a grant
will jeopardize total financing of the project, the funds will be
allocated as a grant.
The City Manager will negotiate the
specific terms of the agreement, including the form of the
allocation, following council action.
BUDGET/FINANCIAL IMPACT
The recommendations of this staff report would allocate the
letter of credit to the youth hostel project. Since use of these
funds is restricted, award of the letter of credit would not
impact the city's general budget.
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RECOMMENDATION
staff respectfully recommends that the city Council authorize the
City Manager to enter into negotiations and execute an agreement
with American Youth Hostels, Inc. to utilize the funds provided
by the letter of credit toward the development of the proposed
hostel facility, contingent upon the hostel developer's
demonstration of all commitments necessary to complete the
project and inclusion of appropriate provisions protecting the
City's interests.
Prepared by: D. Kenyon Webster, Senior Planner
John W. Read, Associate Planner
Attachments:
Exhibit 1:
Exhibit 2:
Exhibit 3:
Exhibit 4:
Exhibit 5:
Affordable Overnight Accomodation Mitigation
Agreement
Request for statement of Qualifications
Proposal from American Youth Hostel, Inc.
12/11/87 from Don Coppock to Louise Gabriel
12/15/87 from Kenneth Genser to Louise Gabriel
w/ccyhrp
12/5/88
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.Bania cf!tonioa "cKisloricat. &ooiefy
Founded under the City of Santa Monica Centennial
to collect and preserve the history and culture of Santa Monica
January ii, 1988
l>lr. Kenneth Genser
Western Region Hostel
Development Coordinator
American Youth Hostels, Inc.
130-A San Vicente Boulevard
Santa Monica, California 90402-1513
Dear Ken:
The Santa Monica H~storical Society appreciates American Youth Hostel's offer
to work with the Society in regards to the Rapp Saloon.
Rather than to go into details of some of our exceptions to your statements
in your letter of December 15, 1987 and in keeping with suggestions made by
Don Coppock, manager of the non-profit progran for the California Coastal
Conservancy, in his letter of December ii, 1987 which he sent following the
Coastal Conservancy Hearing on Decemcer 4, 1987, I offer the following Carments
and proposal to AYH on behalf of the Historical Society:
A PROPOSAL FOR PURCI-T..ASE OF THE RAPP SAlOON
a. The Santa Monica Historical Society offers to buy the Rapp Saloon
bu~ldlng and the portion of the lot it sets on from Americ~~ Youth
Hostels, Inc. at a fair market value.
b. The Society would ask that the site include a clearance of at least
five feet to the north and five feet to the westside of the building.
c. We suggest that the lot size would be 25'X50' and the fair market
value be $100,000. These funds will be guaranteed by a letter of
credi t and subject to all parties agreeing.
d. The Santa Honica Historical Society ...ill then restore the building
to Comply with City building and safety Codes.
NOTE: As already indicated in our letter to you dated January 20, 1987,
because of the security measures required to protect the valuable
records, photos, documents and other historical material needed
to operate a viable resource and research center for the public,
shared use of the Rapp building would not be reasor.able.
We welcome the op:portunity to discuss this :plan and hear your Com..'Uents. We
look forward to meeting with you ar.d your co~~ittee as scheduled this month.
~inzPre~y, 1-" .
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Louise Gabriel
Director of Development
cc: J ohn Jal~li. City Manager; Santa Monica City CounCil; Peggy Curran f Acting Plar,r.nin,
BOX 3059ll't reetnr,;. J.1p-hriliid Fariyar.t PlaT'n:Lnp; CpJ1;ili.sloneri.... Don Cqp"pock i Coastal Cor.servancy.
-;-WlL ROuERS-~ I A TION. ~AN A ~UNIGA; CALI~UHNIA 90qv3 . (2U) 828-2 70, (213)S94-2605
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JAN 1 2 1988