The Cruz Hotel Project
What You Need to Know and Why You Should Speak Up
One of the things I’ve been involved with this year has been opposing the Cruz Hotel project. I made many comments at Planning Commission and City Council—first objecting to the privatization of city property, and when that failed arguing for more community benefits and worker protections. We may be at the final opportunity for public input and pressure this week.
The Cruz Hotel project, proposed for the former Santa Cruz Community Credit Union building and several adjoining parking lots (including some city-owned property) at 324 Front Street in downtown Santa Cruz, is being developed by SCFS Venture LLC, a New York, Delaware, and California-based company affiliated with Eagle Point Hotel Partners, and local developer Owen Lawlor of Lawlor LandUse and Consulting. With community pressure over the past few years, the project has undergone significant changes, with the developers adjusting their community benefit proposals and adding a limited number of lower-cost hotel rooms.
Several appeals have been submitted against the project, focusing on issues like affordable accommodations and broader community impacts. The California Coastal Commission will hold Substantial Issue and De Novo hearings on Thursday, September 12, 2024 (hopefully mid-morning or lunchtime), where the public can raise concerns and ensure the project meets community needs.
Jesse Kathan has been following this project at Santa Cruz Local for several years. Their most recent update is here: Downtown Santa Cruz hotel could get lower-cost rooms.
The agenda and more information are on the California Coastal Commission website.
You can find the submitted appeals, the Coastal Commission Staff Report, and many supporting documents in the agenda linked above.
If you’d rather just see the appeals and the staff report, here’s my folder of submitted documents.
Please enjoy the letter (below the cat) we’ve sent to commissioners, and use it as inspiration for your own comments!
Dear California Coastal Commissioners:
We greatly appreciate the thoroughness of the Coastal Commission staff in considering the complex issues surrounding the Cruz Hotel project. The staff report demonstrates a clear understanding of various policy concerns, including environmental justice and lower-cost accommodations. However, despite this thoughtful analysis, there are substantial issues that remain inadequately addressed, which we strongly urge the Commission to reconsider during the upcoming September 12, 2024, hearing.
Greyhound Rock County Park Cabins (Page 16 b.)While we support the development of cabins at Greyhound Rock County Park, the allocation of $5 million from the Cruz Hotel project would be far more impactful if directed toward the Santa Cruz Hostel Society. The Hostel Society has the experience and infrastructure to maximize the use of these funds to produce lower-cost accommodations within the city of Santa Cruz itself, benefiting the urban beach visitors and service/hotel workers this fee is meant to serve. Greyhound Rock, situated 30 minutes out of town and without public transit access, is better suited for educational groups rather than Santa Cruz visitors. Our appeal raised this issue, yet the staff report does not fully capture these concerns. Additionally, if the full $5 million isn't used within seven years, it is unclear how and where the remaining funds will be redirected. We urge the Commission to reconsider this allocation in favor of a solution that serves the City of Santa Cruz community directly.
Hotel Worker Discount Program/Reduced Rate Rooms (Page 16 c.)The hotel has touted the hiring of 130 employees, yet the discount program for hotel workers only applies to full-time employees, a condition that does not reflect the reality of the hospitality industry. Many hotel workers are part-time or seasonal. According to the California Employment Development Department, a substantial portion of jobs in this sector are part-time, meaning that many workers would be excluded from this benefit. This exclusion undermines the spirit of the program, which is meant to benefit all employees. We recommend that the Coastal Commission broaden this benefit to include all hotel workers, ensuring that it fully serves its intended purpose rather than becoming symbolic.
Affordable Housing Shortfall (Page 19 a.)The project’s contribution to affordable housing falls significantly short. While four affordable rental units are proposed for hotel staff, these are guaranteed for only 20 years—a fraction of the expected lifespan of the hotel, which could easily operate for 40-60 years. Furthermore, the overall in-lieu fee has a $1 million shortfall compared to the state norm, and the number of affordable units offered is insufficient. Given the hotel’s scale, expected income, and the inadequate duration of affordability, we urge the Commission to require more affordable units and that affordability be maintained for as long as the hotel is in operation.
Community Benefits (Page 19 b.)The project includes several community benefits, such as donations to the Boys and Girls Club, the Santa Cruz Hostel Society, improvements to the riverwalk, and funding for the Santa Cruzer shuttle. While these contributions are appreciated, they are relatively modest compared to the anticipated profits from the hotel’s operations, which include retail, conference spaces, and high-end amenities like a restaurant, rooftop pool, and spa. Given the scale of this project, this offer of one-time donations is notably inadequate. Our community deserves sustained, substantial investment from an upscale development that stands to profit significantly from operating in a prime location, with impacts on generations of local residents and workers.
Environmental Analysis and Cumulative Impact (Pages 28-29, Footnotes 13-15)The staff report asserts that the project poses no significant impact on local wildlife, the San Lorenzo River, or air quality, yet there has been no cumulative environmental impact assessment for this project or the others planned along the river. Given the precedent of past Coastal Commission decisions, which included cumulative assessments of related projects, we believe the same consideration should apply here. The potential for this project to compound negative environmental impacts is substantial, and without proper assessment, the report's conclusion is incomplete. Additionally, no environmental justice groups were involved in the development planning process, which raises concerns about the inclusivity of the project's benefits. For example, we are aware that uniteHERE members—representing an environmental justice demographic—attended multiple planning commission and city council meetings over the course of several years, and their input seemed to be largely ignored.
Lower-cost Accommodations, Market Feasibility Study and Land Acquisition Costs (Page 35, Footnote 27; Page 37, Footnote 36; Page 62, Footnote 47)The $429,000 per lower-cost unit calculation used in the report includes construction costs, land acquisition, and a 10% management fee. This figure appears to be a reasonable estimate for new construction in Central Coast California, where land and construction costs are typically high, especially in areas like Santa Cruz, which is one of the most expensive rental and real estate markets in the country. However, the developer’s actual costs for adding lower-cost units on-site may be lower than this estimate. The developer has already purchased the land and committed to constructing a large-scale hotel, which should give them flexibility to offer more lower-cost units. Since land acquisition costs have already been covered, the incremental cost of adding more lower-cost units may be less than $429,000 per unit.
We believe the developer can afford to offer more lower-cost rooms than the 20 currently proposed. The Coastal Commission generally expects 25% of hotel units to be set aside as lower-cost accommodations, especially for larger hotel projects like this. However, the Cruz Hotel proposal only offers about 10% of its rooms at lower rates. Given that land acquisition costs are already accounted for and that the developer has scaled back the total number of rooms from 232 to 190, there is ample room to increase the number of lower-cost units without compromising the financial feasibility of the project.
This raises important questions: Why not offer the standard 25% of lower-cost units as the Commission usually recommends, and what has changed in the financial assumptions that were originally used to justify limiting the number of affordable rooms? We believe the Commission should require the developer to increase the percentage of lower-cost rooms to more closely align with the 25% standard, particularly given the long-term profitability of this project and the existing land cost coverage. This lack of financial transparency in the project’s current calculations needs to be addressed.
We believe these unresolved issues represent critical areas where the staff report falls short of fully addressing the substantial issues, as well as the needs and concerns of the local community. We urge the Coastal Commission to champion stronger, more enforceable commitments to affordable housing, community benefits, and environmental justice to ensure the Cruz Hotel project serves the broader public interest.
Sincerely,
Joy Schendledecker, Ron Pomerantz, Char Clark, and Sheila Carrillo