By Dana Olsen Friday, March 9th, 2012

Los Angeles-based Caruso Affiliated is one step closer to breaking ground on Miramar Beach Resort & Bungalows in Montecito after the Santa Barbara County Board of Supervisors voted to move forward on an ordinance that would give hotel developers a 10-year tourism tax break.

Rick Caruso’s development company, which is at the helm of the stalled Miramar project, requested the bed tax rebate as an incentive to start construction. It would put an estimated $15 million back into the coffers of Caruso Affiliated.

In exchange for the decade-long tax break, the development company said it would demolish the buildings at 1555 S. Jameson Lane. The site is home to a collection of decrepit cottages that have been unused since the Miramar closed its doors 12 years ago.

Caruso representative Matt Middlebrook said at the March 6 supervisor meeting that the development company will immediately tear down the deteriorated buildings to make way for a planned 259,000-square-foot luxury resort once the rebate ordinance is made official.

“The inability to build this project is not an outlier. The market for luxury hotels is still extraordinarily challenged,” Middlebrook said. “But we are still deeply committed to this project. We think it’s the right project for the right community.”

The rebate, officially called the Hotel Incentive Program, would apply to all hotels built in unincorporated parts of Santa Barbara County over the next 10 years. Although the supervisors did not set a firm standard, the ordinance is likely to apply only to four- and five-star hotels that cost at least $50 million to build.

First District Supervisor Salud Carbajal said that while the ordinance would apply to other hotels, the Miramar is the only one that would be immediately affected. “Today, the Miramar is an example because it was the impetus for the proposal,” Carbajal said at the meeting.

The supervisors also approved a one-year extension for Caruso’s coastal development permit, which was set to expire on March 15.
Last week, the Montecito Planning Commission recommended that the supervisors adopt both of the proposals concerning the Miramar.

“I know this has been long and frustrating. I’m frustrated, too,” said Rick Caruso, who owns the Grove shopping center in Los Angeles, the Americana Mall in Glendale and The Lakes Shopping Center in Thousand Oaks, among others. “We’ve been trying to piece this project together any way we can, which is where the request for a tax rebate comes in. We will build this hotel … we just need some help from the county.”

Carbajal, who introduced the proposal to the board, said he thinks denying the rebate and extension would disadvantage the community. “We don’t have a choice. We have to do something to get this thing demolished and get it built,” he said.

Carbajal, along with Third District Supervisor Doreen Farr and Fifth District Supervisor Steve Lavagnino, voted in favor of the time extension and tax rebate ordinance. Fourth District Supervisor Joni Gray abstained from voting on the extension but voted in favor of the ordinance.

Janet Wolf, the Second District supervisor, voted against both proposals. She said she was “extremely disappointed” in the Miramar project’s slow progress.

Andy Caldwell, executive director of the Santa Barbara County Taxpayer’s Association, said during the meeting’s public comment period that although his organization supports the extension and rebate, he believes Caruso could have handled the project differently. “There were some huge mistakes made. It could have been built a long time ago, and it could have been raising revenue for a long time,” he said.

Gray said she’s concerned about the Miramar project because there’s no guarantee the hotel will ever be built. She said the situation reminds her of the saga of Bill Levy, a hotel developer who bought the La Entrada hotel project on lower State Street in Santa Barbara in 1999 and made no building progress before he declared bankruptcy in 2006.

“This has shades of Bill Levy. I don’t know why we should grant the extension,” she said.

Still, many speakers agreed with Caldwell and said they supported Caruso’s proposals simply because they hope the project, which has been at a standstill for the five years since Caruso bought the site and seven before that, will get moving.

The county auditor’s office reported that the Miramar currently generates $568,000 per year in property taxes. If the tax rebate goes into effect, the hotel will generate an estimated $1.7 million in property taxes, $1.5 million in sales tax and about $2.2 million in bed taxes after the 10-year rebate expires. It will also support about 1,000 temporary construction jobs and 2,000 hospitality jobs, the auditor’s office said.

With the affirmative vote, the Board of Supervisors directed its staff to move forward with drafting the tax rebate ordinance. It’s set to come up for final approval by summer.

[EDITOR’S NOTE: This is an updated version of this story, published in print and online on March 9, 2012. The article was originally posted online on March 6 at 2:53 p.m.]