Coastal Commission gives Santa Monica’s Shore Hotel permits to stay open — with conditions

After an hours-long debate about the need for affordable lodging along the beach, a split California Coastal Commission voted Thursday to allow a luxury hotel overlooking the Santa Monica Pier to continue operating even though it opened without proper permits and demolished two moderately priced hotels to make way for the swanky project.

The commission voted 7 to 5 to approve the after-the-fact permits for the Shore Hotel but only after negotiating with the hotel’s lawyer to require that it include 72 moderately priced rooms, waive the resort fees for guests in those rooms and limit parking fees to no more than $25 a night.

The hotel developer must also pay $2.3 million in mitigation fees.

Even the commission members who voted in favor of the permits expressed anger and frustration with the hotel developer, noting that the commission in May imposed a record $15.6-million penalty on the developer for opening the luxury boutique hotel without a proper permit.

“We shouldn’t have to work this hard,” said Chairman Steve Padilla, who voted for the permits but described the developer’s actions to build the hotel as “shenanigans.” “In the interest of fairness, we have achieved what we wanted.”

Commissioner Roberto Uranga, who was among the five members who voted against the permits, complained that the commissioners had to negotiate a resolution to keep the hotel open instead of forcing the developer to come up with a fix.

“I think we did a disservice to the people who came out here,” he said of the three dozen or so opponents who testified against approving the permits.

During the hearing, Steve Kauffman, an attorney representing Shore Hotel developer Sunshine Enterprises, compared himself to Gumby, the clay animation TV character of the 1950s and ’60s, because he said his arms were being twisted by the conditions imposed by the commission members.

The debate over the project began in 2009 when the commission, which has jurisdiction over development along the coast, initially gave Sunshine approval to demolish two hotels with moderately priced rooms near the corner of Ocean Avenue and Broadway to replace them with another more-affordable lodging project. The two hotels that were removed had a combined 87 rooms, including 72 rooms that were defined as “low-cost” by the commission.

But after the demolition permits expired, the developer instead replaced the two hotels with an upscale, 164-room, full-service hotel featuring two restaurants, a pool, a gym, meeting space and a view of the Santa Monica Pier. Room rates start at $265 and go as high as $800.

The commission imposed a $15.6-million penalty on Sunshine Enterprises, the highest fine in the 40-year history of the state panel.

In hopes of getting the needed approval to stay open, Sunshine Enterprises came to the commission Thursday with a promise to add to the hotel an on-site, 14-bed, low-cost hostel with rates no higher than $52 a bed per night and a public cafe. The developer also proposed offering 14 rooms in the existing hotel to teachers, firefighters, police and other public service employees at a rate of $127 a night until the on-site hostel began operation.

The developer was willing to pay mitigation fees of $8.3 million. The developer had already paid the city of Santa Monica $1.2 million in fees.

But during a hearing that lasted several hours, environmentalists, coastal access activists and hotel labor union groups spoke out against the proposed deal, saying it would allow the Shore Hotel to buy its way out of its legal morass.

Critics also argued that the deal violated the California Coastal Act, which ensures that affordable lodging be available along the coast. They said the 14 rooms offered in the proposed hostel didn’t make up for the 72 low-cost rooms that were lost when the project was built.

“These rooms need to be replaced,” said Anna Evans-Goldstein, an analyst for Unite Here, a labor union representing hotel workers. “They were stolen from the public.”

Susan Jordan, executive director of the California Coastal Protection Network, said it would only be fair that the hotel replace all 72 of the low-cost rooms with the same number of affordable rooms at the Shore Hotel.

“We want one-to-one replacement on site,” she said. “Stop pretending that writing a check and throwing in a hostel gets you out of this mess.”

After public testimony, commission members called the proposed deal insufficient and began to press the lawyer for the hotel to amend his proposal.

“In this particular case for me, this is not a case of technical noncompliance,” Vice Chairwoman Donne Brownsey said. “This is a case of egregious noncompliance.”

When the panel finally voted, it had pushed Kauffman to agree on a deal that would convert the 14-room hostel into a “micro-hotel.” Under the deal, the Shore Hotel must offer a total of 72 rooms, including the rooms in the micro-hotel, at a base rate of no more than about $180 a night.

The hotel also agreed to waive the $25 resort fee for guests in those rooms and limit parking rates to no more than $25 a night. The parking rates are currently $43 a night.

In addition, the mitigation fee that was previously set at $8.3 million was dropped to $2.3 million.

The hotel agreed to give local nonprofit groups access to the micro-hotel for outdoor youth programs.

A state law prohibits the commission from imposing nightly rates on hotels along the coast, but the hotel’s attorney agreed to the rates after Padilla pointed out that the permits would not get enough votes in support without the lower rates.

Kauffman, the hotel’s attorney, originally said that including 72 moderately priced rooms in the hotel wouldn’t make sense financially. But he relented in the end.

“I’m concerned about feasibility, but at the same time I hear what you are saying,” he said when the commissioners pushed him to negotiate.