SMCLC Files Objections to Hines Papermate Project and Urges Council to reject Project and Conduct Independent Economic Study

March 22, 2011
By Email

RE: Item 8-B, SMCLC's Objections and Comments Relating to the Hines Project

Dear Members of the Santa Monica City Council,

The Santa Monica Coalition for a Livable City ("SMCLC") strongly opposes any initial approval of the current "float up" design for Hines' Bergamot Transit Village ("Papermate Project") and any authorization for the City to enter into any negotiations for a Development Agreement at this time.

In 2007 when Hines purchased the Papermate property, it intended to build a project at least somewhat attuned to the neighborhood, the surroundings, and the existing traffic congestion. Hines' senior vice-president, Colin Shepherd, told the Los Angeles Times that Hines hoped to build two-to-four story office buildings totaling about 300,000 square feet. (8/27/07 LATimes)

Now Hines is proposing a project that is over three times that size and up to seven-stories and 86 feet in height with crippling, and far-reaching consequences that the City and residents would have to endure forever. If this project were to go forward, years from now the reigning City Council would then shake its collective head and say "well, we weren't around when Papermate was approved," just as the more recent City Council has shaken its head and said "The Water Garden wasn't on our watch." Councils may change but the consequences of thoughtless overdevelopment remain. We ask this City Council to be forward thinking and progressive, and not allow Santa Monica to become a paid-for, developer-run city.

The massive Papermate Project as presented by Hines is ill-conceived, would be irreversibly detrimental to Santa Monica, and would flout the opposition raised by residents, including at the "scoping" meeting and community meetings. Building almost 1,000,000 square feet, largely commercial, on the already grossly over congested 26th Street and Olympic Blvd corridor should be unthinkable. It should be as "dead on arrival" as the multi-towered Santa Monica Place project when it came before the Council.

In addition, Hines' Development Application is legally defective. The Application failed to include the fiscal impact statement required by City law, as more fully discussed in SMCLC's enclosed letter of December 13, 2010, to Ms. Jing Yeo ("SMCLC Letter"). Why is Hines being given a pass on City rules? Moreover, the fiscal impact statement belatedly provided by Hines just prior to this March 22nd hearing is untimely, flawed, and incomplete as discussed below.

The timing of the Council's consideration of the Project is also premature from a good planning point of view because its massive scope and impact is being considered outside of a Master Plan. Yet the City has just recently entered into a contract with HUD to develop such a Master Plan for the entire 140-acre area, including this very site. Any consideration of a project of this size needs to await such a Plan, including dealing with infrastructure and other multiple factors that need to be evaluated for the entire area.

The many serious flaws in the proposed Project are significantly compounded by the ability of Hines to develop or not develop the Project over an almost 20-year period and to develop or not develop it in whole or in any part, all at its sole discretion. This obviously makes any of the traffic, economic, environmental or other assessments even more speculative than they already are. In the area encompassed by the upcoming Master Plan, in the City as a whole, and for our surrounding neighborhood communities, the ongoing possibility, over 20 years, that almost 1,000,000 additional square feet can be developed at any time, as of right, with no apparent ability by the City to alter course, would have to be taken as a fact with respect to all future development proposals in the area. The City would, in essence, be granting Hines a "free development card" for 20 years and shift the consequences onto the City. A lot could change over these decades, yet Hines would hold its special privilege, its vested card. Approval of such a plan now would be poor City planning in the extreme.

Further, the proposed "public benefits" are woefully inadequate. Most of them are not even "public" benefits, but rather proposed tenant inducements such as plazas and perimeter sidewalks masquerading as public benefits. Ask yourself how many times you have used the interior plazas in the Water Garden when not visiting a tenant there?

Hines also provided its Fiscal Impact Statement ("Hines' Memo") in an untimely manner. When we finally see it now, almost a year after Hines submitted its Application and well after community meetings for the Project, we understand why. Even though we only recently received it, we have some initial comments. We urge the Council to get its own professional analysis of this Statement and not to act until it has. Indeed, legally, Hines must resubmit its Application and start the process over, including the public process so that the Memo can be properly evaluated.

1) Significantly, Hines' Memo states in its summary that "This report does not rely on a market study and makes general assumptions about the Project at build-out under a future year of stabilized operations." Thus, it is essential for the City to make a detailed analysis of each and every assumption and to understand fully all of the back-up that supports the assumptions and to what extent there are alternative assumptions that would lead to different results. Since Hines can build the Project or parts of it over a 20-year period, and since these assumptions only come into effect after "stabilized operations" at some undefined time thereafter, these current assumptions are enormously speculative and any reliance on them is highly questionable.

2) Hines' Memo reaches analytical conclusions on such matters as retail rental revenues, parking rental income and so on, partially based on assumptions that are either not properly backed with data (in the Memo), or on analyses by other organizations (such as Real Capital Analytics, Table 5) whose data sources are either unknown in the Memo or not based upon the supporting data. Other assumptions are based on Hines' own estimates (of Cap rates, for example) or by using the Multiple Listing Service in Los Angeles. But the methodology that evaluates those estimates is not described, so there is no way of understanding their accuracy (saying "I checked the MLS" isn't a particularly good back-up for fiscal analysis information). And trusting a developer's assumption of future revenue streams is risky, since developers' revenue assumptions typically have been overly optimistic, as we have witnessed with the recent real-estate meltdown.

3) There are a large number of other unsubstantiated assumptions in this Memo that should give the City a long pause. For another example, on page 7 Hines states: "Assuming the Proposed Project and alternatives perform according to target sales goals and operating characteristics estimated herein, the proposed development could generate . . . ." The obvious question is "How realistic are these embedded assumptions?" Hines provides no way of evaluating this because the information contained in the Memo is insufficient for reaching realistic conclusions. We also note the large number of qualifying words contained in this single important Hines' sentence: "Assuming," "goals," "estimated," and "could."

4) Hines' Memo also does not provide any analysis of a net possible fiscal benefit to the City, only a gross figure. It does not even attempt to include any estimate of the cost/burdens to the City of the proposed Project if fully or partially built, including police, fire, schools, infrastructure, wastewater and water usage or environmental issues resulting from more vehicular traffic, lost time and worsening air quality. The City must have this type of analysis before proceeding here in order to make informed decisions about the project.

SMCLC urges the City Council to send Hines back to the drawing board and to the community for a suitable project more in line with Hines 2007 public promises. Enclosed is the SMCLC Letter and Exhibits which we incorporate here in full, containing other comments and objections.

Diana Gordon

Exhibit A Area Development Map
Exhibit B HUD & DOT Monetary Award
Exhibit C Bergamot - MUC Area Plan - Location Map
Exhibit D SMCLC letter re: Papermate DEIR 12-13-10

Rod Gould, City Manager
Eileen Fogarty, Planning Director
Marsha Moutrie, City Attorney
Planning Commission
Neighborhood Association Leaders