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Warnings sounded as Modesto considers spending $380K in downtown hotel project

The site for the proposed high-end hotel on 11th street between K and L streets in downtown Modesto, Calif. is pictured from the Bee’s drone on Wednesday April 17, 2019.The site is in the Modesto Centre Plaza’s parking lot.The hotel would complement the 258-room Doubletree by Hilton Hotel, pictured here at back left.
The site for the proposed high-end hotel on 11th street between K and L streets in downtown Modesto, Calif. is pictured from the Bee’s drone on Wednesday April 17, 2019.The site is in the Modesto Centre Plaza’s parking lot.The hotel would complement the 258-room Doubletree by Hilton Hotel, pictured here at back left. jlee@modbee.com

At least three of Modesto’s elected officials want to spend roughly $380,000 to cover the city’s costs of exploring the potential development of a 200-room, high-end hotel in downtown.

But the spending won’t start just yet.

That’s because only four of the City Council’s seven members voted on this proposal Tuesday. The vote was 3-1 in favor, but needed four votes. The council will reconsider this at a future meeting when the full council is present.

The vote came after two residents spoke against the spending, saying if there were a need for the hotel then developers would be knocking on the city’s door. They also reminded the council that Modesto lost millions of dollars the last time it got involved in the development of a hotel.

“If this is truly a feasible project, wouldn’t developers already be interested in investing in it?” asked Modesto resident Eleanor Chase. “I don’t have a problem with building another hotel downtown. I don’t. But public funds should not be used for private-sector development.”

Councilwoman Kristi Ah You, who voted against approving the spending, asked city staff how many companies have contacted the city about building a downtown hotel and whether the city had a developer waiting in the wings.

“... I would not say, ‘waiting in the wings’, but I know there is interest,” Parks, Recreation and Neighborhoods Director Laurie Smith said. “... I’ve been working on this project the last 2 1/2 years, and I know that there is interest. And of course interest lies with what the terms and the deal points will be, (which the city would negotiate with a developer).”

The city is considering the development of a hotel in Modesto Centre Plaza’s 1.5-acre parking lot, which is bounded by 11th, K and L streets. The hotel would complement the 258-room DoubleTree by Hilton, which is connected to Centre Plaza.

A consultant’s study concludes the hotel is feasible if several conditions are met.

They include the renovation of Centre Plaza, which has served as the city’s community-convention center for three decades, and that parking be provided for the hotel. (The $380,000 includes $60,000 for an engineer to look at whether the city’s three downtown parking garages can be expanded.)

The renovation is estimated to cost $3.2 million, and the city would have to find a way to pay for it if the project moves forward, though that could be part of the negotiations with a developer. The consultant’s study says a renovated Centre Plaza is necessary to draw more conventions and conferences and generate more room nights at the DoubleTree and new hotel.

Proponents say there is demand for another high-end downtown hotel and Modesto is following a process other cities have successfully used.

“It would mean more jobs, more foot traffic and increasing visibility for our community,” Modesto Convention & Visitors Bureau CEO Todd Aaronson told council members.

He said Modesto is well-positioned for another hotel because of recent changes in the region. They include the Stockton Metropolitan Airport adding daily flights to and from Los Angeles and the work to upgrade a section of Highway 132, which will make it a more attractive option in connecting Modesto with the Bay Area.

Aaronson said the Highway 132 project is critical as Manteca continues to develop, resulting in worse traffic on Highway 120.

Besides the $60,000 parking study, the roughly $380,000 includes $170,000 for legal work and $116,700 for a consultant that would help the city find a developer and then negotiate an agreement. City officials say the spending would stop as soon as the city realized the project would not work.

But Modesto resident Emerson Drake said if the project were viable, then a developer would do the legwork.

“What I don’t understand is if I was a company that was looking to build a hotel here, I think I would be doing all of this footwork,” he said. “I’m not sure I understand why we’re doing the footwork trying to attract somebody.”

Drake and Chase both brought up the specter of the Red Lion.

The DoubleTree was a Red Lion Hotel when its then-owner lost the property in 1996 to foreclosure after defaulting on its construction loan. The city lost the land beneath the hotel, which it had been leasing to the owner and had been pledged as security for the loan.

Modesto also lost millions of dollars. The city had paid $1.4 million for the land and had expected to receive $4.2 million in additional payments over the 25 years that had been left on the lease agreement.

Mayor Ted Brandvold and Councilmen Tony Madrigal and Doug Ridenour voted to authorize the $380,000. Councilwoman Jenny Kenoyer and Councilman Bill Zoslocki were not at the meeting. Councilman Mani Grewal was at Tuesday’s meeting but did not take part in this item because as a hotel owner he has a conflict of interest.

Kevin Valine covers local government, homelessness and general assignment for The Modesto Bee. He is a graduate of San Jose State University and grew up in San Jose.
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