UC-Davis Hotel Expansion: City Concerns I

STAFF REPORT DATE:

April 19, 2011

TO:

City Council

FROM:

Ken Hiatt, Director of Community Development and Sustainability Katherine Hess, Community Development Administrator

SUBJECT:

Hyatt Place Hotel Expansion and Old Davis Road Extension – Response to Campus Tiered Initial Study

Recommendation Staff recommends that the City Council authorize and direct the Mayor to send the attached letter to UC Davis regarding the proposed hotel expansion and Old Davis Road extension.

Council Goals Develop Davis as a visitor destination Present options to the City Council for the development of a hotel/conference center facility within or adjacent to the downtown.

Fiscal Impact Costs of preparing the attached letter have been absorbed within the approved budget for the community development program. The proposed hotel expansion would likely have impacts on the City’s Transient Occupancy Taxes and other revenues – the economic impacts are proposed to be addressed in the Environmental Impact Report for the project.

Background and Analysis The Hyatt Place hotel was completed on the UC Davis campus in 2010. The project has 75 rooms and a small food service area. It is near the UC Davis conference center, in the area of the Graduate School of Management and the Mondavi Center. The campus originally proposed a larger hotel on the site, but reduced the size during the public and environmental review of the project. UC Davis is now proposing to increase the size of the hotel by 52 rooms, so it will have a capacity of 127 rooms. This hotel expansion will require an Environmental Impact Report.

With the hotel, the campus is considering extending Old Davis Road to a connection with A Street (see site plan, Attachment 2).

The City has received the “Tiered Initial Study” document for the Hyatt Place Hotel Expansion and Old Davis Road Extension on the UC Davis campus. Public comments on the Initial Study are due by April 21. This Initial Study is in preparation for the Environmental Impact Report on the project, which will be prepared before the Regents take action on the project (anticipated July 2011). The Initial Study document is at http://sustainability.ucdavis.edu/local_resources/docs/onlinedocs/hotel_expansion/IS%20Hyatt% 20Place%20Hotel%20Expansion%20and%20Road%20Extension.pdf.

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The on-campus hotel, and its impact on Davis hotels, has been an issue in the City of Davis since the original hotel was proposed. The City raised concerns about the original proposal in 2002.

Hotel Expansion The Initial Study states: The proposed project would introduce additional hotel rooms to the Davis area and these additional rooms may affect occupancy rates at other hotels in the Davis area. To evaluate the potential effects of these changes, the campus will conduct an economic impact assessment to determine whether the proposed project could cause any closures, whether there are potential alternative uses for properties that could be affected, and whether the project could create physical blight in the community.

Staff’s understanding is that the campus is obtaining a market analysis to evaluate the impacts of the hotel expansion. This analysis is appropriate. The recommended letter notes the impact of the Hyatt Place on the Davis hotels, and suggests that the appropriate response is to increase the demand for hotel rooms, rather than dilute the existing market.

Old Davis Road Extension The proposed project would extend Old Davis Road through the existing parking lot near Solano Park, so there would be a direct connection from the UC Davis I-80 interchange to A Street. The connection has the potential to shift traffic patterns, including possibly diverting downtown trips from the Richards/I-80 interchange to the UC Davis interchange.

The Initial Study states: Project activities would result in traffic and circulation effects from expansion of the hotel and from the proposed realignment of Old Davis Road. The impact from these effects will be evaluated in the project EIR. This analysis is appropriate. The recommended letter notes potential impacts of the project on roads and intersections within the City of Davis as meriting particular review.

Next Steps The campus will be preparing an Environmental Impact Report on the proposed hotel expansion and Old Davis Road extension. When the EIR is released, staff will review it and make recommendations on further City action.

Attachments 1. Recommended letter 2. Project description and site plan

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April 20, 2011

A. Sidney England Assistant Vice Chancellor – Environmental Stewardship and Sustainability University of California One Shields Avenue 436 Mrak Hall Davis, CA 95616 RE:

Hyatt Place Hotel Expansion and Old Davis Road Extension Tiered Initial Study

Dear. Mr. England: The City of Davis has reviewed with great interest the Tiered Initial Study for the Hyatt Place Hotel Expansion and Old Davis Road Extension. As you know, visitor attraction and accommodation is a key element of the City’s economic development efforts, and Transient Occupancy Tax currently contributes an average of $1 million annually to the City’s operations. The City and its Redevelopment Agency have been working to enhance the vibrancy and attractiveness of our downtown to residents and visitors alike.

We appreciate the University’s commitment to analyzing economic impact and traffic impacts of the proposed hotel expansion and road extension. To support those analyses, we offer the following comments.

Hotel Economic Impacts The Hyatt Place Hotel has increased the supply of hotel rooms in the Davis area while the recession has reduced conference and tourism dollars nationwide. The combination has led to significant reductions in hotel stays, room rates, and TOT collection within the City of Davis. TOT reported to the City of Davis in 2010 is 23.5% less than the amount reported in 2008. Two of our hotels have shown signs of severe financial distress. We do not believe that the campus conference facility has provided the economic benefits and increased room nights that were originally anticipated.

The City is making every effort to add a full-service conference facility near the downtown as a way of bolstering the hotel market. The City Council took action to identify a preferred project on March 29, 2011, and we are working toward an Owner Participation Agreement for approval this year. Our goal is to increase the community’s attractiveness for conferences to support the host hotel and other hotels in Davis. Adding rooms, without increasing total visitors, will dilute the market further and jeopardize the success of our conference center effort.

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The current Initial Study states that the EIR will evaluate potential alternative uses for other hotel properties. The economic analysis prepared for the original hotel development in 2002 evaluated the potential of converting existing hotels to student residences as a form of adaptive reuse. The City of Davis took exception to that conclusion at that time and our objections on feasibility of conversion remain. Moreover, we would like to stress that the apartment market is very different now from that of 2002. The vacancy rate was at its lowest in 2002, at 0.2 percent. The latest rate was 3.4 percent, slightly below the “balanced” rate of 5 percent. The additional student housing at West Village will further soften the rental housing market in Davis. Further diluting the demand for hotel rooms will lead to deterioration of existing hotel properties and result in urban decay and blight in the current market.

We would also like to stress that blight is more than an “aesthetic” issue. Blighted properties can certainly cause aesthetic impacts, including boarded-up or abandoned buildings, graffiti, and unkempt properties. In addition, urban decay and blight can increase criminal activity, require additional public safety services, decrease values of surrounding properties, and reduce City revenues while increasing costs of services.

Failed hotels would exacerbate the neighborhood and financial pressures being currently faced by the City of Davis. This concern applies both to downtown and to South Davis, where a number of commercial buildings are currently vacant. This could further result in impacts to land use through incompatibility of adjacent uses throughout the Davis community.

If the project proceeds, mitigation measures that should be considered include efforts to increase hotel demand in Davis, such as capital or operating contributions to the downtown conference facility; additional conference bookings at the UC Davis Conference Center; or increased contribution to the Yolo County Visitors Bureau.

Traffic Analysis We support the University’s commitment to analyze the traffic and circulation effects from effects from expansion of the hotel and from the proposed realignment of Old Davis Road. We trust that this analysis will “follow the trips” into and through the City of Davis, particularly through the downtown Core Area.

The connection of Old Davis Road to A Street will allow westbound vehicles on I-80 to exit at UC Davis and access downtown Davis without experiencing the congestion at the Richards/Olive/First Street corridor. However, the through traffic on A Street is likely to increase significantly, as will the number of vehicles at the intersection of First and A streets. This intersection is already identified as a critical intersection in the LRDP EIR, and programmed for regular monitoring. The current conflicts between automobiles, buses, and bicyclists are likely to be exacerbated by this project. We are very interested in seeing the results of the traffic assessment and recommended mitigation measures.

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Thank you for the opportunity to comment on the Initial Study. If you have any questions or require clarification, please contact Ken Hiatt, Director of Community Development and Sustainability, at 757-5610 or khiatt@cityofdavis.org.

Sincerely,

Joseph F. Krovoza Mayor

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