Plans to build a new hotel in downtown Hollister could stall due
to disagreement between the city and a local developer.
Plans to build a new hotel in downtown Hollister could stall due to disagreement between the city and a local developer.
In 2004, the Hollister Redevelopment Agency awarded Tod duBois an “exclusive negotiating agreement” for his proposal to build a four-story structure that would include retail space, offices and a hotel with around 60 rooms. But duBois said Wednesday that city leaders and staff aren’t making a serious commitment to the project.
“(The city) basically wants me to take all the risk,” said duBois, who is also planning to build the mixed-use Artisan’s Plaza in San Juan Bautista. “I could easily spend a million dollars … and then the council votes that they don’t like the project.”
Councilman Doug Emerson said development on the 400 block of San Benito Street – now a grassy field at the Fourth Street intersection – will be a “key element” in a successful downtown Hollister and it would “absolutely” be reasonable for the RDA to subsidize construction.
“But we need to have some foundation to do that,” Emerson said.
Before investing millions of dollars, the city has to see studies showing the project will bring its touted economic benefits, Emerson said. DuBois and city staff previously reached an agreement to pay for one report each, but now the developer is balking.
“I’m not really comfortable spending $20,000 without a better deal in place,” duBois said.
City staff “pretty much know” what the study will show, duBois said – namely, that the hotel won’t be a hit, at least initially. It would still be a benefit to the city, he said, by drawing visitors downtown and also earning the City of Hollister around $500,000 per year in transient occupancy tax.
DuBois emphasized that he’s not trying to fleece the city out of RDA funds. In fact, he said he’s unlikely to make a profit.
“I just don’t want to lose money,” he said. “With the economics for downtown Hollister, the market does not support this kind of building.”
When he signed the deal in 2004, the building would have cost $10 million to build, but would only be worth $7 million, duBois said. With rising materials costs, the bill now would probably be closer to between $15 million and $17 million, he said.
“It’s a big gap that would have to be bridged by RDA funding,” duBois.
In the early 1990s, the RDA bought the land and buildings, some of which were damaged in the Loma Prieta earthquake. Since then, other developers have tried to get projects done there – such as a performing arts center or a movie theater – but those plans fizzled.
After the 2004 deal, duBois said the project didn’t go anywhere because of the city’s building moratorium. With the moratorium scheduled to end in December 2008, duBois said he’s spent the past year trying, without success, to get things moving again.
If the project is going to work, duBois said city leaders need to create a “predictable” approval process to minimize his risk and commit to subsidizing the hotel’s operation for several years.
“I can’t get an investor group to put a dime into the project until the RDA commits,” he said.
City Manager Clint Quilter acknowledged that by going through the planning process – with all the costs entailed – duBois is taking a risk. That’s “what developers do,” Quilter said.
So will the lot continue to be unoccupied for a long time to come? Emerson said he’s hopeful that a good project will eventually make its home there.
“But in this particular thing … I’m pessimistic,” he said.
