Aliso Creek project on ice

Athens Group confirmed on Tuesday speculation that the Aliso Creek Area Redevelopment Plan had been put on hold.

The decision was attributed to the economy, which hospitality industry watchdogs report has a chokehold on Orange County’s luxury hotels, two of which are in Laguna Beach.

“After much deliberation, project investors have decided to indefinitely suspend the Aliso Creek Area Redevelopment Plan process,” Athens Group’s Vice President John Mansour said in a statement issued Tuesday. “The economic downturn and challenges associated with advancing new development in today’s market have led the owners to this decision.”

Mansour was speaking on behalf of Aliso Creek Properties LLC, owner of Aliso Creek Inn and Golf Course, and Driftwood Properties LLC, owner of 250 acres north of the golf course. The owners retained Athens Group, which developed the Montage Resort & Spa, to prepare a comprehensive redevelopment plan for the properties.

A concept plan was made public at a meeting in October 2005 at City Hall. After refining, the plan was submitted to the city in 2007.

Preparation of an environmental impact report was underway when the economy went sour.

“Their announcement doesn’t come as a surprise,” Councilwoman Verna Rollinger said. “Ken [City Manager Frank] advised us a month ago of problems.

“The future is uncertain and we don’t know if the project will come back or when. We will just have to wait and see what happens to the project or what makes sense to the property owners.”

The Pilot reported in the Aug. 7 edition that the city had stopped working on the environmental impact report for the project due to a lack of information and money.

“We won’t continue working on it until the trust fund is replenished and the necessary information provided,” Frank said in answer to questions posed by the Coastline Pilot.

“Right now even billionaires are hanging onto their money. It’s as bad as ever, ever, ever.”

Hotels hard hit

The effect of the economy on the hospitality industry resonated with the city during the budget hearings for the next fiscal year.

Bed taxes, a percentage of the bill for hotel stays, are a major source of revenue for the city. Unlike property or sales taxes, the city does not have to share the bed taxes with the state or the county.

“Based on the figures coming in on bed taxes, we knew the writing was on the wall when the budget was being done,” said Karyn Philippsen, president of the Laguna Beach Visitors Bureau. “People are being more cautious about spending their money. They are figuring they can spend the same amount of money but stay longer and some of the more modestly priced hotels are benefiting. The ones I have talked to are feeling OK about this summer.”

Smaller hotels may be in a better position to weather the economic storms in the short term.

Hotel Laguna owner Claes Andersen is reporting 77% occupancy for July and 82% occupancy for August. And, as suggested by Philippsen, guests are staying longer, on the average a day longer compared to 2008, Andersen said.

“But we are all worried about September,” Andersen said. “We are not seeing corporate meetings — the companies just are not spending the money. The high-priced hotels especially are taking a hard hit.”

City budget unaffected

Although the cessation of the Aliso Creek project might have blighted some projections of revenue for capital improvements in the future, it will have no immediate impact on the city’s budget.

Assistant City Manager John Pietig said the city was prepared for the effect of the reduction in bed taxes on city budget, but the cessation of the Aliso Creek project will have no immediate impact.

“We are always looking for new revenue, but we did not figure in revenue from that project — it was just too early in the process,” Pietig said.

The Aliso Creek Area Redevelopment Plan included a residential component that would have plumped up the bed taxes a sizable amount, based on the revenue generated by the Montage. The project totals 325 acres that include the Aliso Creek Inn and Golf Course; Aliso Highlands, sometimes called the Esslinger parcel, north of golf course; and Aliso Lots. formerly called Driftwood Estates.

“We are grateful to the many members of the Laguna Beach community who have demonstrated support of the plan and its environmental and public benefits to date,” said Mansour. “I would like to take this opportunity to thank the City Council, planning commissioners, city staff and everyone who participated in Town Hall meetings, tours and briefings over the years. This input was instrumental in shaping the plan for the property.”

The project was endorsed by the Laguna Beach Taxpayers Assn., which pointed to the Montage as an example of projects that bring tourists to the city and revenue in the form of property taxes and even better, bed taxes.

“It’s very sad that economy put this project on hold, but I hope when the economy improves it will get back on track,” association President Martha Lydick said.

However, the project was opposed as proposed by local environmental activists, who expressed dismay at the residential component of the redevelopment plan they felt violated the integrity of Aliso Canyon.

The decision to suspend redevelopment efforts does not affect operations of the Aliso Creek Inn and Golf Course.

“We plan to continue full operations of the golf course, inn, banquet facilities and restaurant for the enjoyment of local residents and guests,” General Manager Ned Snavely said.

The Athens Group will maintain a presence in Laguna Beach, led by John Mansour, who will continue to live here, according to Athens Group spokeswoman Joan Gladstone.