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Rick Caruso (left) with 1st District Supervisor Salud Carbajal

Paul Wellman

Rick Caruso (left) with 1st District Supervisor Salud Carbajal


Miramar Blight Gone, but Fiscal Stalemate Continues

County, Caruso Haggle Over Hotel Incentive Program Language


Thursday, January 24, 2013

While progress is actually being made on the Miramar property — all the buildings are gone after a couple months of demolishing by owner Rick Caruso — negotiations between county officials and Caruso’s team are basically at a standstill, as the two sides can’t seem to see eye-to-eye despite consistent meetings and exchanges of letters.

The two sides last met earlier this month to try and iron out proposed language of an implementation agreement for a Hotel Incentive Program, which would kick some bed taxes normally collected by the county back to the developer. With Caruso’s Miramar in mind, the Santa Barbara Board of Supervisors last year approved an incentive program ordinance, the goal of the program being to encourage luxury hotel developers to build. Through the program Caruso would receive back 70 percent of the bed tax he pays to the county.

But the two sides can’t agree on how that would play out. County officials have said the supervisors would need to decide on an annual basis whether or not to distribute the money under the agreement. Caruso disagrees with that determination but is willing to go along with it provided there is language in the agreement explaining that Caruso can go to court to recoup the money should the county not pay.

County officials, however, have balked at Caruso’s proposal. Instead, according to a letter sent Tuesday by County CEO Chandra Wallar to Caruso Affiliated vice president Matt Middlebrook, the language would state that:

The County could terminate its obligation to make annual Incentive Program Rebates to the Miramar Project only if the Miramar Project defaults within the Implementation Agreement, or as otherwise authorized by California law.

and

If the County did not make an annual Incentive Program Rebate, the remedy of “specific performance” would be available to the Miramar Project, as allowed by California law.

The issue for Caruso is that county officials won’t explain what they mean by the legal term “specific performance,” despite repeated requests to do so.

Specific performance, generally, is a legal remedy to compel performance under a contract. But in California, the specific performance remedy is generally only allowed when other remedies, such as damages, aren’t available. In this case, Caruso would only pursue litigation if Caruso Affiliated didn’t get paid, and only for the amount owed them, Middlebrook said. What isn’t clear is what the county means by specific performance. “[I]f your view of ‘specific performance’ does include the payment of the rebate [then] we think we could swiftly move to an agreement,” Middlebrook wrote in a January 9 letter to Wallar. “If specific performance, in your view, does not include an enforceable obligation to pay the [hotel bed tax, then] your proposed language is meaningless and moves us no closer to an agreement.”

Declining to explain how they interpret that phrase, the Santa Barbara County Counsel’s office leaves a question mark about how it would argue in court how the phrase should be interpreted. “As County Counsel explained at the meeting, though, our County Counsel provides attorney-client legal advice to the Board of Supervisors and cannot provide you with a legal opinion about a Caruso Affiliated decision,” Wallar wrote back. Despite the reluctance of county officials to share their interpretation, Wallar said they aren’t trying to hide anything. She told The Santa Barbara Independent on Thursday there is no “gotcha rabbit in the hat” in the county’s interpretation of “specific performance.” But still, Caruso’s team is hesitant.

Tuesday, at a press conference on the newly demolished Miramar property, Caruso wouldn’t get into detail on the discussions but said both sides continue to work on a deal. “It’s critical to get it done,” he said. “The framework is there. I don’t think it’s very complicated, to be honest.”

He said he remains 100 percent committed to the project and the community. Caruso has been demolishing the property over the past two months, eliminating a longstanding eyesore that didn’t sit well with the community. The demo alone cost Caruso in excess of $1 million, Middlebrook said.

Caruso bought the property in 2007, the third owner of the Miramar since it shuttered in 2000. He gained approval for his project right around the same time the economy imploded, leaving him with a property, and a project but nowhere to turn to find financing. That situation is improving, he said, and banks are interested.

Potential financiers are also interested in the Hotel Incentive Program, and any way that makes the Miramar’s bottom line fatter and a potential loan more secure. But in his letter to the county on January 9, following the January 3 meeting, Middlebrook expressed frustration with county officials. “The failure by the County to work cooperatively with us to identify a solution stops all of these benefits in their tracks and delays them indefinitely,” he wrote.

Caruso said Wednesday he remains hopeful the Miramar doors will open in 2016.

Jagwar Ma

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