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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
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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.

Comments

Independent Discussion Guidelines

As a Republican, doesn't Mr. Caruso believe in no government handouts? I guess that doesn't apply when you are rich and want a government handout. I would rather my tax dollars go to someone that really needs it. If he can't afford to build there, he shouldn't have bought it.
How much money has he donated to the County Supes political war chests?

tw1950 (anonymous profile)
January 24, 2013 at 5:31 p.m. (Suggest removal)

According to news reports here and elsewhere, Caruso donated quite a lot. Doreen Farr still voted "No".
I bet the challenger in the next election will make hay with the photo accompanying this piece.

Ken_Volok (anonymous profile)
January 24, 2013 at 5:58 p.m. (Suggest removal)

Yeah, let it sit there and continue to generate practically no tax revenue, no jobs, etc.

JohnLocke (anonymous profile)
January 25, 2013 at 9:36 a.m. (Suggest removal)

In the words of Red Leader One in Star Wars: Stay on Target! I hope the county sticks to it's guns on this one This whole idea of giving the guy a handout so he can have an bed taxes excused for FIFTEEN YEARS is preposterous. I wonder how it even got this far? Scale your project back a little and chill. Also, it kind of cracks me up, it is almost uglier with the big old train crossing just sitting there. $800 a night. Ridiculous. He remains %100 committed to his wallet. I don't think he gives a #$%@ about the community by trying to get out of the bed taxes.

bimboteskie (anonymous profile)
January 25, 2013 at 9:38 a.m. (Suggest removal)

I think this issue of giving away the bed tax IS critical, Mr. Caruso, why are you blandly stating this? Gotta be with JL on this one, how is it "Caruso would receive back 70 percent of the bed tax he pays to the county"? Let's find a developer who will assume the appropriate burden, and pay full bed taxes etc. over to the County.

DrDan (anonymous profile)
January 25, 2013 at 10:12 a.m. (Suggest removal)

Corporate Welfare by any other name.

"Cooperation" does not mean a fat subsidy from the County General Fund at the expense of mental health, law enforcement, fire suppression, and the like.

Not seeing 3 votes at the Board of Soups on this one.

John_Adams (anonymous profile)
January 25, 2013 at 12:33 p.m. (Suggest removal)

I wouldn't give in to him. Just because he's a big fish, he should get no special favors. He can develop the property if he wants to. His choice. But he needs to pay the same tax as everyone else. To me, this is more principle than money.

Botany (anonymous profile)
January 25, 2013 at 12:59 p.m. (Suggest removal)

When I, Botany and Adams all agree you know something's rotten in Denmark.
I have a few friends like Locke who bring up the valid point about jobs and revenue. I maintain that:
1) We're already for better or worse not reaping the benefit of the jobs/tax revenue.
2) The employees will have to pay taxes on their pay, but the boss wouldn't.
3) Potential short term gain for long term loss.
4) The guests at the hotel apparently still pay the tax, but it'd go into Caruso's pocket. I wonder what kind of publicity that might generate for starters. And if the guests aren't to be charged, at $800 they can certainly afford the extra $40 tor so tax.

All in all, should he run for mayor of LA- this whole affair will for sure be a black mark on his record.

Ken_Volok (anonymous profile)
January 25, 2013 at 1:11 p.m. (Suggest removal)

@DrDan: I was being sarcastic.

Some of you folks posting here were the same ones objecting to Caruso from day one. I'm seeing a delicious irony here. Perhaps the good folks of SB County could see this as compensation for holding up this project for years. I sat in some of the meetings - many of the objections were crap, but Caruso repeatedly replanned, SHRUNK the project (thereby ruining his original assumptions), and continually tried to please an ever-shifting objectionista.

K_V, I don't understand "Potential short term gain for long term loss" - seems to me to be the opposite, i.e. short term tax forgiveness for long term tax gain.

Also "The guests at the hotel apparently still pay the tax, but it'd go into Caruso's pocket". Of course, that's how the County is providing benefit to Caruso. If the customers didn't pay the tax and Carus didn't get it, what would be the point?

Just wonderfully ironic.

JohnLocke (anonymous profile)
January 25, 2013 at 4:58 p.m. (Suggest removal)

So Caruso is a double dipper, thanks for clarifying. Botany says they're a landlord, why don't we give him/her a similiar tax break.

Ken_Volok (anonymous profile)
January 25, 2013 at 5:20 p.m. (Suggest removal)

How is he a double dipper?

JohnLocke (anonymous profile)
January 25, 2013 at 5:29 p.m. (Suggest removal)

First he plans on charging the guests whatever for a room, fair enough it's his hotel and nobody is obligated to stay there. But then he's gonna charge them a "tax" which he intends to pocket. Why not just raise hotel rates, they're already up there anyways. Why disguise the extra money as a "tax"? See my point? It can't really be called a tax, it's more of a gratuity..

Ken_Volok (anonymous profile)
January 25, 2013 at 5:35 p.m. (Suggest removal)

Not really. Caruso doesn't "charge them a tax", there is a Transient Occupancy Tax levelled on top of the room rate and separately stated on the customer folio (as they call an invoice in the hospitality biz) - it's the County charging the tax, the hotelier is just acting as tax collector. The County has agreed to rebate a portion of the TOT to Caruso for 15 years. Either he collects the full tax and remits it to the County who in turn writes him a check for the promised rebate, or he collects the full tax, keeps his rebate share and writes a check for the rest to the county. In any case the customer paid the TOT as they do in every hotel - the rebate is to Caruso, not to the customer. Not double dipping unless he kept his rebate share AND the county wrote him a check as well. Jeez, our Supes couldn't be THAT dumb could they?

JohnLocke (anonymous profile)
January 25, 2013 at 5:53 p.m. (Suggest removal)

Ah I see thanks for clarifying that for me. As to your final question, do you really want me to answer that?!

Ken_Volok (anonymous profile)
January 25, 2013 at 7:30 p.m. (Suggest removal)

As my geometry teacher used to say decades ago "the proof is left to the student". -)

Nice chat.

JohnLocke (anonymous profile)
January 26, 2013 at 8:52 a.m. (Suggest removal)

This is all very tricky. No Board of Supervisors can ennact a law that constrains a future Board of Surpervisors from changing it. If an action by a Board has a one time effect, such as a budget, that is okay. But no Board can take an action that constrains a future Board. Caruso is just going to have to live this fact of law. This is not arbitrary lawyering by the County. It is a fundamental legal precept. Think about it. If a Board of Supervisors could zone a piece of property residential or agricultural and constrain every other future Board to that zoning, there would never be a chance for future Boards to change the zoning. There would be all kinds of lawsuits about such a public policy. Caruso needs to decide whether of not to take the risk or sell the property to someone who will. His only other option is to float a voter initiative that would enact this form of corporate welfare. Good luck with that.

Eckermann (anonymous profile)
January 27, 2013 at 9:26 p.m. (Suggest removal)

Where are the public records, the URLs, for campaign donations — for the BOS, but also for the Assembly campaigns? It would be interesting to know what Caruso did give to the Supervisors; similarly for the Chumash. Facts are preferable to mutterings.

at_large (anonymous profile)
January 28, 2013 at 6:49 a.m. (Suggest removal)

Salud has to hold his coat shut to hide his shiny new moneybelt, full of course, compliments of Mr. Caruso.

BeachFan (anonymous profile)
January 28, 2013 at 8:24 a.m. (Suggest removal)

According to the Indy, Carbajal received 15g from Caruso.

Ken_Volok (anonymous profile)
January 28, 2013 at 8:32 a.m. (Suggest removal)

Heaven forbid that a "Job Creator" play by the same rules in place for everybody else. Entitlements, handouts ....seems like Mr. Caruso likes those when they benefit him.

rblacumbre (anonymous profile)
January 28, 2013 at 10:54 a.m. (Suggest removal)

Wasn't Carbajal basically running uncontested? The other candidate Carol _________ dropped out, no?

Ken_Volok (anonymous profile)
January 28, 2013 at 11:12 a.m. (Suggest removal)

Why again does Caruso get to keep a big share of the TOT tax but other hotel owners do not?

Let's get back to basics in this corporate welfare scheme/scam.

John_Adams (anonymous profile)
January 30, 2013 at 2:03 p.m. (Suggest removal)

What's Fess Parker's, chopped liver?

Ken_Volok (anonymous profile)
January 30, 2013 at 2:21 p.m. (Suggest removal)

first of all Caruso is a registered independent not republican - not that that should matter to an intellectually honest person.
second, while it may be easier for some people to simply pay higher taxes to the government in order to get a small percentage handed back, why not let someone invest their own money and take the risk themselves - locals reap the benefit and make due with a little smaller handout for 15 years then they get the whole pie "due" them -
just for the record, Caruso will make a bunch on money on this project which he will have to pay higher taxes on.... if it just sits then it is a loss and he pays lower taxes, the locals get less tax revenue, and the eyesore brings no new "big spenders" in which also hurts the local economy.
go figure how THAT makes sense -

RSW (anonymous profile)
February 13, 2013 at 11:28 a.m. (Suggest removal)

RSW, you don't get it. he will be charging his guests the tax and pocketing it. Kinda double dipping don't you think?
And taxes on this property and others like it are not a handout since we pay for streets, sewer, emergency services ect that the property benefits from.
Basically the whole pro give Caruso millions is that if he doesn't get it he'll stomp his foot and go home.

Ken_Volok (anonymous profile)
February 13, 2013 at 12:50 p.m. (Suggest removal)

My last visit to the Miramar property was in the mid-90s when I sat on a balcony overlooking the water, eating sandwiches I had brought along due to limited funds. I was shaping the last few ideas for an internet business and making my decision to quit my well paying TV gig. As you might guess it was a good move to gamble everything and try that new fangled World Wide Web. So the Miramar is near and dear to me.

I have to wonder how much tax income has been lost by Federal, State and Local governments because this property has been vacant for the past 13 years. Money that could have been used to help strengthen the community along with those in need. This is a valuable piece of property and sure, whoever develops it is bound to make some money. But for whatever reason it has sat empty.

It appears that the Santa Barbara Board of Supervisors created a program to stimulate hotel/resort construction. Well... It looks like the new owner wants to go that route. And in doing so he wants the wording of the agreement to be made very clear. Understandable so, he is going to be investing a large amount of money. For several years, until the doors open, he will have no income at all. Just as he has since he purchased the property. I don't see anyone stepping up to help him pay for demolition of the ugly eyesore. And he is risking that when the doors open the World economy will be such that he can charge profitable rates.

I'm not sure if the owner said $800 per night, or if it was a price created here by a poster. I'm sure some of the rooms will go for that rate and even higher, but no way can a property that size charge that as a minimum rate. It may be posted as a legal rack rate minimum, but real world rates would be much lower for the majority of the rooms.

I'm surprised that locals don't want to see their neighbors put to work on a project like this. The number of tourists entering the US is growing quickly and this would be an excellent destination and source of tax income. More high end foreign tourists means more money for small businesses all over Santa Barbara. Or would locals be happier with a Motel 6?

The reality is that in order for lots of people to do well you will almost always discover one person at the beginning who took a big risk. Just like the risk I decided to take. During those days at the Miramar 18 years ago I had a vision of how the internet was going to change the world. I risked everything, committed my savings, and took the plunge.

BMurray (anonymous profile)
March 12, 2013 at 3:26 p.m. (Suggest removal)

I have a small house, which I rent, on the beach. I collect and pay the 10% TOT tax to the county. When I renovate the house, make improvements spending hard earned dollars, (not somebody else's money) I never get a rebate. Why should he?

thomas592003 (anonymous profile)
March 19, 2013 at 7:58 a.m. (Suggest removal)

If Caruso gets a rebate, I say Thomas should too. At he's a local resident.

Ken_Volok (anonymous profile)
March 19, 2013 at 11:19 a.m. (Suggest removal)

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