Quick Take
Groundbreaking could happen as soon as next summer on the hotel at Front and Laurel streets in downtown Santa Cruz, though its developer says the new fees, passed by the Santa Cruz City Council on Tuesday, could delay final financing. The fees aim to help pay for development of "lower-cost overnight accommodations" and to aid social service organizations.
The Santa Cruz City Council moved along plans for the Cruz Hotel, the long-discussed downtown development, approving deed restrictions that require nearly $6 million in additional fees during Tuesday’s council meeting. The fees don’t include the price of the adjacent parking lots the hotel will purchase from the city or any construction costs.
The California Coastal Commission originally outlined the fees as a condition of approval when it authorized the project in September 2024, and the city council adopted them in the deed restrictions as it approved the sale of the city’s $2.5 million property at the corner of Front and Laurel streets in downtown Santa Cruz.
The Cruz Hotel will feature 190 rooms, reduced from the initial proposal of 232 rooms, and reach up to 70 feet tall after receiving height exceptions from the city. It will also feature a restaurant, bar and public rooftop access. The city council approved the project by a 5-1 vote in March 2024.
Cruz Hotel developer Owen Lawlor said his organization is still working on financing the project and will “probably” see delays in the construction timeline because of the new fees.
“It’s a very heavy burden for the project,” Lawlor said.
Lawlor declined to comment on the relevance of these fees that are seemingly unrelated to the project. He said the causes they would be paying into are “admirable,” but that it will pose a significant challenge to finance the fees in addition to the actual construction. He said he believes it’s a “great project, the right one in the right place.”
Lawlor said he is hoping to break ground by late summer or fall next year, and once the project begins, it will take around 2½ years to complete.
The biggest chunk of the new fees, some $5 million, will go to the city to fund the development of “lower-cost overnight accommodations” in the Santa Cruz County coastal zone, with a preference for the lodging to be located in Greyhound Rock County Park, located near the county’s northern border.
The coastal commission’s in-lieu fees — which are tacked on when a hotel development doesn’t provide enough lower-cost rooms — include the $5 million, along with $50,000 to the Santa Cruz Hostel on Main Street.
The deed restrictions also require the Cruz Hotel to offer 20 lower-cost rooms, which as of 2024 would be capped at $150, and to establish and advertise hotel employee and underserved community reduced-rate programs. The hotel will subsidize at least four units of employee housing in Santa Cruz where the employee pays no more than 30% of their income toward rent and the hotel covers the rest.
Other public benefits the deed restrictions require the Cruz Hotel project to pay:
- $727,500 to the city’s Affordable Housing Trust Fund;
- $50,000 to the county’s Boys and Girls Club to support youth sports;
- $10,000 per year toward the Santa Cruzer beach and downtown shuttle bus operation.
Last, the restrictions allow local nonprofits to use the hotel convention center at a reduced cost or for free three days per year.
The city estimates that the Cruz Hotel will also generate $2.4 million in its first operating year in payments of the city’s transient occupancy tax, a tax on accommodations such as hotels and Airbnbs.
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