Is downtown’s first hotel in nearly a century Cruz’n into town? What we know about the hot-button project

There are steps left to take if supporters of the for-now-called Cruz Hotel project are to get past loud opposition and become part of the overhaul of lower Pacific Avenue and the riverfront zone. It is one of six projects slated to be at least six stories in a downtown with few buildings that tall.

Santa Cruz is one step closer to seeing its first downtown hotel development in more than 90 years — a six-story, 152,000-square foot development known by the placeholder name, “Cruz Hotel.”

Amid outcry from some of its customers, the Santa Cruz Community Credit Union officially sold hotel developers its downtown property at 324 Front St., just north of Laurel Street, on Sept. 30. But the developers are still waiting for the city to sign over neighboring properties currently being used as parking lots before they break ground, and they could face staunch opposition from community members.

The most vocal opposition comes from grassroots organization Build Community Not Hotels, a group of credit union members who believe a hotel is ill-timed given the city’s dearth of affordable housing and the number of people experiencing homelessness.

If it gets through those remaining hurdles, the Cruz Hotel would become a key part of what city leaders are envisioning for the transformation of lower Pacific Avenue area into a popular piece of the downtown landscape. It’s one of six proposed developments slated for the area between Laurel Street, Pacific Avenue and the San Lorenzo River. In addition to the hotel, the projects will offer tens of thousands of square feet of commercial space and more than 700 units of housing.

With seven new six- and seven-story buildings planned for downtown, nobody disputes that it will alter the look of Santa...

According to Bonnie Lipscomb, the city’s economic development director, the proposed hotel will give the city revenue for affordable housing projects, in addition to supporting businesses and ensuring the long-term sustainability of downtown Santa Cruz.

“I’m a big, big advocate both for the (hotel) project but also for affordable housing creation and I believe that this project enables us to move forward on both,” she said.

Here’s what we know so far about the proposed downtown hotel.

What is the Cruz Hotel?

Proposed by San Francisco-based developer Stephen Chan, of Eagle Point Hotel Partners, and local developer Owen Lawlor, the Cruz Hotel would include 232 guest rooms, along with a restaurant and bar facing the San Lorenzo River.

Rooms would range from the mid- to high-$100s per night, depending on the season, Chan said in communications with the city’s economic development department obtained by Lookout.

“Our vision is to bring a mid-market enterprise to the downtown area that will facilitate family, university and business clienteles within the local community,” Chan wrote. “We are not planning a boutique or luxury hotel.”

The developers hope to acquire two city-owned parcels, to the north and south of the current credit union building. The southern parcel, on the corner of Front and Laurel streets, is a parking lot currently being used by homelessness advocacy group Food Not Bombs and is occupied by numerous people experiencing homelessness.

The other parcel is a parking lot just north of the credit union building. Developers hope to construct a 50-foot paseo — a publicly accessible open space connecting Front Street to the San Lorenzo River.

According to Chan, the development would include 103 spaces for bike parking and 15 spaces for cars. The hotel would also use valet parking to store cars in private and public lots scattered around downtown and the beach area.

“While visitors are at the hotel they can access downtown and the beach without a car due to the location,” Chan explained. “Bikes will be provided for visitors and our location on the bike path is ideal.”

Developers Stephen Chan and Owen Lawlor.

Developers anticipate the project will generate over $2 million annually in tax revenue for the city. They also plan to partner with local Santa Cruz nonprofits, who have yet to be determined, and give guests the option to donate to a couple of dollars per night or a small percentage of their bill. Eagle Point Hotel Partners has similar programs in place at its hotels in Jackson Hole, Wyoming, and Greenpoint, New York, that distribute funds to educational and environmental nonprofits.

According to Chan, 95% of investors in the purchase of the property are from Santa Cruz and the greater San Francisco Bay region. It’s unclear who those local investors are and what percentage of the hotel cost they are actually financing.

What’s happened so far?

The developers have stated that, in addition to the credit union building, they also need the two neighboring city parcels in order to develop the hotel — a decision that rests with Santa Cruz City Council. On May 25, the council started the process of selling the parcels, declaring them exempt surplus land.

According to the California Surplus Land Act, when a local agency sells surplus land, it must be prioritized for open spaces or affordable housing, but land can be sold for other purposes if it is designated as exempt surplus.

Mayor Donna Meyers, Vice Mayor Sonja Brunner and Councilmembers Shebreh Kalantari-Johnson and Renee Golder ultimately voted in favor of exempting the surplus land, arguing money from the sale could be used for other housing projects. Councilmembers Justin Cummings and Sandy Brown opposed. Councilmember Martine Watkins was absent.

Cummings proposed instead incorporating the parcels into a housing project, though his motion failed.

Councilmember Justin Cummings, who previously served as mayor, with artist and activist Abi Mustapha.
Councilmember Justin Cummings, who previously served as mayor, with artist and activist Abi Mustapha. He has said the hotel project is not a done deal.
(Kevin Painchaud / Lookout Santa Cruz)

I share a lot of the community sentiment around wanting to build more affordable housing.

— Justin Cummings

“I share a lot of the community sentiment around wanting to build more affordable housing,” Cummings told Lookout.

Most of the letters the council received prior to the May meeting were in opposition to the proposed hotel development. The Santa Cruz County Chamber of Commerce was one of the few that wrote in favor.

“Why take away an opportunity to explore revitalization of lower downtown that can be an economic benefit to (the) future of Santa Cruz?” wrote Casey Beyer, the chamber’s CEO.

The main opposition group, Build Community Not Hotels, formed last summer to protest the sale of the credit union property, gathering hundreds ofsignatures from credit union members in a petition against the sale.

“It’s going to take up space that could be used for people that live here and work here,” said Micah Posner, a former Santa Cruz councilmember who is spearheading Build Community Not Hotels’ efforts. “In this particular moment in the history of Santa Cruz, we can’t afford to supplant housing sites with hotels.”

Micah Posner leads the opposition group.
(Kevin Painchaud / Lookout Santa Cruz)

In this particular moment in the history of Santa Cruz, we can’t afford to supplant housing sites with hotels.

— Micah Posner

Although the board had already agreed to sell the building to the developers in February 2019, it agreed to hold an August meeting to hear petitioners’ complaints even though they didn’t have enough votes to require it.

“The Board wanted to hear them out and hopefully clear the air,” said Elizabeth Carr, the credit union’s president and CEO. “The Board was unable to pull out of the sale agreement because it was a binding contract and to pull out of the agreement would have resulted in detrimental action both legal and financial against the credit union.”

According to Carr, the proceeds from the sale will fund the credit union’s member access plan, which increases banking services for underserved community members.

Carr also said in a statement, “The Santa Cruz Branch building is quickly becoming obsolete in the context of changes in the financial services industry, customer/member preferences and the pending loss of all current parking spaces due to redevelopment projects planned and underway in Downtown Santa Cruz.”

The credit union will remain in its current downtown building until a nearby location, with better parking, is identified within the next year.

So what happens next?

The timeline for approving the hotel is murky, at best, with many of those closest to the issue still in the dark about the process moving forward.

According to Lipscomb, the city is still negotiating the sale of the two parcels with the developers. Once the terms of the sale are finalized, the sale will go to the city council for approval in an open session. Lipscomb hypothesized this could happen in late November or early December, though no dates have been set.

“It’s going to be up to the council,” Cummings added. “It’s not a done deal yet.”

The development must also be reviewed by the planning department, which must approve coastal permitting and show the project is consistent with the city’s general plan. Build Community Not Hotels even brought in legal support to make sure the city shows how the project aligns with the general plan publicly, sending a warning letter to the city on Sept. 9.

“We think the community in an obvious public way should weigh in,” Posner said.

Those opposed to the hotel, like Posner, plan to speak during the public comment time at the Oct. 21 planning commission meeting. Andy Schiffrin, the chair of the commission, said the issue is not scheduled on that day, and Planning Department Director Lee Butler did not respond to comments about the larger timeline.

However, the development will be discussed at the Dec. 2 Downtown Commission meeting, according to the city planner of the project, Ryan Bane.

The developers are also required to hold a community meeting discussing the project and are working with the city to schedule one. Chan said they are hoping to obtain all approvals by the end of the year.

For the record: The timing of the decision to sell the Santa Cruz Community Credit was miscast in the original story. Also, though many more signatures were submitted by Build Community Not Homes, a third-party auditing firm hired by the credit union could only verify 280.

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