Some things are, in fact, too big to fail; the American auto industry comes immediately to mind. By contrast, Rick Caruso and his new and improved Miramar Hotel project aren't remotely in that category.
I don't have anything against Caruso just because he builds experiential shopping malls and sports French cuffs and collars. I just don't think county taxpayers should bail out anyone wealthy enough to toy seriously with buying the Los Angeles Dodgers — as Caruso did — to get him to do what he long ago told us he could do on his dime. Adding to my sense of vexation, I have serious doubts that even if the county supervisors vote this Tuesday to give away the store to Caruso — as they are scheduled to do — that this gift be sufficient for Caruso to transform the Miramar from mirage into reality.
According to the millionaires and gazillionaires growling their sweet nothings into my phone, Caruso's plans for the Miramar, however magically transformative they may be, defy the laws of economic common sense. Unless Caruso has the Sultan of Brunei in his hip pocket, they tell me, his plans are not economically viable from any rational investor's point of view. Caruso's $170 million plans are simply too big and too fancy, I have been told. To recoup such costs, the Miramar would have to charge around $800 a night. Nobody's pulling down room rates like that on the South Coast, no matter how many stars they boast.
Supporters of Santa Barbara's very own billionaire bailout scheme (okay, maybe Caruso isn't quite a billionaire, but on a windy day he's within spitting distance) contend that by absolving Caruso of his obligation to pay bed taxes on his proposed new hotel for 10 years, the Los Angeles mall developer will be able to attract the investment capital needed to make this fantasy fly. And whatever the county loses by way of bed taxes — somewhere in the neighborhood of $15 million — will be more than compensated for by increased property tax revenues and increased sales taxes, too. At least that's what County Auditor Bob Geis is telling us. And if we don't give Caruso this special dispensation — legally it's a gift of public funds — we are warned, the hotel — shut down for the past 12 years — will never be rebuilt. As such, it constitutes a continued poke in the eye with a sharp stick, at least aesthetically speaking. In other words, we are told, Caruso has us by the short hairs, and there's nothing we can do about it.
As a card-carrying county taxpayer, I don't have any spare change I'd care to give Caruso right now. And the arguments I'm hearing on his behalf violate City Hall's prohibition against aggressive panhandling. Let Mr. Caruso build his hotel on his own dime or pound sand. His permits expire in two years. If he doesn't get cracking in that time, the county should let his permits die. At that point, the value of his property will be considerably less than it is now, maybe by half. At that reduced price, maybe some other developer can come along who can actually build a new hotel.
At the very least, the county supervisors should slow everything down. I know Supervisor Salud Carbajal has twisted a lot of arms to make this deal happen. Carbajal represents Montecito, where the Miramar lives, as do many residents who want that site cleaned up yesterday. While the Miramar's so-called blight doesn't bother me, I do understand how important views are to many Montecitans. In fact, actor Kevin Costner was just sued by a neighbor for $500,000 because shrubs and trees on the Costner property are obstructing the neighbor's ocean views. In this case, the neighbor doesn't even live there; he offers the place as a vacation rental so that his tenants can do a looky-loo on a famous celebrity from the comfort of their living room couch.
Lest the supervisors appear as if they're changing county policy on behalf of just one person, county administrators have strained heroically to craft an ordinance that provides them a credible fig leaf; if the policy is passed, they could say with a straight face that it applied to anyone who wants to build a five-star luxury hotel anywhere in the county. Privately, even Caruso's most ardent backers concede the deal is for him. The ordinance was first released for public perusal this Thursday. The supervisors could vote on the matter as soon as this Tuesday. Not counting the weekend, that means interested parties and members of the public will have two days to study the implications of all this fine print. Even if the ordinance makes all the sense in the world, that's not enough time. The supervisors need to put the brakes on. It would behoove the two supervisors who received major donations from Caruso — Salud Carbajal got $15,000 and Doreen Farr got $5,000 — to lead the charge in favor of due deliberation and thoughtful consideration.
Before the supervisors pass anything, the county needs to have some independent economic analysis that can show a $170 million hotel can be built where the once dowdy, blue-roofed Miramar once stood. Prove all the doubters calling me up wrong. It is worth noting that in the 12 years since the Miramar went dark, we've had three credible operators, none of whom have delivered as promised. In that time, the economy has tanked and soared and tanked again. We've gone from Ian Schrager, the urban hipster of New York City's Studio 54 fame who reportedly paid $32 million for a property worth $27 million. He and Philippe Starck, his superstar French designer, and Starck's steely eyed, sexy Romanian assistant wowed Montecito movers and shakers, way too eager for a little glitz and glam. Schrager left a lot of well-wishers stranded at the altar, never building his hotel, never even bothering to say good-bye. He sold to Ty Warner, the Beanie Baby magnate, for $42 million, and Warner got in trouble with the natives — or at least some of them — mostly because of his über-reclusive Howard Hughes ways. Warner famously gave up in disgust and sold to Caruso for $52 million. And here we are.
In the meantime, there are a lot of hoteliers and developers with their noses out of joint; how is it they didn't have the same opportunity to enjoy a multimillion-dollar tax break as Caruso? And the money the county “gives” Caruso is money that would otherwise be spent promoting Santa Barbara as a tourist destination. The way I do the math, existing operators wind up getting screwed twice in the deal. No wonder they're steamed.
Lastly, the supervisors shouldn't get into a business partnership with Caruso because they're not competent enough to look out for their own good, which in this case, happens to be our own good. A case in point: Last week, the Grand Jury released a report detailing the collapse of the Lompoc Housing and Community Development Corporation, which until recently owned and operated two homeless shelters in Lompoc, not to mention 255 units of affordable housing.
Over the years, about $6 million in taxpayer money was funneled into this organization, most via the county government. According to the Grand Jury, there were warnings as early as 2003 that Lompoc Housing was not following the rules and was getting into financial hot water. The problem was that the county administrators who should have paid attention did not. They repeatedly failed to see or turned the other way. The ultimate responsibility lies with the county supervisors, who intervened only after it was too late to do any good. Because of this wholesale neglect, county taxpayers could be on the hook for $1.4 million.
If the county administrators couldn't hold their own with Lompoc Housing, why should anyone have confidence they can deal with someone as shrewd, sharp, and creative as Rick Caruso? When Caruso first showed up, he assured us all he could finance this project out of his own pocket. It's time for Mr. Caruso to put up or shut up.