Considerations Regarding Chinatown

September 2008

Journal Article by Mayor Dave Romero

The “Chinatown” project proposed by the Copeland family provides the City with a unique opportunity to redevelop this rundown block in a manner that will meet many General Plan goals and policies, following guidance of the Downtown Concept Plan. The project will provide a downtown hotel, downtown housing, new shopping facilities in an attractive setting, and will help the City in meeting its longtime goal shifting public parking from inefficient surface use to very efficient structures, thus allowing commercial and mixed use infill.

Preliminary negotiations on three Copeland projects (Court Street, 919 offices and parking structure and Chinatown) commenced in 1999. Agreements were formalized in November, 2003 for the Chinatown project, with the City offering its parking lots and building for $2,950,000, based on a fair market appraisal. A condition of the agreement was that the Copeland family obtain all approvals and be ready to commence construction before the city would complete the sale. The Copeland family was unable to complete the complicated review process by the agreement termination date (plus extensions), thereby necessitating a second agreement.

The second agreement was approved in July, 2008, with cost for City property now $3.7 million (about a 20% increase over the 4 ½ year period). By this time the Copeland family had invested millions of dollars in acquiring additional properties to make the project more functional and in studies and fees required by San Luis Obispo’s development review process.

With the Copeland family somewhat over a barrel, why didn’t our city switch to a higher appraisal which has recently surfaced? For me two factors were primary:

A. San Luis Obispo has a long time reputation for honesty in government and in dealing fairly and ethically with everyone. In my view it would have been unethical to greatly increase our asking price after 4 ½ years and a huge financial investment and time expenditure by the other party.
B. Because this is essentially a redevelopment project, the city asked our long time consultant, Allan Kotin, for a “reuse appraisal” and analysis commonly used with this type of project. His analysis indicated that with City constraints on development, the difficult site, uncertainties regarding historic buildings, and high and still uncertain development costs, the return on investment was marginal. He pointed out that we were fortunate to have a developer with a proven record of excellent development who was oriented toward developing projects to manage within his own hometown. Kotin’s report showed an estimated yield (sales tax, property tax and hotel tax) at $1 million/yr, increasing over time.

The primary objectives of the City Council are the development of a healthy and vital downtown and maximizing our revenue stream over the long term, therefore it was easy for me to accept the more modest $3.7 million for our property rather than a higher appraisal, which I believe is based on flawed and unreasonable assumptions.

Properties considered in this sale were acquired by the City at various times between 1956 and the late 1970s at a fraction of our current sales price. We’ve used some of these properties and derived revenue on them for over 50 years. Funds received will be allocated to accounts used with the original purchases, $2.6 million to the parking fund and $1.1 million to the general fund.
We can argue endlessly about whether the city should have insisted on a higher amount. In my view the redevelopment aspect and the substantial tax revenue stream made it no contest.

I feel confident that our City Council made the wisest choice for our beloved SLOTOWN.