DeRose: Prop 499 delays downtown hotel project financing

Hotel developer Chris DeRose, president of CivicGroup LLC, which plans to bring a LivSmart by Hilton hotel to Downtown Glendale, conducted a call with media Oct. 31 to discuss how Proposition 499 jeopardizes investments like his and puts similar future hotel developments at risk.

Also joining the call were Glendale City Council members Joyce Clark, Ian Hugh and Lauren Tolmachoff, and Councilmember-elect Dianna Guzman.

Here are some highlights with links to video:

DeRose on the uncertainty caused by Proposition 499:

“We're in the process of taking that out to capital. Then we get a proposition that gets ballot access that threatens to upend all of our economic modeling and throw uncertainty into the whole project.

“Unfortunately, that’s frozen us in our tracks because whether you're talking to a bank or you’re talking to investors, they want to know, ‘Hey, what's the labor cost here?’ For a hotel, your number 1 expense, especially in a limited-service model where you don't have F&B, it’s salary for staff. And so, this proposition has created uncertainty, and we’re not able to answer those very basic questions right now. And as a result, we're not able to move the project forward.”

DeRose on the cap on productivity contained in Proposition 499:

“What's really unusual about this, it’s a minimum wage that’s really – it’s a proposition that is disguised as a minimum wage. The minimum wage part is the Trojan horse.

“The problem is that there’s actually a cap on productivity and that is unprecedented. I don't know of another jurisdiction in America where you have a cap on productivity and in this case it's 3,500 square feet, which is about 10 hotel rooms.”

DeRose on the risk posed to Glendale taxpayers:

“It's not just about profit and loss, it’s also about risk. And I think of particular interest to Glendale taxpayers, they're going to be footing the bill for this new regulatory agency, which means that they're either going to pay more in taxes or they're going to have fewer first responders. It’s one or the other.”

Councilmember Tolmachoff on the mandates on the city:

“To put the city in a position to be a regulatory authority and to have to intervene and interact between a civil disagreement between an employee and an employer is absolutely no place for a city to be.”

Councilmember Hugh on Glendale’s reputation as a business-friendly city:

“This is the worst thing I’ve ever heard of. Glendale's success is because we are business-friendly, creating jobs, and this bill is just the opposite of what Glendale wants to have happen.”

Councilmember Clark on Proposition 499’s effect on Glendale’s competitiveness:

“I think it's important to note that Glendale will be the only city in the state to mandate $20 an hour. And overtime, it's more than that. It's $40 an hour, which people are not paying attention to. It puts Glendale at a competitive disadvantage with every city in the state and the Common Sense Institute says that it may cost Glendale anywhere from a million dollars on up annually just to regulate this and in lost revenue from other projects that may have considered locating in Glendale.”