Montebello Approves $50M Hotel Bond

Project will be built on golf course property.

By Nancy Martinez, EGP Staff Writer

A hotel project expected to generate at least one million dollars in revenue for the City of Montebello was approved last week after the city council agreed to pursue a multi-million bond to cover construction costs.

The 130,000-square foot project will bring a Home2 Suites by Hilton, an extended stay hotel, to the city that could be the first of its kind in the state.

The hotel will be built on a city maintenance yard at the Montebello Golf Course, near the Hilton Garden Inn and Quiet Cannon entertainment center. The Montebello Armenian Genocide Memorial and the Bicknell Park Scout House – all owned by the city – also share the site.

The mid-scale hotel would be home to 203 rooms featuring extended stay perks such as in-suite kitchens, free breakfast, pet friendly accommodations, gym, pool, Wi-Fi and a businesses center.

A new hotel will be built adjacent to the Montebello Golf Course property where a Hilton Garden Inn is currently located.  (EGP photo by Nancy Martinez)

A new hotel will be built adjacent to the Montebello Golf Course property where a Hilton Garden Inn is currently located. (EGP photo by Nancy Martinez)

The building itself would be owned by the city.

City engineers estimate the cost at no more than $38.9 million. To finance the construction, the city council, which also serves as the Montebello Public Finance Authority, authorized starting the process to secure a Lease Revenue Bond, 2016 Series A, in an amount not to exceed $51 million.

City officials estimate the new hotel will generate $4 million a year in revenue, $3 million of which would be used to cover the annual payments on the borrowed money. The remainder, approximately $1 million would go to Montebello’s general fund to pay for basic city services such as police and fire, street paving, tree trimming and park maintenance.

“We expect the hotel will generate more than adequate cash flow to cover the debt service of the bond,” City Manager Francesca Tucker-Schuler assured the council.

Some in the city are questioning the council’s decision to borrow more money during a time of financial uncertainty, and ahead of the upcoming budget study sessions that will be used to set spending priorities in Montebello’s 2016-2017 Fiscal Year budget.

Montebello resident Tila Gregorian told EGP she was unaware the city council even had authority to approve such high revenue bonds without voter approval. Gregorian said she is concerned that if the hotel does not generate the revenues they estimate, the city will have to use general fund revenue to cover payments on the debt.

“We can’t even pay for bonds we already owe,” she said dumbfounded. “We are just getting further and further into debt.”

Longtime resident Margot Eisner said she doesn’t understand why Montebello would go into debt to help build a hotel for the Hilton Corporation, a multi-billion dollar company.

Councilmember Bill Molinari, however, defends the Hilton project, He says the hotel will generate revenue directly and indirectly for the city, but did not provide specific details how that would work, instead saying “that is for another discussion.”

The longtime council member said he has more confidence in the Hilton project than in the hotel being built on Washington Boulevard.

A hotel market demand analysis of the venture estimates an 82 percent occupancy rate for the new hotel, citing it’s strategic location at the golf course and near the 60 Pomona Freeway, a major transportation route in the region.

“The subject hotel will be competing primarily within the San Gabriel Valley market area,” according to the study. “With its newer facilities and accommodations the hotel will be positioned to capture commercial, group and leisure demand…as well as generate additional demand in the area,” the study concluded.

Signaling their strong desire to quickly move the project, the council also approved a $36 million agreement with KPRS Construction Services to build the hotel. KPRS’ bid came in six percent lower than the city engineer’s estimates, but was also the only bid Montebello received.

Before the vote, Councilwoman Vanessa Delgado disclosed that her brother works for the construction firm, but clarified that neither she nor her brother have financial ties to the project, nor do they live with one another.

“The city attorney has advised me there is no economic or financial relationship between me, KPRS or my brother and [that I] could participate and vote on this matter,” said Delgado, reading a prepared statement. “However, out of an abundance of caution, I will be participating solely to be establishing quorum in the city council chambers and will be abstaining from roll call,” she said.

Councilman Jack Hadjinian and Mayor Pro Tem Vivian Romero attended the meeting via teleconference and joined Mayor Art Barajas in voting in favor of the project. Molinari chose to abstain from voting, saying he felt the request for proposal process had been too short and that may have prevented more contractors from submitting bids.

“When there’s only one bidder there’s nothing to compare it to,” he argued.

City Attorney Arnold Glassman responded that the city had provided the minimum 10-day notice for such bids as required by law. The developer also had communications with 6 different contractors throughout the process, he added.

The hotel could open as early as September 2017, according to the city.

“This is a very important project for the city,” said the mayor. “It will be a great benefit to our budget in the years to come.”

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May 19, 2016  Copyright © 2012 Eastern Group Publications, Inc.

Comments

One Response to “Montebello Approves $50M Hotel Bond”

  1. virginia grigorian on May 19th, 2016 10:01 pm

    i live right behind the golf course close to the hilton garden inn and it just doesn’t make sense to build a hotel so close to one another. also, it isn’t right for the city council to make such a big decision for its citizens like they have done so many times in the past.

    IT SHOULD BE PUT TO A VOTE BY THE RESIDENTS OF MONTEBELLO11111

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