STAFF REPORT

DATE: April 19, 2011

TO: City Council

FROM: Ken Hiatt, Director of Community Development and SustainabilityKatherine Hess, Community Development Administrator

SUBJECT: Hyatt Place Hotel Expansion and Old Davis Road Extension – Response toCampus Tiered Initial Study

RecommendationStaff recommends that the City Council authorize and direct the Mayor to send the attached letterto UC Davis regarding the proposed hotel expansion and Old Davis Road extension.

Council GoalsDevelop Davis as a visitor destinationPresent options to the City Council for the development of a hotel/conference centerfacility within or adjacent to the downtown.

Fiscal ImpactCosts of preparing the attached letter have been absorbed within the approved budget for thecommunity development program. The proposed hotel expansion would likely have impacts onthe City’s Transient Occupancy Taxes and other revenues – the economic impacts are proposedto be addressed in the Environmental Impact Report for the project.

Background and AnalysisThe Hyatt Place hotel was completed on the UC Davis campus in 2010. The project has 75rooms and a small food service area. It is near the UC Davis conference center, in the area of theGraduate School of Management and the Mondavi Center. The campus originally proposed alarger hotel on the site, but reduced the size during the public and environmental review of theproject. UC Davis is now proposing to increase the size of the hotel by 52 rooms, so it will havea capacity of 127 rooms. This hotel expansion will require an Environmental Impact Report.With the hotel, the campus is considering extending Old Davis Road to a connection with AStreet (see site plan, Attachment 2).

The City has received the “Tiered Initial Study” document for the Hyatt Place Hotel Expansionand Old Davis Road Extension on the UC Davis campus. Public comments on the Initial Studyare due by April 21. This Initial Study is in preparation for the Environmental Impact Report onthe project, which will be prepared before the Regents take action on the project (anticipated July2011). The Initial Study document is athttp://sustainability.ucdavis.edu/local_resources/docs/onlinedocs/hotel_expansion/IS%20Hyatt%20Place%20Hotel%20Expansion%20and%20Road%20Extension.pdf.

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The on-campus hotel, and its impact on Davis hotels, has been an issue in the City of Davis sincethe original hotel was proposed. The City raised concerns about the original proposal in 2002.

Hotel ExpansionThe Initial Study states:

The proposed project would introduce additional hotel rooms to the Davisarea and these additional rooms may affect occupancy rates at other hotelsin the Davis area. To evaluate the potential effects of these changes, thecampus will conduct an economic impact assessment to determinewhether the proposed project could cause any closures, whether there arepotential alternative uses for properties that could be affected, and whetherthe project could create physical blight in the community.

Staff’s understanding is that the campus is obtaining a market analysis to evaluate the impacts ofthe hotel expansion. This analysis is appropriate. The recommended letter notes the impact of theHyatt Place on the Davis hotels, and suggests that the appropriate response is to increase thedemand for hotel rooms, rather than dilute the existing market.

Old Davis Road ExtensionThe proposed project would extend Old Davis Road through the existing parking lot near SolanoPark, so there would be a direct connection from the UC Davis I-80 interchange to A Street. Theconnection has the potential to shift traffic patterns, including possibly diverting downtown tripsfrom the Richards/I-80 interchange to the UC Davis interchange.

The Initial Study states:Project activities would result in traffic and circulation effects fromexpansion of the hotel and from the proposed realignment of Old DavisRoad. The impact from these effects will be evaluated in the project EIR.

This analysis is appropriate. The recommended letter notes potential impacts of the project onroads and intersections within the City of Davis as meriting particular review.

Next StepsThe campus will be preparing an Environmental Impact Report on the proposed hotel expansionand Old Davis Road extension. When the EIR is released, staff will review it and makerecommendations on further City action.

Attachments1. Recommended letter2. Project description and site plan

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April 20, 2011

A. Sidney EnglandAssistant Vice Chancellor – Environmental Stewardship and SustainabilityUniversity of CaliforniaOne Shields Avenue436 Mrak HallDavis, CA 95616

RE: Hyatt Place Hotel Expansion and Old Davis Road ExtensionTiered Initial Study

Dear. Mr. England:

The City of Davis has reviewed with great interest the Tiered Initial Study for the HyattPlace Hotel Expansion and Old Davis Road Extension. As you know, visitor attractionand accommodation is a key element of the City’s economic development efforts, andTransient Occupancy Tax currently contributes an average of $1 million annually to theCity’s operations. The City and its Redevelopment Agency have been working toenhance the vibrancy and attractiveness of our downtown to residents and visitors alike.

We appreciate the University’s commitment to analyzing economic impact and trafficimpacts of the proposed hotel expansion and road extension. To support those analyses,we offer the following comments.

Hotel Economic ImpactsThe Hyatt Place Hotel has increased the supply of hotel rooms in the Davis area while therecession has reduced conference and tourism dollars nationwide. The combination hasled to significant reductions in hotel stays, room rates, and TOT collection within the Cityof Davis. TOT reported to the City of Davis in 2010 is 23.5% less than the amountreported in 2008. Two of our hotels have shown signs of severe financial distress. We donot believe that the campus conference facility has provided the economic benefits andincreased room nights that were originally anticipated.

The City is making every effort to add a full-service conference facility near thedowntown as a way of bolstering the hotel market. The City Council took action toidentify a preferred project on March 29, 2011, and we are working toward an OwnerParticipation Agreement for approval this year. Our goal is to increase the community’sattractiveness for conferences to support the host hotel and other hotels in Davis. Addingrooms, without increasing total visitors, will dilute the market further and jeopardize thesuccess of our conference center effort.

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The current Initial Study states that the EIR will evaluate potential alternative uses forother hotel properties. The economic analysis prepared for the original hotel developmentin 2002 evaluated the potential of converting existing hotels to student residences as aform of adaptive reuse. The City of Davis took exception to that conclusion at that timeand our objections on feasibility of conversion remain. Moreover, we would like to stressthat the apartment market is very different now from that of 2002. The vacancy rate wasat its lowest in 2002, at 0.2 percent. The latest rate was 3.4 percent, slightly below the“balanced” rate of 5 percent. The additional student housing at West Village will furthersoften the rental housing market in Davis. Further diluting the demand for hotel roomswill lead to deterioration of existing hotel properties and result in urban decay and blightin the current market.

We would also like to stress that blight is more than an “aesthetic” issue. Blightedproperties can certainly cause aesthetic impacts, including boarded-up or abandonedbuildings, graffiti, and unkempt properties. In addition, urban decay and blight canincrease criminal activity, require additional public safety services, decrease values ofsurrounding properties, and reduce City revenues while increasing costs of services.Failed hotels would exacerbate the neighborhood and financial pressures being currentlyfaced by the City of Davis. This concern applies both to downtown and to South Davis,where a number of commercial buildings are currently vacant. This could further result inimpacts to land use through incompatibility of adjacent uses throughout the Daviscommunity.

If the project proceeds, mitigation measures that should be considered include efforts toincrease hotel demand in Davis, such as capital or operating contributions to thedowntown conference facility; additional conference bookings at the UC DavisConference Center; or increased contribution to the Yolo County Visitors Bureau.

Traffic AnalysisWe support the University’s commitment to analyze the traffic and circulation effectsfrom effects from expansion of the hotel and from the proposed realignment of Old DavisRoad. We trust that this analysis will “follow the trips” into and through the City ofDavis, particularly through the downtown Core Area.

The connection of Old Davis Road to A Street will allow westbound vehicles on I-80 toexit at UC Davis and access downtown Davis without experiencing the congestion at theRichards/Olive/First Street corridor. However, the through traffic on A Street is likely toincrease significantly, as will the number of vehicles at the intersection of First and Astreets. This intersection is already identified as a critical intersection in the LRDP EIR,and programmed for regular monitoring. The current conflicts between automobiles,buses, and bicyclists are likely to be exacerbated by this project. We are very interested inseeing the results of the traffic assessment and recommended mitigation measures.

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Thank you for the opportunity to comment on the Initial Study. If you have any questionsor require clarification, please contact Ken Hiatt, Director of Community Developmentand Sustainability, at 757-5610 or khiatt@cityofdavis.org.

Sincerely,

Joseph F. KrovozaMayor

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