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Quail Lodge Closes, Hits C.V. Finances

Carmel Pine Cone, Aug. 11, 2009



200 jobs lost at famed resort

By CHRIS COUNTS

THE DEBATE over the economic viability of incorporation
reignited this week after a significant source of tax revenue
for the proposed Town of Carmel Valley, the hotel at
Quail Lodge Resort and Golf Club, announced it will close
its doors Nov. 16.

The owner of the 97-room hotel, Hong Kong and
Shanghai Hotels Ltd., said it failed to turn a profit despite
investing millions into the business, which it bought from
founder Ed Haber in 1997. The resort’s golf club will remain
open, with “reduced services.”

Opponents of the drive to incorporate Carmel Valley have
long contended that the loss of a major resort within the proposed
town’s boundaries would leave it seriously underfunded.

In response, proponents of incorporation insist they will
not only weather the loss of the hotel’s transient and occupancy
tax revenues, but they have budgeted for a contingency
fund that will enable them to withstand other potential losses
of revenues.

“It’s not good news for the town,” said proponent Mike
McMillan of the hotel’s closure. “But we do have a reserve.”

While the new town might be able to survive the loss of
one of its biggest sources of revenue, the demise of the
hotel is certain to put a dent in its projected coffers.

According to Louis Solton, Monterey County tax collector,
Quail Lodge generated $521,265 in TOT revenue for
the county during the fiscal year ending June 30. Last
year, the county received $692,273 in TOT. Before the
announcement of Quail Lodge’s closing, incorporation supporters
estimated the town would receive $2,888,812 in TOT per year.

But McMillan — who serves as secretary for the proincorporation
Carmel Valley Forum — said the loss of Quail
Lodge revenue shouldn’t present a problem, since the town
plans to have a budget surplus of more than $2.4 million after
its first year. “During the first year of incorporation, the
county has to pay the cost of services,” said McMillan,
explaining the reason for the surplus.

The new town would be responsible for the cost of services
in its second year, and as a result, at least $787,182
would be added to the contingency fund annually, according
to a comprehensive fiscal analysis prepared by the Local
Agency Formation Commission.

McMillan insisted proponents used very conservative
numbers. “We preferred to overstate expenses and understate
revenues,” he said. “We created a contingency fund that’s
considered high by most government standards.”

In its second year of operation, the new town would spend
just under 8 percent of its general fund expenses on the contingency
fund, he said. In contrast, the county set aside $5.5
million in its 2008-2009 budget for a contingency fund, less
than 1 percent of its general fund expenses.

Despite the loss of TOT revenues as a result of the hotel’s
closure, McMillan doubts the shortfall will last long.

“It’s unlikely the hotel will be closed permanently,” he
added. “It’s an icon. Someone will reopen it.”

Do the numbers add up?

Scott Dick, an incorporation opponent who’s running for
town council, disagreed with McMillan’s assessment of the
town’s budget. While Dick conceded the hotel’s closure alone
was not enough to doom incorporation, he insisted the cumulative
effects of a variety of “budget flaws” would prevent the
town from being able to pay its expenses.

Dick said the fiscal analysis fails to account for lost tax
revenues due to reassessed property values. Carmel Valley
Ranch was recently reassessed at $18 million, down from
$44 million, and Dick predicts Quail Lodge will do the same.
Also, he said many local homeowners will seek tax relief
through reassessment.

“We’re going to lose a ton of property tax,” Dick said.
“We don’t know how bad it will be.”

The demise of the hotel will adversely affect retail sales as
well, Dick suggested. “Quail Lodge employed people who
shopped in Carmel Valley,” he said. “They’ll be gone, and
sales tax will take a hit.”

Dick also said the town’s road budget will be running a $2
million deficit by the 10th year of incorporation.

These cumulative shortfalls, in Dick’s view, will put “a
stake in the heart of incorporation.”

Nearly 200 to lose jobs

According to UNITE HERE Local 483, the union representing
Quail Lodge employees, the hotel’s closure will cost
199 workers their jobs, including 146 union members.

“This is shattering news for these workers and their families,”
said Leonard O’Neill, the union’s secretary-treasurer.
O’Neill insisted the union has been more than fair in its
dealings with the resort.

“We want the community to understand the union
employees had accepted a company contract with concessions
amounting to more than $1 million dollars over the next
two years, in order to keep their jobs,” he explained.

O’Neill said the hotel’s soon-to-be unemployed workers
face considerable challenges in an uncertain economy.

“Please keep these workers and their families in your
prayers as they try to rebuild their lives,” he added.



Last Updated: Sep 11, 09

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