Levy ready to break ground
on $170 M timeshare project

As approval nears, questions linger

After years of false starts, construction on Santa Barbara's controversial Ritz-Carlton Club timeshare project is three to four weeks away, according to the developer and the city.

Community Development Director Paul Casey said he's about two weeks from giving final approval, and developer Bill Levy is poised to get a building permit for the $170 million project in the next month, he said.

"It's the largest project ever built in Santa Barbara monetarily," said Mr. Levy during an interview inside his spacious second-story office in El Paseo. "It's also the largest because it is spread out. And it will be the largest until Cottage Hospital comes around. It is going to change the area dramatically."

Architectural renderings of the 62-unit timeshare project show a major transformation of the first two blocks of lower State Street Buildings will be knocked down and in their place will rise a small village of timeshares, stores, restaurants, parking lots, wider sidewalks and narrowed streets, and public walkways.

The project will be built in phases and will take up to two years to finish, Mr. Levy says. The developers plan to close public areas intermittently during construction, a move that will result in disruption unlike any Santa Barbara has seen for a while. But the end result, according Mr. Levy, will be a dynamic, vibrant community that connects the beach area to an already redeveloped State Street.

Mr. Levy sat down with the News-Press to talk about his controversial project and his hope that it will be a success.

"People are going to feel like it's been there 50, 60, 70 years," he said. "They are just going to feel like it's Santa Barbara".

The timeshare project has been laced with controversy, delays, a name change, questions about financing, a lawsuit and an incredible amount of public scrutiny.

Environmentalists and housing advocates have fought the project, saying it doesn't belong in downtown Santa Barbara because it is focused on high-rolling tourists who can afford to pay between $100,000 and $300,000 to own a timeshare for 21 days a year.

The latest major obstacle for Mr. Levy was partly his own fault. When he partnered with Ritz-Carlton, he and the upscale hotel company made several changes that required the city to review the plans one more time.

Among the biggest changes was the decision to rebuild the Californian Hotel, on the corner of Mason and State Streets, last instead of first. The change was significant because rebuilding the earthquake-unstable building was one of the biggest selling points of the project, formerly called Entrada de Santa Barbara.

City officials were fearful that Mr. Levy and his investors would run out of money and decide not to rebuild the Californian. They worried about public embarrassment akin to the problems at the Miramar Hotel in Montecito and the Carrillo Hotel in Santa Barbara, two projects delayed for years by money problems after demolition had already begun.

To avoid that kind of problem, the city worked with a Levy-paid consultant to make sure there's enough money to build the entire project.

Mr. Casey said all of Mr. Levy's finances checkout, but won't issue the final public report for about two weeks because there are stacks of paperwork associated with about 15 contracts that need to be signed.

But Mr. Casey did offer a glimpse into Mr. Levy's financial packaging for the timeshares. He said the developer secured about $115 million in a construction loan; $55 million from private investors; and has another $15 million in reserve funds for the project.

He said he's looking forward to Mr. Levy pulling the first building permit.

"The benefit to the city is the improvements to lower State Street," Mr. Casey said.

But the city will also benefit financially. Mr. Casey stopped short of giving any dollar estimates because he said that the city has not done the financial analysis.

But he says the city stands to gain from property tax, sales tax from the restaurants and retail shops, and a hotel-bed tax if the owners of the timeshares choose to rent their rooms out to the public. It's too early to know what the tax revenue would be, he said, because the city has not dealt with timeshares before and the success of the retail shops can't be predicted.

The property tax assessment won't come until after the project is built. "We haven't done this before," Mr. Casey said. "This is a new entity. We don't have timeshares."

As the project gets rolling, some are still skeptical. Mr. Levy has had many false starts on the project. Even Ritz-Carlton promotional material states that the Ritz-Carlton Club, Santa Barbara is "scheduled to open in late 2004," which clearly isn't going to happen.

Mr. Levy's proposed changes to the approved plans should have been enough to trigger a new public review of the process, according to the Citizens Planning Association, who, along with the League of Women Voters, sued the city and the California Coastal Commission over the project three years ago.

Naomi Kovacs, executive director of the CPA, said even though Mr. Casey has concluded that the finances check out, her group still has questions.

"We have not yet heard what guarantee or proof the city is requiring to ensure that the entire project will be built out, including the essential component of the Californian Hotel," Ms. Kovacs said.

Her group believes that Mr. Levy's changes after the project was approved in 2001 should have undergone a full public review.

"A new formal review process should have opened," Ms. Kovacs said. "Instead, the project has been going through a process of being granted substantial conformance without full public disclosure and input."

Mr. Levy said that he and Ritz Carlton have no reason not to finish building the timeshares. In fact, they have to, he said, in order make the project work.

"From an economic standpoint, we have to build the whole thing," Mr. Levy said. "This project needs to be built in its entirety."

The project will have 62 timeshares, with 18 one-bedrooms; 26 two-bedrooms; and 18 three-bedrooms. They will range from about 1,000 to 2,000 square feet.

Retail shops will line State Street The sidewalks will be wider, and lower State Street will be narrowed to one lane in each direction. There will be public parking, and the city pushed Mr. Levy to create public paseos and, plazas so that locals don't feel left out.

Mr. Levy will also place all of the power and utility poles underground.

"It's going to change dramatically," he said. "Architecturally, it's going to be a Santa Barbara-style village and neighborhood."

Mayor Marty Blum said she would like to see Mr. Levy hurry up and build the project. Earlier, she had major concerns about it, but said the project has been massaged so much that she believes that it now has a public benefit.

She said initially she was concerned about size, but it is not as bulky as originally proposed. And it was supposed to be a gated community, she said, but the city convinced Mr. Levy to create open space for the public.

"We opened it up," she said. "It was going to be gated and closed in. To open it up and make it more public, that was a good thing to do."

Mr. Levy knows the pressure is on him to build something soon. Even though it's complicated, he said he's ready to go.

"It's the most difficult project I have ever worked on," said Mr. Levy, who also helped build the Paseo Nuevo mall. "It's probably the most difficult the city has done."