The Shore Hotel is currently operating without a valid permit from the Coastal Commission and owners are relying on a pair of court cases to determine the hotel’s future.

Without a valid permit the best-case scenario for the hotel could be millions of dollars in fines, or at worst, the hotel could be shutdown until the commission is satisfied its conditions have been met.

The dispute dates back to the original application to build the hotel.

In 2009, the Farzam family filed paperwork to demolish their two hotels on Ocean Avenue (the Pacific Sands Motel and a Travelodge) and they proposed a new hotel with 164 rooms.

At the time of their application, they said the old hotels were approaching the end of their useful lives and new construction was the best option for the site. The application said the family chose to build a moderate-priced hotel over a boutique luxury hotel.

“…the Farzams, consistent with City and State policies for the Coastal Zone, elected to pursue a replacement moderately-priced Travelodge rather than yet another new luxury hotel in the Coastal zone,” their application said.

The documents say the new hotel would not contain a restaurant, bar, conference facility, spa, florist, lounge, multi-room suites or other “luxury” amenities.

The commission approved the application with conditions such as providing specific geological and archeological reports.

Owner Michael Farzam said he provided those reports to commission staff, but staff contends the reports were not filed and therefore the conditions were not met. The final, valid permit was never issued but construction began in 2011 due in part to the receipt of valid permits from the City of Santa Monica.

Despite a municipal code that requires the Coastal Commission permit, the City of Santa Monica did issue demolition and construction permits. Farzam’s attorney, Sherman Stacey, said his client assumed the City had received a copy of the Commission permit and that issuance of construction permits constituted approval of the project.

In 2014, the Commission was made aware of the hotel’s construction and staff began discussions with the hotel operator to bring the project into compliance.

The Farzams argued that their permit should have been issued years ago and therefore, the Commission could amend the permit to account for any minor discrepancies. Commission staff said no amendment could be made to a non-existent permit and the hotel operators were required to submit a new application for an after-the-fact permit.

At their September meeting, the Coastal Commission denied the after-the-fact permit application. If approved, the permit would have brought the hotel into compliance with state regulations in exchange for an additional $3 million in fees to cover the loss of low-cost hotel rooms, a deed restriction, regulation of parking rates for non-hotel guests and additional administrative fees. However, the applicant objected to the conditions as too stringent while several commissioners felt the deal was too lenient.

According to the staff report, the hotel’s violations extend beyond the failure to finalize paperwork and include what they contend are substantial deviations from the original application.

“The constructed hotel differs from the project that was proposed by the applicant and approved by the Commission in 2009,” reads the report. “In 2009 the applicant proposed to replace the existing budget motels with a low to moderately price hotel with a room rate of $164 per night. No restaurant was to be provided in the ‘limited amenities’ facility. Today, the constructed hotel called the ‘Shore Hotel’ is a self-described boutique hotel with 164 rooms (approximately 330 sq. ft.) including 20 suites (465 sq. ft.). Overnight rates for rooms currently range from $309 to $579 per night, with suites costing $669 per night.”

The hotel’s website lists the restaurant Blue Plate Taco as an amenity and the hotel offers room service. In addition, their website lists plans for an upcoming restaurant.

“In homage to the original hotel that was in this exact location, we have named our new, upcoming restaurant & bar after it,” said their dining tab. “Pacific Sands is a California farmer’s market inspired restaurant planning to open soon.”

Stacey said the original application included retail and said nothing in the original discussion or conditions precluded an independent restaurant from leasing one of those locations.

The Coastal Commission is a quasi-judicial state agency with jurisdiction over activities near the shoreline. Part of its role is to preserve coastal access and several commissioners said that includes preservation of affordable hotels along the coast to provide working families with an opportunity to visit coastal areas. However, they do not have the ability to mandate prices.

Stacey, with Gaines & Stacey LLP, represented the Farzam family at the hearing. He said the commission should approve the new permit because the physical building was exactly the same as proposed and that the hotel’s price point was a function of Santa Monica’s robust tourism market. He said the Shore has smaller rooms and lower prices when compared to other nearby units.

“You would only deny [the permit] because you can’t control the price and you want to control the price and there’s no basis for controlling the price,” he said.

In response to the commission’s concern about the loss of lower cost accommodation, he said the two original motels would have closed regardless and the applicant shouldn’t be penalized for replacing them with a nicer building.

“The loss of motels was not because they were demolished for the Shore Hotel but because they would have gone away sometime in the near future after 2009 simply because of their operational obsolescence,” he said.

He said it was unfair to try to compel anyone to operate an unprofitable business and that the hotel owners should not be punished because the building turned out in design to be nicer than anyone expected.

“The physical structure is exactly what was built,” he said. “What we’re dealing with here is the question of whether the social impacts of what was built justify the imposition of the fee recommended by the staff.”

Commissioners ultimately rejected the application.

“When something is approved with the notion that it is going to honor the commitment of the Coastal Act and honor the commitment of low cost spaces and then it does not, I don’t think there should be a reward for that. I think the project should be denied,” said commissioner Carole Groom.

Mary Shallenberger said the proposal was unsatisfactory.

“I can’t think of a reason why we should vote yes on this,” she said.

Several letters were filed with the Commission asking for the hearing to be postponed until it could be held closer to Santa Monica. However, due to limitations on the timeline for approving applications, the Commission was required to make a decision that day.

Representatives from the hotel union Unite Here Local 11 also argued against approving the permit, saying the hotel has operated as a luxury operation and failed to adequately post required notifications about the commission meeting.

Roberto Uranga said he was sympathetic to the concerns of the union but said his decision was based on the actions of the applicant.

“More than anything else I see a lot of disingenuity on the part of the applicant,” he said.

Without a permit, the status of the hotel is unclear. Several commissioners said they did not want to close the business but there were also differing opinions on the size and type of fees that should be imposed.

Mayor Kevin McKeown said the council is prohibited from interfering with potential enforcement actions but said the City does take situations like this seriously.

“We are well aware both of allegations of worker issues and of possible violations of operating conditions, including the Coastal Commission permit denial,” he said. “While the Coastal Commission will choose how to enforce its own decision, City staff is reviewing whether the permit denial and reported operational expansions at The Shore may violate City permits as well. If violations are determined, enforcement will follow.”

During the hearing, Commissioner Greg Cox raised the possibility of sanctions against the City of Santa Monica for issuing its permits without the approval of the Coastal Commission.

“There’s plenty of complicity that involves a lot of different parties,” he said.

Stacey said the hotel owners have already filed a lawsuit over the Commission’s initial decision to force a reapplication, and that they will dispute the current ruling in a second court case.

The commission could release additional documents at subsequent meetings clarifying their position and staff said they have several regulatory tools at their disposal.

“The goal is to get it in compliance with Coastal Act,” said commission executive director Charles Lester.

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