Redevelopment of South Lake Tahoe’s Knights Inn area may be off the table
August 23, 2016
After 20 years of serving South Lake Tahoe, council member Hal Cole will not be running for reelection — and it's largely due to the halt of work on the Knights Inn redevelopment project that he's been working on for two years.
"It's two years worth of meetings and contracts that have just fallen apart and it didn't have to be this way," expressed Cole. "If I spent two years trying to get this done and I was not effective, I don't want to start over with another project. If I don't have the respect or the confidence of my peers at the TRPA, then someone else needs to build that trust back up again."
According to Cole, the city was poised to purchase the Knights Inn and Mo's Place on Lake Tahoe Boulevard for $6 million after entering into a purchase agreement with owner Pradip Patel in February.
Cole and the city worked with Halferty Development Company on plans for redevelopment of the area. This included new commercial additions, like a Whole Foods Market, and the restoration of a Stream Environment Zone (SEZ), Lake Tahoe's natural water filter, which would reportedly capture 11,000 lbs of sediment that is currently going into the lake through a culvert.
Following the environmental restoration, the developable areas of the property were to be sold to Halferty for $4 million through a purchase agreement that was on the Aug. 16 city council agenda for approval, but was ultimately removed prior to the meeting.
"The deal is not dead," city manager Nancy Kerry assured.
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The situation, however, is not just as simple as purchasing the property from Patel.
The success of the project was contingent on the cooperation of several different parties, including the California Tahoe Conservancy, Tahoe Regional Planning Agency and Placer County.
To help with the cost of purchasing the property, the city applied for a $5.5-million grant through the California Tahoe Conservancy based on the benefits of the Stream Environment Zone restoration.
Following the demolition of the inn, the city had plans to sell 64 Tourist Accommodation Units — a Basin-wide commodity that controls development — to sell to Placer County for $800,000. This agreement was also removed from the Aug. 16 agenda.
"At the 11th hour, the TRPA, Conservancy and one member of our governing board decided they didn't like the design of the project. They didn't like the parking; they wanted to change the configuration," said Cole, adding that they also wanted the restored Stream Environment Zone to be larger.
Patrick Wright, executive director of the Conservancy, said that the initial drawings of the development that he saw a month ago did not demonstrate the environmental benefits they were expecting.
"We started to see some of the initial conceptual drawings. At that time we raised some concerns because based on that, we didn't think the environmental benefits merited the $5.5-million grant, especially because it was primarily based on storm water management even though there are already certain requirements for that in development. It didn't appear to have the same level of benefits as was in the grant application."
Though the Conservancy set aside the funds for the grant back in March, the plan is to instead award the city a planning grant of "several hundred thousand dollars" at its Sept. 15 board meeting to flesh out the details of the environmental benefits of this project, according to Wright.
"Our hope, which may not be realized, was that there would be significant Stream Environment Zone restoration," added Wright.
City manager Nancy Kerry said the city has halted work on the project, but that the state-mandated California Environmental Quality Act analysis was nearly completed.
The purchase agreements were removed from the council meeting agenda, according to Kerry, because Wright allegedly told Patel's lawyer that the city would not be getting the $5.5-million grant from the Conservancy.
"The owner [Patel] is saying, 'I think I can get more money.' The real issue is the owner's lawyer spoke with [Wright], and he said we are not going to get that money. That's what's tanking our deal. The board of directors should be making that decision."
Nevertheless, Kerry is still "confident that this will work out."
Even without the Conservancy's grant and the TRPA Tourist Accommodation Units, it is still within the city's rights to redevelop the Knights Inn property, said TRPA spokesman Tom Lotshaw.
"We want to be as supportive as we can of any sort of project around the Basin, and I think a lot of people are very supportive of those kind of projects. If the city can negotiate a good project with environmental improvements, then we can award those bonus units," said Lotshaw. "At the end of the day, it's a delegated project that the city would have full authority to move forward with."
Cole said that unless Halferty is willing to rework the commercial development plans, the city will likely not receive the grant nor the units necessary to implement the restoration of the Stream Environment Zone.
"Right now we don't know if the owner of the motel is still going to sell. We don't know if the developer is going to do anything," said Cole. "If I am to believe what these people are telling me, I don't know how it will go forward. If it does go forward without their help, it will just be a project — it won't have substantial water quality benefits."