Hotel Project
1775 Francisco Boulevard
San
Rafael, California
Prepared by Attila & Gang, Dwayne Hunn Ph.D.
For Fred Grange, Owner
October
30, 2000
Neighborhood Need
Serving Uses
After the 1775 Hotel proposal has received all required City approvals and construction is undertaken, the owner of 1775 Francisco will allocate $350. per approved hotel room into an escrowed account to be dedicated to Neighborhood Need Serving Uses (NNSU) in East San Rafael. If the approved hotel has 85 rooms the escrowed amount will total $29,750. If the approved hotel has 120 rooms the escrowed amount will total $42,000. Using the two proposed hotels detailed in this PPP application as examples, this escrowed account will be funded in four increments of $7,438 - $10,000 each at these intervals:
I. Upon receiving all City approvals needed to begin construction, the project owner will deposit $7,438 - $10,200 into the NNSU account.
II. Upon ground breaking for hotel construction, the project owner will deposit $7,438 - $10,000 into the NNSU account.
III. Upon opening of the hotel, the project owner will deposit $7,438 - $10,000 into the NNSU account.
IV. After one year of operation, the hotel project owner will deposit $7,438 - $10,000 into the NNSU account.
Within 60 days of depositing the funds the Hotel Team will decide on the recipient of the NNSU funds. At this time the 1775 Hotel Team has identified at least twelve worthy neighborhood needs to which it would be interested in allocating its NNSU escrowed funds. Since approvals and construction does not always proceed on a clearly marked schedule and since neighborhood needs often change, the property owner reserves the right to add to this list of worthy neighborhood needs to which the team will allocate the funds.
Directed Financial
Benefits
1. Bahia School Site Child Care Capital Improvements fund that is presently administered by Canal Community Alliance.
2. Bahia School Site Child Care Administration fund dedicated to cover administrative, overhead and staffing child care costs.
3. BRIDGE / City Affordable Housing Renovation Fund to be used to renovate the apartment complexes at 162 and 172 Belvedere in East San Rafael.
4. BRIDGE’s (Bay Area Residential Investment Development Group) educational programs dedicated to residents’ skill building, financial management, and scholarships. .
5. Canal Ministry’s community education programs dedicated to upgrading the skills of students and residents in East San Rafael.
6. An as yet undeveloped but perhaps being studied, anticipated and needed East San Rafael jitney/shuttle service.
7. East San Rafael Affordable Housing Ownership Fund dedicated to addressing homeownership needs for low and moderate income residents of the area
In addition to the above-mentioned Directed Financial Benefits, the hotel would provide Other Direct Economic, Educational, Social And Affordable Housing Benefits to the East San Rafael (ESR) neighborhood. These would include:
Direct Economic,
Educational, Social and Affordable Housing Benefits
8. Conference rooms designed into the hotel will be available for use by community groups for educational and community uses. For use by East San Rafael’s non-profits, the hotel will match the rates charged by the Pickleweed Community Center.
9. It is the hotel’s intention to give preference in hiring of hotel employees to equally qualified residents of ESR. We will follow all applicable legal fairness laws, but the City can be assured that all the area non-profits will be notified and requested to get the word out to their clients. East San Rafael residents will be fully aware of local job opportunities available at the hotel. The Hotel Team may also be able to channel some of its direct financial NNSU funds to classes that will improve neighborhood residents’ skills in hotel management and better prepare them for their hotel job applications.
10. A live-in manager’s unit will be designed into the hotel. The same intention to give preference to the area’s residents seeking a job and affordable housing will be followed as mentioned above in selecting the live-in manager. Consequently, the hotel will add at least one high quality affordable housing unit to East San Rafael’s critical affordable housing need.
11. At this PPP abbreviated juncture in the design process, the Hotel Team envisions having additional live-in units designed into the hotel for other members of the hotel’s working staff. This would provide additional critically needed affordable housing units in East San Rafael. Later in the design and application process the hotel will be able to more accurately quantify the number of affordable units for working staff.
12. Yes, placing a hotel in East San Rafael will increase revenues to the City through its Transient Occupancy and Sales Taxes and will generate more economic activity in the community. However, what is often overlooked with adding a hotel to East San Rafael is the economic multiplier effect it generates in the community. East San Rafael has a ready resource of surplus, employable worker. These workers who can be employed at the hotel have a high marginal propensity to consume (MPC) in East San Rafael and San Rafael. (The same can be said about the hotel’s guests, which produces an added economic kicker to San Rafael and this neighborhood.) Their high MPC means fewer dollars will be leaked to other communities. A car dealership, on the other hand, is not likely to have as many East San Rafael workers earning wages that will be regenerated over and over again in East San Rafael and San Rafael transactions. The Hotel will have a higher PCL (Percentage Consumed Locally) than a car dealership and consequently will add more economic, financial and social benefits to the City and East San Rafael’s neighborhood needs.
Elaborating on
the: Multiplier Effect In The Local Community
For this elaboration let us assume the following plausible points:
The hotel employs 20 people
East San Rafael has enough unemployed
or underemployed workers to meet the hotel’s employment needs.
Due to an excellent education and
outreach program directed by East San Rafael’s non-profit communities, 80% of
those employees come from the ESR community.
These hard working employees in these
stepping-stone hotel employment positions tend to spend most of their time and
money living, shopping, recreating and raising their families in East San
Rafael and the City of San Rafael.
The average annual income for these
employees is $25,000 per year.
The larger the proportion of income
that is spent locally (PCL) the larger will be the propensity for those local
expenditures to generate and re-generate additional income in the local
economy. Consequently, the larger will be the income multiplier (IM).
The more dollars that are earned and
spent locally, the less dollars that will be leaked to other municipalities.
IM = 1 / (1 - (PCL X PSY))
Where:
IM = Income multiplier
PCL = The proportion of all household budgets spent locally. This ranges
from .40 to .95
PSY = The proportion of a new dollar that becomes income to local
households. This ranges from .25 to .60
For example, when the proportion spent locally by households (PCL) is 80 percent or .80 and when the proportion of an earned dollar that becomes income to local households (PSY) is 50 percent or .50, then the income multiplier can be calculated as:
IM = 1 / (1 - (.80
X .50))
IM = 1 / (1 - .40)
IM = 1 / .60 = 1.66
The Income Multiplier dynamically creates new income within the community which are regenerated into the local households in that community. In economic terms this is called making new income.
Consequently:
Total change in income for the local economy is greater than the dollar volume of the initial expansion alone |
An output (or business) multiplier is the total change in
sales generated throughout the local economy by a |
Therefore the economic impact to the community of employing an estimated 18 ESR employees averaging an estimated $25,000 per year is not just the estimated $450,000 per year. It is the estimated amount times the 1.66 multiplier, or an estimated $750,000 per year.
In economic terms, the hotel has helped East San Rafael and San Rafael, “make $750,000 of new income” from employing ESR’s abundant resource of employable people.
Not to mention the
guests…
In addition to the multiplier effect that comes from employing local residents, the hotel will be capturing, with the glad acquiesce of its happy visitors, the pocket books of their guests. The guests will not “live in” the community but during their stay in the community they will have a strong propensity to consume in the local area (PCL) and in the City of San Rafael.
Entrepreneuring residents of East San Rafael will see this as an opportunity to attract these visitors as well as expand businesses (PSY) to address the spending desires of the hotel’s affluent guests. The multiplier effect will again replay itself amidst the healthy competition that increased opportunity provides.
The multiplier effect provided by the spending pattern of the much more numerous guests of the hotel could soar above those provided by the example above using the hotel’s employed local residents. We have not tried to estimate that significant economic impact here but may do so during future presentations.
The 1775 Hotel proposal offers numerous, substantial and
sustainable benefits to the East San Rafael community and the City. The Directed Financial Benefits and Other
Direct Economic, Educational, Social And Affordable Housing Benefits
address numerous General Plan outlined ESR Needed Neighborhood Serving Uses (NNSU),
Affordable Housing Needs (AH) while generating substantial income to
the City and significantly addressing community needs.
Thanks for your
consideration. The Hotel Team looks
forward to detailing these proposals during our presentation to you.
Dwayne Hunn
Dwayne Hunn
Ph.D. Public Finance & Administration