I served as City Manager during the years the Cheval Blanc Beverly Hills hotel project moved through the city review and approval process. This included a 5-0 approval of the project by the Planning Commission, and a 4-1 approval by the City Council.
As the recently retired City Manager who dedicated more than three decades of public service to the city of Beverly Hills, I’d like to provide some important background on the project, the city’s approvals, and what’s at stake in the special election on the project to be held on May 23. To be clear, I am not being paid to advocate for this project.
Process: The Cheval Blanc project went through a multi-year review and approval process, in full accordance with the California Environmental Quality Act. The proposal went through a comprehensive review, including a full Environmental Impact Report, and was the subject of a detailed Development Agreement.
Development Agreement: The Development Agreement is a binding contract between the project sponsor, LVMH, and the city that delivers benefits to the residents. Among the provisions in the Development Agreement, LVMH has five years to build, open and operate a hotel, which meets the standards of excellence set by other Cheval Blanc hotels around the world. If they don’t meet the deadline, they forfeit all of their approvals. In addition, they will owe the city $50 million in damages.
City Revenues: Prior to operation, Cheval Blanc has to pay $28 million up-front to the city as part of its Development Agreement. Once the hotel begins operation, the Development Agreement requires that Cheval Blanc will pay a surcharge to the city of 5% of the gross room revenue. Therefore, instead of the code required 14% Transient Occupancy Tax (TOT), Cheval Blanc will pay 19% TOT.
To evaluate any Development Agreement, the city hired independent subject matter experts and they prepare revenue projections looking forward 30 years. Based on their conservative projections, Cheval Blanc Beverly Hills will generate $725 million in General Fund revenue during this period, as long as the hotel continues to operate. As room rates and sales increase, this revenue number will go up.
Flexibility: The City Council kept the funds from the Cheval Blanc Development Agreement “unrestricted,” so future councils have the flexibility to allocate dollars to meet future challenges. For example, the council may decide to invest in additional police and fire services, affordable housing for seniors, greater parks and recreation services, or additional support for the schools. All these options, and others, are at the discretion of the council based on the “unrestricted” funds allocation.
Height: The City’s General Plan allows for taller, anchor developments that enhance an important city “gateway.” Therefore, if the Cheval Blanc project meets the exacting standards set by the city and the General Plan, it would comply as an anchor development. This proposed location was considered as an anchor location and approved by both the Planning Commission and City Council during their Public Hearings.
What’s at Stake: I believe this special election is of vital importance for Beverly Hills. First, there is the risk of losing a once-in-a-generation opportunity to bring a world-class luxury hotel to anchor the northern gateway of the Golden Triangle at Rodeo Drive. The only way for Beverly Hills to have this opportunity is if both Measures B and C pass.
Second, a massive funding stream would be lost if the City Council’s approvals are overturned. This means a projected $725 million in revenue over 30 years is lost.
Third, LVMH worked diligently within the city processes and heeded the feedback provided during the Planning Commission hearings. Based on the Planning Commission’s input and comments, LVMH refined and improved the project and successfully received unanimous approval by the commissioners.
Beverly Hills is a globally unique city with businesses who meet the city’s high standards and earn the privilege to operate here. Cheval Blanc is a fully vetted project and a great fit for Beverly Hills. The approvals of the City Council and the Planning Commission are a testament to the value of this development to the city.