Millbrae officials: La Quinta closure could cost $750K a year

Millbrae originally filed a lawsuit against the county in November in response, arguing purchase violates Article 34 of the California state Constitution, which makes it so any public agency looking to develop or acquire low-income housing must gain the approval of a majority of voters. A decision in the lawsuit is expected to be reached by June 26. 

The Board of Supervisors supported a $600,000 payment to the city annually for three years to make up for the city’s loss in hotel revenue, as well as funding the placement of two additional sheriff’s deputies in the city for three years and a two-year deployment of a mental health clinician, it said last September. 

But the city, which relies on hotel tax to make up 28% of its general fund revenue by pre-pandemic numbers, could see significant long-term financial loss from the potential closure, Sung said. 

The direct impact of hotel, business and sales tax from La Quinta is $579,061, with an additional service impact of $172,173 — with total revenue coming to around $751,234 per year. The 20-year impact of the closure would be approximately $12 million in revenue, Sung said. 

Estimates for La Quinta’s occupancy rates range from 80% to 83%, City Manager Tom Williams said. 

Vice Mayor Maurice Goodman asked for exact occupancy rates, questioned whether the loss of the La Quinta could be absorbed by surrounding hotels to generate alternative revenue and said the city couldn’t predict exact business revenue within a fluctuating market that might see both closures and openings of various businesses over time.  

“How much of that could and would be absorbed by surrounding hotels within Millbrae?” he said. “Obviously we can't say, ‘this is what could happen within 20 years.’ If that's the case, we could have done the same with Lucky’s and Walgreens, and they're gone.” 

Councilmember Gina Papan maintained that the closure of the La Quinta will negatively impact Millbrae — which is already struggling to fund basic services like infrastructure replacements — especially because another hotel or revenue-generating business wouldn’t be able to occupy the space. 

“Thankfully, the La Quinta is still operating. We appreciate that, because it is helping our basic financing,” she said. “This is a governmental agency coming in, which wipes the slate clean here. We don’t get other taxes, we don't get other revenue from that. What we do get are more residents, more burdens on infrastructure, more burdens on police.” 

The city is working to diversify its economic revenue sources beyond its three major hotels, Williams acknowledged, but said the loss of La Quinta could still have a direct, negative impact.

Councilmembers also discussed making the cost for the lawsuit’s legal fees more transparent to the public — past legal costs are $230,000, Williams said. 

holly@smdailyjournal.com

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