Synopsis: All the claims that building a new Morro Bay/Cayucos wastewater treatment plant on the site of the existing plant would be the cheapest route were flushed down the drain with a study by the engineering consultant for the two communities, who concluded that developing a "boutique" hotel on the existing site and building a new plant elsewhere in Morro Bay or Cayucos would save taxpayers millions of dollars.
A blockbuster analysis by the official consultant to Morro Bay and the Cayucos Sanitary District on development of a new jointly-owned wastewater treatment plant confirms for the first time that building the required new plant in a different location would save an estimated $8 million, thereby reducing the net cost of the new plant by that amount — and possiby more — and saving taxpayers significant amounts they will be required to pay to finance the plant.
The analysis by Dudek engineering, buried on the city's website without any public alerts about its significance, states that if Morro Bay and Cayucos (MB/CSD) were to pursue the development of a "boutique" hotel — and possibly other visitor-serving enterprises such as retail stores — on the present site of the old plant and/or on the site of the adjacent Morro Dunes Travel Trailer Park, it could generate a net gain in value of approximately $8 million, which then could be used to offset the cost of a new wastewater treatment plant (WWTP) elsewhere in the city or Cayucos by that much. (The Dudek report, called an Alternative Highest & Best Use Analysis, can be found at Civic Plus)
That $8 million could turn out to be a significant percentage of the overall cost of building a new plant, although no estimates have been made yet.
The California Coastal Commission (CCC) staff, which is overseeing the development of a new WWTP and has the authority to decide where it will be located as well as its design/capability, has already ruled out replacing the old plant, located on the shores of Estero Bay just south of Morro Bay High School, with a new one at the same site, which MB/CSD have been proposing for more than a year. The CCC staff has ruled it out because it is located in a 100-year flood plain and a tsunami zone. The city's own Local Coastal Plan (LCP) prohibits a new plant from being built in such areas subject to potential flooding.
Therefore, the significance of the Dudek report is not in providing evidence to justify building the plant somewhere else, because that has been decided by CCC staff findings. What the report does do is refute claims by Mayor Bill Yates and many others on the MB/CSD elected bodies that replacing the old plant with a new one at the same site would be the cheapest. The Dudek report shows it wouldn't.
What Dudek did, apparently in response to information requests by the CCC staff, was to conduct a basic economic analysis of the value in using the existing plant site for a visitor-serving development to generate income that will serve to offset the cost of the construction of a new WWTP at some other site. It is the kind of analysis that retired engineer Barry Branin, a Morro Bay resident, and some other residents have been advocating for more than a year in comments to the MB/CSD and the CCC staff based on the fact that the CCC staff is not going to allow a new plant to be developed on the old plant site. Therefore, development of that site should be factored into determining the net cost of building a new plant somewhere else, they have argued.
Meantime, a planned hearing on the MB/CSD WWTP project before the Coastal Commission on April 12 has been cancelled. Called a de jure (required by right or law) hearing, it was envisioned as the event where the final approval of a new MB/CSD plant project would be considered. The CCC staff reported that MB/CSD and Dudek have provided the latest requested information about the project to the staff, opening the way for that potentially-conclusive hearing.
But due to changes in staff assignments in the Central Coast office of the Coastal Commission, which is overseeing development of the project, a review of that information has had to be delayed, the staff reported. However, that doesn't mean the latest information provided to the CCC staff was acceptable — even had the staff been able to review the information in a timely fashion, it still could have been found inadequate and additional information could have been requested, possibly causing cancellation of the hearing.
In its report on the "Alternative Highest & Best Use Analysis" of the site of the existing plant, Dudek said "in response to numerous comments received from the public, as well as issues raised by the CCC" in its rejection of the original project proposed by MB/CSD in January, 2011, the "following provides a brief assessment of the (present) site’s underlying valuation, in context of the ability to redevelop with a coastal-dependent and/or visitor-serving use in accordance with applicable LCP and Coastal Act policies, as well as the potential to offset the costs of a potentially relocated plant." Dudek pointed out that the analysis does not include the cost of developing a plant on a new site, which has not yet been estimated. But it does conclude that whatever that cost may be, it can be reduced by about $8 million from development of the current plant site or the property next to it.
However, the savings might be even greater than about $8 million, depending on the other visitor-serving functions the hotel development would provide.
MB/CSD also would save significant but unestimated amounts by avoiding building on the present plant site, which would require costly digging through the sand on which the old plant was built to locate solid ground for the foundation of a new plant. It would also avoid building on a site likely containing Native American artifacts, which could require significant costs to minimize that kind of disruption of what is considered sacred ground by some Native American tribes.
The Dudek report said, "Reasonable alternative uses (of the present plant site) include development of a boutique visitor-serving hotel, mixed-use visitor serving commercial, or expansion of the adjacent RV park, which currently operates under a 25-year lease with the City."
Here is how the alternative uses are described in the Dudek report:
"The eastern one-half of the existing WWTP site lying inland of Atascadero Road, and a narrow strip at the north end of the parcel adjacent to Atascadero Road, are subject to inundation during the 100-year storm event, given the current approved FEMA (Federal Emergency Management Agency) . . . map . . . The entire lateral extent of the current WWTP site would be subject to inundation during a 100-year storm event . . . Residences and lodging facilities are typically considered incompatible uses for flood-prone areas . . . However, the westerly two-thirds of the currently developed subject parcel (plant site area), including the existing Morro Dunes RV park, lie outside of the current boundary for 100-year flood inundation."
Why not build the plant on that westerly two-thirds of the parcel? Because, as the report maintains, it would be advantageous cost-wise to build it somewhere else and use that valuable property near Estero Bay with spectacular views of the ocean for visitor-serving purposes, such as a boutique hotel. In addition, as the CCC staff has emphasized before, such a scenic area is required by the Coastal Act to be used for the benefit of the public and visitors, not for industrial development, such as a WWTP.
"Given that the CCC places a high priority on lodging facilities in close proximity to the coast, one potential re-use of the site which could achieve a 'higher use' would be a boutique style hotel," the Dudek report said. "Placing the hotel structure on the western half of the WWTP site would keep it out of the boundaries of the current . . . 100-year flood zone . . . In order to provide an approximate valuation for a theoretical boutique hotel on the current WWTP property, Dudek used a formula employed by real estate brokers in the hotel/resort industry. The formula provides an approximate value of the property for the purpose of establishing a market value pricing for the hotel development."
The Dudek report went on to say that a fully-operational 120-room hotel built on a part of the plant site would have an estimated value between $7.25 and $12 million, depending on the scope of the mixed commercial use that the development would entail and the presumed room rates to be charged.
But another scenario was laid out by Dudek that could generate more value for MB/CSD, involving expansion of the adjacent recreational vehicle campground, Morro Dunes Travel Trailer Park. Here is the way it described this potential plan:
"The City of Morro Bay currently leases land along the western and southern boundary of the WWTP site to Morro Dunes Travel Trailer Park. The leased area is divided into two zones, one for accommodation of recreational vehicle travelers and the other for off-season storage of recreational vehicles, boats, and trailers.
"The available space on the WWTP site, if the (plant) were to be located to one of the alternate sites (17 have been under consideration by the CCC staff), would amount to approximately 40% of the area currently leased to Morro Dunes Travel Trailer Park. In the event the WWTP were to be located to one of the alternate sites, the Morro Dunes Travel Trailer Park could be theoretically expanded onto the vacated WWTP site, (and) the City could expect to receive average annual rents on the order of $101,500 per year for the WWTP site if it could be converted for lease to the Morro Dunes Travel Trailer Park.
"In order for the WWTP property to be viable for lease to Morro Dunes Travel Trailer Park, decommissioning and demolition of the current WWTP would need to occur . . . That cost would be in the range of $1.35 million."
However, the "City could modify the existing lease to swap the decommissioned WWTP land area for an equivalent area of the RV Park leasehold . . . while the development area size for a hotel may be equivalent under a land swap scenario, the desirability of the hotel facility could be greatly enhanced as compared to the WWTP site boutique hotel. Rooms could have unobstructed ocean views, therefore, under this scenario, the underlying land value of the ocean-adjacent boutique hotel parcel could be on the order of $8.5 million to $9 million." That doesn't include additional value of other visitor-serving retail operations that could be part of the hotel complex.
The estimated $1.35 million cost of demolishing the existing plant to make all this possible would need to be factored in to determine the net value of the land for the boutique hotel and other visitor-serving businesses, the report indicated.
