A developer was hit Wednesday with a record $15.58 million fine for constructing a high-priced hotel on the Southern California coast after initially obtaining a permit for a property with moderately priced rooms, in what state officials called a "bait-and-switch" building scheme.
Sunshine Enterprises violated a state law that enshrines public access to beach areas, according to the California Coastal Commission.
Commissioners unanimously approved the fine — the largest in the agency's 40-year history — but decided not to immediately levy an additional, staff-recommended $5.9 million in mitigation fees linked to approval of a new permit.
The fees would have been held in an account to help fund projects offering lower-cost alternatives for people who might have stayed in the moderately priced rooms, such as rehabilitating old motels or expanding campgrounds.
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Instead, the commissioners postponed a decision on issuing the fees and granting an after-the-fact permit. Commissioners indicated that they wanted to see dozens of replacement rooms created either at the current hotel or nearby. No deadline was given.
"Past behavior is often a predictor of future behavior," Commissioner Aaron Peskin said before the vote. "I don't want their money — I want their hotel rooms. Why can't they just convert 87 of the 164 rooms to an affordable price point?"
Sunshine Enterprises was permitted to rebuild and expand two motels — the Pacific Sands and a Travelodge — that were among a dwindling number of affordable accommodations along a tourist-heavy strip of pricey hotels near the Santa Monica Pier. The new hotel would not offer a bar, restaurant, spa or other "luxury" amenities and rooms would cost about $165 a night, according to the permit application.
But the company let that permit expire and instead built the boutique Shore Hotel, where rooms with a "bed and breakfast package" start at around $300 and ones featuring Pacific Ocean views can run up to $800, documents show.
Under the landmark Coastal Act, the commission protects resources including marine habitat, fisheries, shoreline public access and less-expensive visitor accommodations.
"We don't want beaches to become only a place for the wealthy. We have many residents who don't live within driving distance to the coast and they should be able to enjoy it and spend some time," Commission Supervisor Andrew Willis said earlier this week.
Efforts to make sure lower-income people can visit beaches and also afford to spend the night are central to the commission's mission, said Sean Hecht, a law professor at the University of California, Los Angeles.
Commissioners lambasted Sunshine Enterprises before the vote.
"It's almost textbook environmental injustice," Commissioner Mark Vargas said.
Sunshine Enterprises had said in a Tuesday statement that it will pay all penalties and work with the commission to reach "full resolution of this matter."
"Shore Hotel recognizes the hotel was opened without the Coastal Commission's permit and regrets this violation took place and the length of time it has taken to rectify this violation of the Coastal Act," the company said.
Sunshine Enterprises lost in court after suing when commissioners denied an after-the-fact permit for the new Shore Hotel. An appeals court this year upheld the commission's denial.
"The court upheld that it was a bait-and-switch," Lisa Haage, the commission's chief of enforcement, said of Sunshine Enterprises' actions.