Chateau project team being reassembled


By Kathryn Reed

Joe Stewart with SMC Contracting put in the concrete and rebar at the convention center project in South Lake Tahoe. His crew is ready to resume work.

Pete Joseph was ready six years ago to move his McP’s Pub into a much larger building that would sit near the corner of Highway 50 and Stateline Avenue. He’s still ready to move.

MBA Architecture and Design in Reno came up with the original plans for what is still being called the Chateau project and they are back in the game today figuring out what the next phase will look like.

Randy Lane with the now bankrupt Lake Tahoe Development Company was to develop the $400 million project. Today he is offering advice to Bill Owens, who now owns the majority of the 29 parcels that make up the nearly 11-acre site.

The original rendering of the Chateau project by MBA Architecture and Design.

The original rendering of the Chateau project by MBA Architecture and Design.

Lew Feldman, the attorney who represented Lane, is now advising Owens.

It was the South Lake Tahoe City Council of Hal Cole (he was mayor), John Upton, Mike Weber, Ted Long and Kathay Lovell who on July 11, 2006, approved the owner participation agreement. This was the contract for what was to be the largest development in the city limits. It included two condo-hotels, a 93,000-square-foot convention center and about 57,000-square-feet of retail space.

Next week city officials and the latest project proponents are going to have a sit-down about the next steps. The Owens group has submitted plans the city keeps calling incomplete.

While council members would not normally have to sign off on modifying the number of phases when a permit has already been issued for a project, they have requested to do so after the planning commission takes action. Cole will get to vote again. Joining him are electeds Tom Davis and Brooke Laine, who with their pasts, are well versed on projects in that area. New to voting on items in this location are Councilwomen Angela Swanson and JoAnn Conner.

The plan is to develop about 20,000-square-feet of retail and 9,000-square-feet of food and beverage that will mostly span Highway 50, but will go down Stateline Avenue a bit, too. The section is a bit triangular, with the point being at the west side before McP’s Pub. It will be divided on the highway by a driveway that will access the underground parking.

The concrete that is there is the floor of the garage. While the original plan never had enough parking spaces for the entire project, a bit of irony is that this phase being proposed would have more parking than should ever be needed.

Back in the day, Jim Marino who is now capital improvements project manager for the city, and Hilary Roverud, who now runs the planning department, told the council it should not approve the project because the parking plan was inadequate. The electeds ignored the professional advice.

On the day the OPA was signed then Redevelopment Agency Manager Gene Palazzo said a performance bond was still needed.

The official city minutes from that meeting say, “Palazzo explained that in the event the developer were unable to finish the project, the performance, labor and materials bond provide the ability for the city to step in and get the project completed. Palazzo noted that this item was not included in the agreement and required resolution.”

Someone dropped that ball and was never held accountable for never securing that performance bond.

Also in the minutes from that meeting is talk about the Highway 50 tunnel.

The minutes say, “Palazzo remarked that per the OPA, the developer was required to construct the underpass tunnel connecting Project 3 to the Park Avenue Project; however the OPA only required that the developer maintain onsite improvements, of which the tunnel was not a part. Palazzo noted that this item was not included in the agreement and required resolution.”

Promises evaporate with redevelopment agency

While the OPA is a rather thick document, it is now useless. City Manager Nancy Kerry explained because it was an agreement between the developer and the city’s Redevelopment Agency it ceased to exist as a legally binding document when the state dissolved the Redevelopment Agency.

So, while the permits from the city and Tahoe Regional Planning Agency are in effect, there is no contract. This means inadequate parking will be an issue at full build-out and that there is no way other than crosswalks at Stateline and Friday avenues to get from the Chateau site to Heavenly Village. This means crossing a five-lane state highway.

Work on the hole could begin in three months. Photo/LTN

Work on the hole could begin in three months. Photo/LTN

It also means what was supposed to become a city-owned convention center is now likely to be a privately operated conference center. Through the Redevelopment Agency and tax increment the city was going to have money invested in the original Chateau project. It was guaranteed to have access to the convention center for a predetermined number of days. That is out the window even though Kerry would like it to be a negotiating point when appropriate.

She doesn’t understand “how any city manager could allow this to get to the condition it is because a consolidated parcel map would have been standard.” (Dave Jinkens was city manager when the OPA was signed, when construction began, when work ceased and when LTDC filed bankruptcy.)

Going forward

Construction is expected to begin in July, sources told Lake Tahoe News.

Before any of that happens, though, the city needs to receive a plan from the developer that is complete.

Kerry said she isn’t going to cut corners. She isn’t going to let work resume without these seven affected parcels being consolidated into one map. She is going to insist on a performance bond.

“Nothing occurs until we see documents of ownership,” Kerry told Lake Tahoe News.

Stewart, the contractor, has been talking with Owens, but as of today a contract has not been signed. That would be a bit premature without having received the city’s OK to start again.

“Rumors have been going on since the day they shut that down. I’ve never felt very confident anything would happen on that job until now,” Stewart told Lake Tahoe News.

In addition to putting in the foundation for the Chateau project, SMC built most of the retail at Heavenly Village as well as the transit center next door. SMC also built the Tamarack Lodge at Heavenly, Zephyr Lodge at Northstar and all of the new buildings at South Tahoe High School.

Stewart said it wouldn’t be weird to work on a small portion of what will be a larger project. He likes the idea of having a large area for staging.

“The hardest will be along Highway 50 that we would be doing this year. Being able to focus just on that is nice from a contractor’s standpoint,” Stewart said.

McP’s also doesn’t have a signed contract in place. But Joseph said he’s been in touch with Feldman about his continued desire to occupy a much larger plot of real estate.

The two-story building that is proposed would be on the street level and below ground.

Joseph is familiar with change. Eminent domain forced him out of his spot across the street to make way for Heavenly Village. He was ready to move into the same spot that could be under construction this summer, but instead has been operating on an island of sorts for six years. McP’s is at the west end of the fence that surrounds the concrete and rebar.

He’s been in business for 10 years and wants to stay in Tahoe. If he isn’t part of the Chateau project as originally planned, he told Lake Tahoe News he doesn’t know what the future holds for him.

Joseph is banking on another move – just down the street.

“The building would have a lot more character and that would be helpful. There would be outdoor dining, fire pits, sliding windows from indoors to out,” Joseph said.

The roof design makes it look like a freestanding building.

In addition to the city, the developer needs to work out issues with Caltrans still.

Sidewalks and a streetscape that match what is at Heavenly Village are planned.

The city is going to insist the entrance from Cedar Avenue be more than driving through a construction site. It must be a safe, finished driveway.

“As you pull in off Cedar there will be some sort of wall treatment. You won’t have the sense you’ve been turned loose in an underground construction site,” Feldman said. Improvements to Cedar Avenue will also be made.

Feldman would not disclose the amount of investment Owens plans to make in this initial restart phase, but said it would be eight figures.

The theory is having something usable in the ground will spur someone to come in to develop the rest of the project.

The original project was supposed to be a hotel-condo project, but condos are not a sellable product today. But what the market may bear when someone comes in to build future phases remains to be seen; as well as what that person would want to do.

“There may be plan revisions. That’s not uncommon for a larger scale project to amend the permit to reflect changes in the marketplace,” Feldman said.

While there are ideas about the types of businesses that might occupy the retail, negotiations will not begin until the green light for construction is given. Nor is it being disclosed how many storefronts there might be.


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Comments (18)
  1. Biggerpicture says - Posted: April 6, 2013

    Lane AND Feldman involved?

    Here we go again!

  2. Deb Palmer says - Posted: April 6, 2013

    Very interesting article. The only flaw I see is the statement by the City Manager that the original contract is worthless, due to State dissolution of the Redevelopment agencies. If the City and TRPA gave permits based on that contract, then there is a couple of legal arguments that would support that contract’s viability. You need to consult with counsel on that. Deb Palmer, Esq.

  3. 30yrlocal says - Posted: April 6, 2013

    Why is anyone seeking advice from Feldman and Lane still? This is crazy. Mistake happened, you learn, you move on. How can we move on in a positive manner without learning from history and get new brains and insight on the project. At least there is movement and smart city involvement now!

  4. Bob says - Posted: April 6, 2013

    Sounds like Jenkins was at the heart of not issuing a performance bond. The citizens could file against the city in my opinion. Not sure what good it would do. Sounds like Gene Palazzo would make an interesting witness if it did. Starting this project piecemeal is ridiculous and dangerous in my opinion.

  5. Laketoohigh says - Posted: April 6, 2013

    Well, at least SOMETHING is being done with the HOLE. This whole thing is as messed up as a soup sandwich. I can’t wait to see what we wind up with down there. Probably just going to be more tourist traps to replace the ones that were there before. Looks like Ms. Kerry is prepared to cross the t’s and dot the i’s this time. Don’t let Hal tell you there is no such thing as a performance bond this time.:-)

  6. Lou Pierini says - Posted: April 6, 2013

    Here we go again with Feldman, Lane leading the charge, and the city going along with it all. Maybe , hi Brooke, will remember the hole at Ski Run that Feldman ‘s client caused. That project ended in BK also. His testimony in BK court was negative for the city, ask Von Klug. Brooks memory about Weber being behind in his rent at the airport with no intention of paying unless it was sold will give the council insight into the past. Oh Weber’s partner was front row Carl R, and another person. Feldman, Lane and front row Carl think people have no memory of this so the dog and pony show continues!!!

  7. Scott Blumenthal says - Posted: April 6, 2013

    I hope something can soon be worked out for a win-win-win situation for the city, the developer and the residents. Looking forward to elimination of blight and ugly anywhere and everywhere in our city.

  8. DougM says - Posted: April 6, 2013

    I’m kind of astonished that there’s no mention of the loop bypass plans in this article, and apparently none in the hole development plan. It sounds like they tacitly assume that the 5-lane highway will remain, maybe with a foot-traffic tunnel underneath, as at the casinos? Are all those businesses planning on road-front spaces counting on that highway crawl in front to be an advantage to them? Is the new parking basement accessible only from 50 out front?

    Is the left hand speaking with the right hand? The loop bypass may not have been on the table when the hole was started, but is sure is now. Ridiculous not to plan both in concert with each other. The whole thing will be a disappointing mess unless 50 is eliminated entirely, and the new development is linked with Heavenly Village with no road there at all.

  9. Steven says - Posted: April 6, 2013

    You are right on! No access from hwy 50 should be granted. The loop road should close hwy 50 so what now is hwy 50 becomes pedestrian only. All access to the chateau should be from the back not from hwy 50.
    And Lane and Feldman should be legally excluded from the project.

  10. dumbfounded says - Posted: April 6, 2013

    “Someone dropped that ball and was never held accountable for never securing that performance bond.”

    That is our City in a nutshell.

  11. "HangUpsFromWayBack" says - Posted: April 6, 2013

    They been playing with the same deck cards too long,time for some new players and new dealer, new cards.
    Speculation is big word here.

    These same people who let the airport rent slide are bound to blow another issue,you can bet on it!

  12. sunriser2 says - Posted: April 6, 2013

    The best thing the city an do at this point is stay out of the way. Putting demands on the developer at this point is like trying to put a condom on a five year old. The time for these restrictions was six years ago.

    Owens is the one hope for developing anything on the site. The only reason he is going forward is he needs to recoup at least some of the tens of millions he has invested there.

  13. tahoeadvocate says - Posted: April 6, 2013

    sunriser2—I can’t believe you really think the developer would do what is in the interest of the City and residents. Don’t stay out of their way. Require all the things the city council and building department didn’t the first time. The permits were issued based on a now defunct redevelopment agency so I question that they are still valid. They should be required to be updated or allowed to expire. Make the owner do what’s right for the City as well not just for him.

  14. John says - Posted: April 6, 2013

    Tahoeadvocate, you are recommending slowing down the process as much as possible so that we can continue to have a hole in the ground? Really? So you think the city is competent to push this project forward?

  15. tahoeadvocate says - Posted: April 6, 2013

    I do not recommend slowing down the process as much as possible. I recommend the process be done correctly. Fool me once, shame on you. Fool me twice, shame on me.
    The City holds the power today since the permit was for a different design than is planned. That means that unless the original design is built the city can change things and should.

  16. sunriser2 says - Posted: April 6, 2013

    Get real the project is a total failure It will go into text books as the largest screw-up in real estate history.

    The gentleman from Crescent “V” had a lot of great points regarding the subcontracting of the demographic studies by the national chains. We need to face the fact that it may look like the Ormsby house if Owens doesn’t go forward. No one else in the world wants that lemon.

  17. hmmm... says - Posted: April 7, 2013

    “There’s an old saying in Tennessee — I know it’s in Texas, probably in Tennessee — that says, fool me once, shame on — shame on you. Fool me — you can’t get fooled again.” — George W. Bush,

  18. MTT says - Posted: April 7, 2013

    A tunnel under US 50? And no commitment to do it?
    I can picture everything from a nice well lit walkway to a cold scary tunnel.

    I see an over pass in your future. Probably a 3rd floor walkway from Harvey s to new place across the street to Gondola