San Diego sues Grand Del Mar resort for $1.5M in allegedly unpaid fees

San Diego is suing the Grand Del Mar luxury hotel complex in Carmel Valley for nearly $1.5 million in unpaid fees that are allegedly required by the project’s development agreement and a ballot measure that allowed its construction.

The lawsuit, filed April 21, says the city treasurer’s office tried unsuccessfully to collect the money before seeking a legal remedy.

The Newport Beach law firm listed as representing the hotel, the Sitzer Law Group, did not respond Tuesday, May 4, to requests for comment.

The bulk of the allegedly unpaid fees, $1.1 million, came due Dec. 30 — during a pandemic that has created significant financial challenges for nearly every business in San Diego’s tourism industry.

Built in 2007 on nearly 400 acres of previously undeveloped land, the sprawling resort includes 249 hotel rooms, several time-share villas, a golf course, a 20,000-square-foot spa, 27,000 square feet of meeting space and a large ballroom.

Proposition C, which was approved by city voters in 1996 to allow development in the city’s northwestern corner, gave permission for a 300-room hotel on the site but required whoever developed it to provide money for habitat preservation.

The original developer of the hotel complex, Westshaw Associates, paid the city an initial lump sum of just under $2 million to buy nearby habitat and preserve it.

Westshaw also agreed to slowly pay the city another $6.3 million for habitat preservation during the first 12 years of operation, a period that ended Dec. 30.

The lawsuit says that obligation has transferred to each successive owner of the property, including the Fairmont Hotels chain that bought the complex in 2015.

The required payments, which were based on room occupancy, were projected to be roughly $630,000 per year.

The lawsuit doesn’t say how much the city received when the payments have been made each year on Dec. 30. But the total received since 2007 is nearly $5.2 million, leaving a balance of just over $1.1 million.

In addition to the balance, the city is seeking nearly $30,000 in late fees.

The lawsuit seeks another $320,000 for allegedly unpaid fees from the villas on the Grand Del Mar property, which are described as time-share units.

The development agreement requires the owners to give the city a portion of the homeowners’ association fees collected at the villas and to provide the city a portion of the proceeds when a villa is sold.

An audit by the city treasurer covering April 2015 through August 2018 found that the city was being underpaid. The lawsuit seeks $232,000 in unpaid fees and $58,000 in late fees.

The total amount the city claims it is owed by the Grand Del Mar is $1.46 million. But the lawsuit notes that the city expects to collect an additional $45,000 in interest accrued through April 6.

The lawsuit says the amount of interest will continue to rise by $279 every day that the alleged debt remains unpaid.

The case has been assigned to Superior Court Judge Richard Strauss.
—David Garrick is a reporter for The San Diego Union-Tribune