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January 19, 2020

Hotel owners sue the city

A group of Morgan Hill hotel owners, fearful of losing their limited clientele, is suing the City of Morgan Hill over a rezoning amendment that will allow the construction of a new lodging facility on land that was previously tagged for industrial use only.

The lawsuit filed by the Morgan Hill Hotel Coalition in Santa Clara County Superior Court claims the city violated the California Election Code when the five-member City Council in July 2015 rejected a petition to repeal the rezoning.

That petition was signed by more than 4,000 voters and was certified by City Clerk Irma Torrez, according to the complaint.

The lawsuit is asking the court to demand the city suspend the rezoning ordinance, known as Ordinance No. 2131.

Hotel representatives have said the council’s decision to change the land use deprives the local economy of needed industrial land.

“The City Council’s desire to ignore the voters’ desire to suspend the ordinance was a discouraging blow to public participation and democracy,” said Asit Panwala, attorney for and member of the Hotel Coalition, which represents six Morgan Hill hotels. “We will fight back. The voter should be allowed to decide this issue as stated in our state’s Constitution.”

The 3.39-acre property in question is located near the intersection of Lightpost Way and Madrone Parkway, according to the court document.

The rezoning proposal was discussed at a council meeting in April. The property owner told the council he planned to build a Hilton Garden Inn hotel at the site.

At that meeting, the council heard from local hotel owners and managers who said the local hotel market cannot sustain another “mid-level” size hotel. By increasing the supply of such rooms by 58 percent in two years, the local hotel industry would be financially devastated, Panwala contested. Furthermore, the coalition explained that half the guests who stay in Morgan Hill hotels come from San Jose, where about 3,500 more hotel rooms will be built in the next two years.

The council voted 3-2 in April to approve the rezoning.

“With increase in hotel room supply in San Jose, the overflow room demand would not trickle down to the Morgan Hill economy,” Panwala said. “The Hotel Coalition advocates bringing mid- to large-size employers to the region so Morgan Hill residents do not need to travel north to the Peninsula for their jobs.”

The Coalition then circulated petitions to repeal the rezoning ordinance, which Torrez certified May 15, 2015. The petitions were signed by 4,130 voters. By state law, a referendum petition signed by at least 10 percent of registered voters meets the eligibility to be placed on a local election ballot.

On July 15, the council voted 4-0 to reject the petition, with Councilmember Marilyn Librers absent. About nine months earlier, in November 2014, the council approved a General Plan amendment that also changed the preferred land use of the property from industrial to commercial. Councilmembers and the city attorney said in July that if the council or the voters were allowed to repeal the rezoning, they would be inconsistent with the General Plan, which would also be illegal.

Mayor Steve Tate said he is aware of the hotels’ lawsuit against the city, but he cannot comment on the pending litigation.

City staff reports published before the July meeting also noted that vacant industrial land in Morgan Hill has been slower to develop in recent years than commercial property.

On Sept. 19, 2015, developer River Park Hospitality submitted a conditional use permit application to build a 149-room hotel on the Lightpost Way property, according to Panwala.

Two more new hotels are coming to Morgan Hill, which the MHHC did not oppose. These are the La Quinta Inn under construction on Condit Road, and a smaller (up to 60 rooms) boutique hotel downtown that has been proposed at what is now the Downtown Mall site.

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