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Tax Incentive Used as Lure for El Monte Hotel Project

January 11, 1987|JAXON VAN DERBEKEN | Times Staff Writer

EL MONTE — Armed with a congressionally approved $4-million tax break that can be passed on to a developer, the city is seeking a builder to construct an $18-million complex that would include a hotel, convention center and retail space.

The city obtained the special tax break as part of the Tax Reform Act of 1986 after intensive lobbying with congressmen.

El Monte was one of about 1,500 cities and businesses nationwide that scrambled to get tax breaks as the reform bill worked its way through Congress. About 300 of the requests were granted at a cost of $10.6 billion.

The special tax breaks, a staple of every major tax bill in memory, are called "transition rules." They are designed to protect certain investments and projects that were on the drawing boards or just getting under way when the tax revision bill was passed last year.

In El Monte's case, the break means that the proposed project will not be subject to new federal rules on how much and how fast commercial property can be depreciated.

Had the exemption not been written into the revised tax bill, El Monte might not be able to attract a developer for the project, which would be built adjacent to a Southern California Rapid Transit District bus terminal near the San Bernardino Freeway and Santa Anita Avenue.

"This was a desperate situation for El Monte," said Rep. Matthew G. Martinez (D-Montebello), who said he had steadfastly opposed the tax revision bill because of clauses that eliminated tax benefits for local development.

"I don't know what Marty (Martinez) did, but he pretty much pulled off a miracle in getting this thing in the tax act," said Assistant City Atty. Dave Gondek.

Political Horse-Trading

Martinez said he met with House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) to lobby for the El Monte agreement. He said that in the end, he agreed to vote for the tax bill in exchange for the El Monte exclusion.

The city recently cleared another hurdle when it reached an agreement with the state Department of Transportation and the RTD, which own about 30 of the 40 acres where the project would be built.

Under the agreement, the two agencies could continue to use the land for current operations or the city would provide land elsewhere. The two agencies now use the land for bus maintenance and storage, employee parking and a dispatch center.

Gondek, who originally sought the tax break, said the project will help overcome "pretty serious blight" that has hit the city in the last decade. To reap the full benefit of the break, construction must begin this year and the project must be completed by 1990, Gondek said.

Finding Developer

The city must now find a developer. El Monte has had trouble attracting developers and without this break, Gondek concluded, "a hotel developer wouldn't have any particular incentive to develop this site."

Because they could depreciate the project for 19 1/2 years, instead of the 31 1/2 years specified under the new law, the builders of the 200- to 250-room hotel and commercial complex would save $1 million over the first four years about $4 million overall, Gondek said.

Martinez said he fought for a similar break for a Bell Gardens project as part of a package of amendments to the main bill but that package died in the Senate in the waning days of the session.

Mayor Don McMillen lauded Gondek and Martinez for their work on behalf of the El Monte project.

"It's one of the many things we're doing to turn this city around," McMillen said, adding that the proposed complex is only one of several residential and commercial developments planned to revitalize the community.

"It will be a great asset for the city," McMillen said. "About all we've got in the city is motels."

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