Lezlie Sterling / Bee file, 2012

A $400 million complex halted in 2008 along Highway 50 became an impromptu skateboard park. Tuesday, hope for construction was rekindled when the South Lake Tahoe City Council approved a new developer’s bid for retail and restaurant space there.

South Lake Tahoe OKs new development for abandoned site

Published: Thursday, Jun. 13, 2013 - 12:00 am | Page 6B
Last Modified: Thursday, Jun. 13, 2013 - 6:53 am

South Lake Tahoe's infamous "hole in the ground" soon may be partially filled after City Council members voted Tuesday to allow some construction to resume this summer.

The 11-acre site along Highway 50, next door to the high-rise casinos of neighboring Stateline, Nev., was planned as the Chateau at Heavenly Village – a $400 million hotel, convention center, retail and restaurant complex.

That was before developers ran out of money in 2008, leaving a six-block excavation site covered in concrete and metal reinforcing rods.

Locals dubbed it the "hole in the ground" and saw it as a symbol of the city's struggle to recover from the recession and competition from American Indian casinos closer to urban areas. Teens climbed the chain-link fence that surrounded the site, turning it into an impromptu skateboard park.

On Tuesday, South Lake Tahoe City Council members unanimously approved a new plan to phase in development starting with retail and restaurants. The hope is that the hotel and convention center will follow, said City Manager Nancy Kerry.

The plan was put forward by Owens Financial Group, a Walnut Creek firm that foreclosed on much of the property last month. It took over parcels once controlled by Lake Tahoe Development Co., which filed for bankruptcy after spending tens of millions of dollars buying land, demolishing existing structures, winning approval from regulators and starting work on the underground infrastructure.

The development permits – which were hard-won in the strict regulatory climate around the lake at a cost of more than a million dollars – were set to expire this year, and Owens Financial was eager to get started, Kerry said. The group proposed revamping the project to start on the retail phase first.

Lew Feldman, a lawyer representing Owens Financial, said the firm plans to start construction in July and complete it by next summer. Plans for the project, now known as the Chateau, call for 29,000 square feet of mostly single-story retail and restaurant space, with wide walkways and mountain-themed architecture. Building the shops and restaurants will help attract developers for the hotel and convention center, Feldman said.

"It's Owens' judgment that completing the frontage of the project will dramatically enhance the marketability of the balance," he said.

He said Owens still needs a permit from the California Department of Transportation because construction will encroach on Highway 50. The Tahoe Regional Planning Agency also must sign off on the changed project.

Tuesday's vote was the product of months of debate over whether such a move was a wise policy choice, Kerry said.

"It's just concerning because of what happened before," she said.

Officials were wary of getting into another predicament with a half-finished project. They asked for and won a commitment from Owens to put up a $10 million bond to ensure completion of the current phase, she said.

"Council members put heat on them," Kerry said, "to say we don't want to be in this position again."

Call The Bee's Hudson Sangree, (916) 321-1191.

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