The council deadlocked on a 7-7 vote on a motion introduced by Councilwoman Katy Yaroslavsky, who represents the area as part of her Fifth District.
She said she's concerned because a lobbyist in favor of the project was married to a city planning deputy at the time.
"It's not just that they were married. It's that she was actively lobbying for this project while her husband was still a city employee," said Yaroslavsky.
The motion would have directed the city planning director to reconsider the initiation of a General Plan amendment needed to permit the proposed Bulgari Hotel to be built in a residential area.
The project would include 12 bungalows, another building with 58 rooms along with a restaurant, spa and parking. Residents at Tuesday's meeting told Eyewitness News they worry about the project's environmental impact.
"If this zoning was changed from residential to commercial and they allowed a hotel in this high-fire severity zone, it would be crazy," said Mark Levin with SAVE OUR CANYON, a nonprofit that advocates for the protection of open spaces in Benedict Canyon. "The evacuation with this kind of operation going on in the narrow streets."
Developer Gary Safady said he made sure the project respects the area and its neighbors.
"I want to do a role model of a project here," he said. "I want to do something where the homes can blend in seamlessly with the environment and put the environment first. Our ethos is sustainability, our ethos is wildlife, our ethos is fire prevention."
Although the motion was defeated, it still does not guarantee the project will ultimately be built.
The council will discuss the project again once the Planning Department releases an environmental impact report.
City News Service, Inc. contributed to this report.