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Fee Waivers Violate City Procedures

Tourism: Officials say excessive discounts have cost the Convention Center $1.8 million since June 2001. Visitors bureau defends practice.


In the year since an audit criticized the Los Angeles Convention and Visitors Bureau for excessive waivers of rental fees at the city Convention Center, nine more conferences held there have received bureau discounts that violated city policy.

All rental fees were waived for the nine events, costing the Convention Center more than $1.8 million.

The city allows discounts to lure business to the sprawling facility, but the amounts cannot exceed the hotel bed tax generated by each event. For the nine events held since June 2001, the discounts exceeded bed taxes by $667,000.

The size of discounts has been the subject of a long-running dispute between the bureau, which has a contract with the city to book conventions, and the management of the city-owned Convention Center, which is supposed to oversee and approve discounts offered by the bureau.

George Rakis, general manager of the Los Angeles Convention Center, said sometimes rents must be waived or discounted to make Los Angeles more competitive with other cities. But he said some discounts have been excessive and have been approved without his full input.

For The Record
Los Angeles Times Sunday July 28, 2002 Home Edition Main News Part A Page 2 National Desk 9 inches; 345 words Type of Material: Correction
Convention Center--A June 16 article about the Los Angeles Convention & Visitors Bureau incorrectly stated that the agency waived rental fees for Digital Consulting Inc. for an event staged in December at the Los Angeles Convention Center. The company received a discount of rental fees for a convention held in 2000, before an audit by the city controller criticized the practice of providing discounts that exceeded hotel bed taxes generated by the event. In the same story, a photo caption misrepresented the statements of George Rakis, general manager of the Convention Center. Rakis said he approved all the rental discounts but complained that they were "done deals" by the time they reached his desk.

Rakis also said the bureau has given large discounts to trade shows that had been booked for years by the Convention Center's own staff and had paid full rent. The bureau offered the discounts if the shows would book as bureau accounts.

The Convention Center manager wrote a letter in July protesting the bureau's practice of raiding the center's "house accounts" to help the bureau meet its booking goals.

"These events have never required discounts and, in some cases, are now having portions of their rental reduced by your sales staff," Rakis wrote to Bureau President George Kirkland. "We strongly disagree with offering discounts to these groups since the discounts are not necessary, and having these events listed as bureau accounts."

Bureau Vice President Michael Collins said this week that those discounts were only offered after other cities stepped up to compete for the shows.

"In each case, the clients are committing to a number of years in the future and in each case there are other West Coast cities that would offer the moon and the stars to have them meet somewhere other than L.A.," Collins said.

Bureau officials say that discounts are necessary to counter Los Angeles' competitive disadvantage with other cities caused by a lack of hotel rooms and other amenities close to the Convention Center.

But city officials say discounts have sometimes been given out without enough thought.

"I'm concerned because it impacts the operating profit of the center," said Peter Zen, chairman of the city Convention Center Commission, which is conducting a wide-ranging review of the bureau's performance and business practices. "It means less revenue."

Zen said he would be less concerned if the discounts were bringing in a lot of business, but he said few conventions are being booked by the bureau these days.

With fewer conventions coming to town, less money is available to pay down the $525-million debt incurred to expand the Convention Center in 1993, forcing the city to dip deeper each year into the general fund to pay off the bonds.

In an audit completed last June, the city controller found that the bureau and Convention Center had waived $25 million in rental fees in the six-year period ending June 30, 2000. The controller noted that $5.8 million in waivers were provided in violation of the policy limiting them to the hotel bed tax generated for the events.

Since then, a review of Convention Center records shows that nine more events received discounts that exceeded hotel bed taxes. The shows include:

* The American Assn. of Health Plans received a waiver of $89,701 but only generated $77,060 in hotel bed taxes.

* The American Society of Health System Pharmacists received a rental waiver of $216,000 while generating hotel bed tax of $132,213.

* Digital Consulting Inc. had all $118,995 in Convention Center rents waived for its event last December but only generated $13,800 in hotel bed taxes.

Bureau officials said there is a difference of opinion over the intent of city discounting policies and who is ultimately responsible.

"The bureau has no authority to unilaterally authorize discounts to conventions," the bureau said in a statement, noting that the city administrative officer and Convention Center must approve all discounts.

However, Rakis said many of the discounts were agreed to by the bureau and convention organizers and approved by City Administrative Officer William T. Fujioka as "done deals" by the time they reached his desk for consent, potentially resulting in liability if he said no.

In the statement, bureau officials said the "collective understanding" of city officials and others was that the aggregate sum of the discounts annually should not exceed the total hotel bed taxes generated in that year by all events.

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