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Council Is Urged to OK Hotel Deal

Two city officials back plan to provide public subsidies and loans to developers of the high-rise. Critics call the proposal misleading.

September 08, 2005|Patrick McGreevy | Times Staff Writer

The Los Angeles City Council's top two advisors have recommended that it approve $266 million in public subsidies and loans for the developers of a 55-story hotel next to the city's Convention Center, a much higher amount than previously disclosed. The proposal from City Administrative Officer Bill Fujioka and Chief Legislative Analyst Gerry Miller sets the stage for the council to adopt a financial package that includes allowing the hotel to keep $246 million in hotel bed taxes that it is expected to generate in its first 25 years.

The two city officials, however, characterized the bed-tax rebate as a $62-million subsidy because that is the amount the developers can raise immediately for construction by borrowing against the 25-year flow of tax receipts. Although that is the "present value" of the subsidy, the city would actually forgo $246 million.

Jon Coupal, president of the Howard Jarvis Taxpayers Assn., criticized the city for trying to present the deal in a way that might be more palatable to the public.

"It's misleading," he said.

Councilman Bernard C. Parks, however, said he was not put off by the final deal, saying the bed tax being returned is new revenue the city would not get if a hotel were not built.

"It basically pays for itself," said Parks, who is chairman of the council's Budget and Finance Committee.

The city is also proposing $20 million in loans and building fee waivers.

Building a 1,100-room hotel would help the city attract more business to the Convention Center, which is not earning enough to cover $32 million in annual debt payments incurred for a $500-million expansion, Fujioka and Miller argued in a report released Wednesday.

The city's general fund is subsidizing the Convention Center debt payments by more than $10 million annually, officials said.

"The Los Angeles Convention Center has not been able to attract the large-scale conventions and events that its competitors have been able to attract because of the lack of a convention center headquarters hotel that provides ample hotel rooms within close proximity to the Convention Center," Fujioka and Miller wrote.

City officials said a development team that includes the L.A. Arena Land Co., a firm owned by Denver billionaire Phillip Anschutz, is obtaining $180 million in private loans for the project, but that the city financing is needed for the project to go forward.

Critics of the deal, some of whom have sued to block it, say it is unfair to other hotels that have to compete with one receiving public subsidies. Coupal, who is not part of the lawsuit, said there is also the risk that the subsidies will fail to make the hotel and the convention center profitable.

"The fact that private capital won't come in and build the hotel should be a red flag to city officials that this project may not be viable," he said.

In arguing for the City Council to approve the deal in the next few weeks, Fujioka and Miller also said it is an important element of the $1-billion "L.A. Live" development of restaurants, theaters, offices and shops being proposed by Anschutz near Staples Center.

To buttress their argument, the two city officials also released an analysis by PKF Consulting indicating that over the first 9 1/2 years of the hotel's operation, it would boost the city's economic output by $2.7 billion, as thousands of additional conventioneers and tourists come to Los Angeles.

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