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Phone tax foes question AEG's backing of bill

The firm, which enjoys city tax breaks, is raising funds for L.A. initiative.

December 17, 2007|David Zahniser | Times Staff Writer

A company whose hotel project is slated to receive at least $246 million in tax breaks from the city of Los Angeles is spearheading the city's effort to win passage of a telephone utility tax on the Feb. 5 ballot.

Tim Leiweke, president and chief executive of AEG, sent a fundraising letter last week urging businesses across the city to contribute $100,000 apiece to Proposition S, which seeks to preserve an estimated $243 million in the city's budget.

The pitch drew criticism from opponents of Proposition S, who argued the city would not need so much tax revenue if it gave smaller raises to public employees and fewer tax breaks to real estate projects.

Under an agreement with the city, the 1,000-room hotel at AEG's L.A. Live project will keep as much as $270 million in taxes generated over 25 years -- roughly the same amount generated in a single year by the city's telephone tax.

"Obviously there's a cozy relationship there, and somebody who receives a subsidy from the city is going to feel an obligation to repay that kindness," said Kris Vosburgh, executive director of the Howard Jarvis Taxpayers Assn.

Leiweke responded angrily, saying he wrote the letter out of a desire to keep the city from having to lay off thousands of police officers and firefighters. "Shame on Howard Jarvis for trying to insinuate that I'm repaying a favor here," he said.

"The question shouldn't be whether I have a conflict," Leiweke added. "The question should be, why aren't more people alarmed?"

As a carrot to voters, the ballot measure would lower the tax from 10% to 9%, generating an estimated $27 million less for city coffers than the current levy.

Mayor Antonio Villaraigosa initiated the campaign for Proposition S out of concern the telephone tax would be struck down in court as soon as next year. Since the measure was placed on the ballot, Villaraigosa has been trying to persuade the region's telecommunications companies to stay neutral.

Steve Barkan, a campaign consultant for Proposition S, said the mayor had a "fundamental obligation" to ask business leaders to give in ways that would protect the city's budget. "Protecting public safety is good for the local economy, and the business community has a right and responsibility to help keep Los Angeles one of the safest big cities in America," he said in a prepared statement.

The mayor backed the AEG hotel deal in 2005, and it was passed unanimously by the City Council. In addition to the tax break, the council approved a below-market-rate loan of $16 million from the city's Community Redevelopment Agency and a rebate of $4 million in building permit fees.

In his letter, Leiweke asked companies to send checks to Villaraigosa's Committee for Government Excellence and Accountability, the political action committee that also funded the mayor's effort to win passage of legislation that would give him more power over the Los Angeles Unified School District.

AEG and a subsidiary already have given nearly $385,000 to mayoral causes, including $125,000 for his campaign to elect a new school board and $100,000 for his education bill in Sacramento. KB Home, which is developing the 54-story hotel with AEG, has given $150,000 to Villaraigosa's initiatives.

Leiweke described the hotel project as a "labor of love" and said he did not enjoy asking other companies for money. Although he is named in the letter as a campaign co-chairman, Leiweke said he was not aware he had been given such a title.

Vosburgh said that although he was critical of the tax measure, he did not fault AEG for securing the deal with the city.

"You can't blame a developer for trying to get a subsidy. But you can blame elected officials for doling them out," he said.

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