Laps of luxury

You Are Paying For ThisLow-income kids - perhaps as many as 9,000 - won't have summer jobs if Mayor Villaraigosa's proposed city budget is adopted. Neighborhood councils - the heart of charter reform in 1999 - would have nearly $2 million cut from their reserve funds. And their annual budgets - just $45,000 for each neighborhood council - would be reduced 10 percent.

The hole in the city's balance sheet is at least $450 million, and the pain of budget austerity is being broadly spread around. Police and fire departments and recreation programs will be diminished, too.

Austerity isn't for everyone, however

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Three luxury hotels - if all are built - will get as much as $640 million in tax revenue transfers under the kind of subsidy agreement that has become standard when cities sit down with developers. Little cities turn over a share of sales tax revenue to get a Wal-Mart or a Costco. Los Angeles gave up hundreds of millions in sales tax and "bed tax" revenue to get a Ritz-Carlton and a J. W. Marriott.

That deal will transfer $270 million to Anschutz Entertainment Group (AEG), proprietor of the 54-story tower that houses both hotels, by the time the city's agreement ends in 2035. Similar deals have been made with developers of hotel projects on Grand Avenue and Wilshire Boulevard. These deals are estimated to transfer another $370 million in city revenue to developers over a comparable span of years. More developers are already lining up for their share.

Los Angeles has approved dozens of subsidy deals over the past 30 years with the authority of California redevelopment law. Land transfers to developers, loan write-downs, and tax revenue rebates are normal parts of doing business here.

What is distinctive about AEG's hotel deal is the size and imperial reach of AEG's ambitions. Staples Center, the LA Live entertainment complex, hotels, and the proposed Farmers Field NFL stadium will complete a wall of AEG development around the Los Angeles Convention Center. (Part of the convention center will actually have to be demolished and rebuilt to get AEG's football stadium as close as possible to AEG's hotels.)

Critics of the Grand Avenue and Wilshire Boulevard projects say that subsidies to build these hotels probably aren't necessary. AEG's deals, however, have come to define what the city is willing to give up. Big developers expect big subsidies; they count on them, in fact, to make deals sufficiently profitable.

Angeleños may wonder what they will get for giving their tax dollars to AEG. Convention center business, it is said, will improve with new hotels, although that increasingly looks like an excuse to expand AEG's dominion. AEG's projects wouldn't be built, it is said, if subsidies weren't offered. Think of the transfer of future city revenue as a wash. Los Angeles will make money, they say, on all the other stuff a big project will deliver. That claim is increasingly disputed.

What's not in dispute is the corrosive effect of unchecked subsidization. In effect, tax revenues are laundered through developers to campaigns for council member and mayor - just another part of doing business here.

D. J. Waldie, author, historian, and as the New York Times said in 2007, "a gorgeous distiller of architectural and social history," writes about Los Angeles every Monday and Friday at 2 p.m. on KCET's SoCal Focus blog.

The image on this page was taken by flickr user David Jones. It is used under a Creative Commons License.

About the Author

D. J. Waldie is the author of "Holy Land: A Suburban Memoir" and "Where We Are Now: Notes from Los Angeles." He is a contributing editor for the Los Angeles Times.
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