Downtown Los Angeles was used to being kicked around. But like the wimpy kid who grows up to be an All American, downtown has beefed up as place to live and work and become a destination for the kind of entertainment that downtowns are there to provide. City Hall -- for reasons both admirable and self-serving -- has sought to cash in.
What downtown Los Angeles doesn't have, say the consultants that City Hall pays to say the obvious, is enough hotel rooms to justify building a bigger and better convention center ... or was it build a bigger convention center to justify more hotel rooms?
This conundrum had an answer in the scheme of the Anschutz Entertainment Group to bring pro football to the neighborhood of L.A. Live, AEG's sports and nightlife complex. AEG offered to modernize and operate the underperforming convention center (via some peculiar fiscal magic) as well as build the Farmers Field stadium.
We know how that played out.
Although AEG continues to pursue an NFL franchise, some of its deal-making with the city will begin to unravel in October when AEG's stadium contract ends. The stadium would have generated, everyone hoped, enough revenue to finance an overhaul of the convention center, which would have brought in enough new bookings to fill hotel rooms as yet unbuilt.
AEG's stadium contract can be extended, of course, and probably will be, but City Hall's pragmatic Mayor Garcetti is likely to let the game clock run out before long.
That leaves the 40-year-old convention center. It's generally regarded as dowdy, too small, and poorly designed. It's also burdened with $325 million in bond debt and a history of unprofitability.
The city is looking for a Plan B, starting with a $700,000 study of convention center expansion options and the construction of another 1,000 rooms of hotel accommodations nearby. Smaller hotel projects are underway already. A pair of Marriott Hotel towers with 400 rooms will open next month at the edge of L.A. Live.
City planners think at least 4,000 new hotel rooms are needed to make the convention center competitive.
Los Angeles has a history of giving away tax revenue to build hotels so that larger trade shows will come to the convention center (justifying the construction of the hotel rooms). According to the Los Angeles Times, the city has already promised to return more than $500 million to downtown hotel developers. Naturally, they have come to depend on tax rebates -- many lasting up to 25 years -- to make their projects profitable.
Tax subsidies to build 4,000 hotel rooms could mean another $200 million lost to the city's general fund, not counting another $300 million in debt to expand the convention center. This is the irony of a downtown economy based on hotels, a convention center, and an entertainment complex (that might include a football stadium), every element of which requires giving away city revenues for decades to come.
As attractive as this play has been for developers, politicians, construction workers, and contractors, what it wins for downtown is hard to calculate.