Acknowledging that their dreams of attracting a local NFL team may soon be dashed again, Los Angeles officials have begun laying the groundwork for the construction of a 1,000-room hotel on city-owned property that would directly connect to the Convention Center.
The City Council has a deal with developer Anschutz Entertainment Group to build a 72,000-seat stadium between the Convention Center and the 110 Freeway, with some stadium proceeds going to expand and upgrade the convention venue.
But with that pact set to expire in five months and the NFL remaining coy about its intentions, officials have begun looking at other strategies for boosting tourism and renovating the facility. "We have to be ready with a Plan B," said Robert "Bud" Ovrom, the Convention Center's executive director. "And Plan B is to modernize the Convention Center and incorporate a headquarters hotel into that design."
The 2012 agreement between the city and AEG assumed the Convention Center's 43-year-old West Hall would be demolished and replaced by Farmers Field, the new stadium. Under that plan, debt payments on a new $287-million Convention Center wing would be covered by stadium proceeds such as parking taxes, lease income, property taxes and a one-time construction tax.
The plan cannot be realized unless AEG secures a team. Ovrom has been diplomatic, saying there's "a 50-50 chance" that will happen before the agreement expires. But L.A. County Supervisor Mark Ridley-Thomas, who tried without success a decade ago to bring the NFL to the Los Angeles Memorial Coliseum, said it was "highly improbable" a team would come to L.A. this year.
Team owners "don't appear to be in any big hurry to do a deal. When a deal is moving, it's not a secret," Ridley-Thomas said. "They continue to court, and in some ways, taunt their suitors, and they're having a good time doing it."
NFL spokesman Brian McCarthy said in an email that the league is continuing to monitor "all stadium developments in the Los Angeles area." Meanwhile, AEG officials have publicly recognized L.A.'s need for a backup plan at its convention facility.
"Although building this project with an NFL stadium has always been our top priority, we share the city's objective of modernizing and expanding the Convention Center and are cooperating with city officials to offer our input and assistance to identify a feasible Plan B should one be needed," said AEG spokesman Michael Roth. AEG currently has a contract with the city to run the facility.
The Convention Center has a major effect on the city budget, sending more than $48 million in hotel tax revenue each year to pay off debt on the facility's South Hall, which opened in 1993 and is known for its curving green exterior. If the Convention Center saw an increase in both bookings and event revenue, more hotel tax money would be available to pay for basic services.
City officials contend 4,000 more rooms are needed within walking distance of the venue to help the Convention Center book bigger and more lucrative events. They plan to ask council members later this month to hold a design competition, with architectural firms submitting proposals for remaking the Convention Center and identifying the spot where a private company should develop and operate an adjacent hotel.
The city's work on a backup plan comes as several private companies are pursuing new hotel projects in the area. The Times reported last week that a developer planning a high-rise hotel-and-residential complex had bought a carwash on Olympic Boulevard, not far from the Convention Center, for an estimated $25 million. On the same street, the developer of a 23-story hotel tower is now planning a similar 450-room project next door.
How a new city-sponsored convention center hotel would be paid for is not clear. One option would be to refinance the Convention Center's remaining debt, expanding the payment schedule and freeing up $200 million to $300 million, Ovrom said.
L.A. would not be the first city to get involved in hotel development. In 2005, officials in Phoenix formed a nonprofit corporation to finance and build a 1,000-room Sheraton hotel one block from its convention facility. Baltimore city leaders tapped a nonprofit corporation to construct the $350-million Hilton Baltimore, a 757-room facility that opened in 2008 and allows guests to reach the convention venue via a skywalk.
In Portland, the push to build a 600-room convention center hotel has spawned a protracted political fight, with opponents suing to force a vote on some of its public financing. Though backers say the project would not be built without $78 million in government loans, grants and subsidies, foes have described the help as unnecessary.
"For us, it's very clearly a rip-off and money going to a corporation that doesn't need it," said Paige Richardson, spokeswoman for the opposition, which includes large and small hotels in Portland.
In Baltimore, outstanding debt on that city's convention center hotel received a negative outlook last year from Wall Street rating service Moody's. Kurt Krummenacker, Moody's vice president and senior credit officer, said the assessment reflected a concern about the hotel's debt payments, which will increase in the coming years.
"That is a particular concern because the hotel business, it's very competitive," Krummenacker said. "Your hotel tends to lose its competitive position over time as your property ages."
In Los Angeles, the work on a convention headquarters hotel is still preliminary. One option, officials say, would be to build a hotel next to the 110 Freeway, replacing a parking garage. Another would be to develop it on Chick Hearn Way, across the street from AEG's L.A. Live entertainment complex.
A third choice, Ovrom said, would be to construct a hotel over Pico Boulevard, which would allow guests to enter each wing of the Convention Center. City officials plan to leave it to competing architectural firms to recommend a location. "We don't want to inhibit their creativity," Ovrom said.Copyright © 2014, Los Angeles Times