When dreams of building a football stadium in downtown Los Angeles died last year, Mayor Eric Garcetti and the City Council decided to charge ahead with Plan B — a taxpayer-funded expansion and renovation of the city's 45-year-old convention center, which has long been considered a money-losing white elephant.
One of the selling points of the now-defunct stadium deal was that Anschutz Entertainment Group had promised to upgrade the convention center, to be paid for out of the revenue from the new stadium. But when the deal collapsed, city officials fell back on the same old, same old: Spend $470 million to fix and grow the convention center, and hope that this time it draws enough tourists who stay in hotels, eat in restaurants and shop in stores to generate the tax revenue needed to make the city's investment worthwhile.
It hasn't worked well in the past. (The center was outdated shortly after it was built, and a $500-million expansion in the 1990s that was supposed to pay for itself in tourism dollars did not.) It might work in the future, but that will likely require subsidizing more hotel construction around the center.
Or the city could try another option. City Administrative Officer Miguel Santana has proposed a public-private partnership in which investors would renovate and expand the convention center, then operate it. In exchange the investors would get an annual operating fee and the right to develop up to 14 acres in the booming South Park neighborhood. The land, owned by the city and adjacent to the convention hall, could include shops, offices, a hotel or apartments. As long as the annual fee to the investors comes to less than $50 million — which is how much the city is expected to have to pay in debt service if it self-funds the expansion and renovation —the city would, in theory, be further ahead with the public-private model. The new development would also be expected to generate additional tax revenue.
The City Council's Economic Development Committee voted recently to pursue a dual track, working on the taxpayer-funded expansion while also soliciting investor interest in a partnership. Some city officials, though, are uncomfortable with Santana's proposal. Councilman Paul Krekorian said there are no examples in the U.S. of public-private partnerships building a convention center, and he worried that the city would be out of its league in negotiating with investors. That's a legitimate concern. Councilman Curren Price, who represents the area, said the city shouldn't allow housing in an entertainment district. Never mind that there are condos in the adjacent Ritz Carlton.
It's impossible to say whether a public-private partnership will ultimately make sense, but it's certainly worth exploring before city leaders double down on another convention center overhaul.