Staples Owners Propose Huge New Project

As downtown Los Angeles reels from the loss of its last major corporate headquarters, a project introduced Wednesday proposes to reshape the city core with a plan that could draw millions of annual visitors, but that threatens to stir political controversy just as the 2001 mayor’s race heats up.

The proposal by the owners of Staples Center would transform more than 30 acres of parking lots and scruffy buildings into a shopping, dining and theater area, capped by a four-star, 40-story, 1,200-room hotel. Those amenities would abut and ring the center, enveloping a public space that the proponents likened Wednesday to “Los Angeles’ Times Square.”

It would also require, the developer said, a taxpayer subsidy.

If built as planned, the project would develop in two phases and ultimately total more than 3 million square feet that would include office space and 800 residential units in an area of the city woefully short of housing. Some of the new units would be set aside as affordable housing, proponents said.

All that gives the project--whose exact cost is undetermined, but that some observers estimate at about $1 billion--enormous economic and symbolic significance for a city center struggling to reestablish itself. Advocates say it could draw 6 million visitors a year, generate millions of dollars in hotel and sales tax revenue, and help rescue the city’s long-suffering Convention Center, which is next to Staples.

Backers Plan to Seek Taxpayer Subsidy

Already, however, there are trouble signs for the proposal: Some downtown interests are concerned that its design and location would draw life out of local businesses rather than bring people toward them; more significant, the project’s proponents say, it cannot be built without taxpayer help.

“It’s clearly going to need a subsidy,” Staples President Tim Leiweke said in an interview. “These large hotels for convention centers don’t get built without one.”

To bolster that case, Leiweke and his staff produced a report detailing city subsidies in Philadelphia, Chicago and elsewhere that helped pay for convention hotels. The payback to Los Angeles for such a subsidy, Leiweke and other project supporters argue, is in attracting more conventions to the city, which is struggling to compete against San Diego, Anaheim, San Francisco and other California convention sites. Los Angeles is at a disadvantage in that competition, observers say, because it lacks a major convention hotel within easy walking distance of its Convention Center.

But the argument that taxpayers should help foot the bill for the hotel is a tough sell under any circumstances. It’s tougher still given the timing of the current proposal--landing just as the mayor’s race begins to pick up steam.

Indeed, one leading candidate for mayor, City Councilman Joel Wachs, built much of his populist, taxpayer-protection image around the issue of public subsidies for Staples Center. Wachs vehemently opposed the early plans to help underwrite the center, and he eventually forced changes in the deal.

Wednesday, he was at the council session when the hotel and retail project was presented, and afterward he sounded some of the same themes that he used in the earlier debate over the sports arena.

“I have a particular concern about the financing of this project,” Wachs said. “Who’s going to pay for it? The people who own it and are going to profit from it or the taxpayers?”

As Wachs noted, the money behind the proposed development includes two of the world’s richest men, Australian media baron Rupert Murdoch and Denver railroad magnate Phil Anschutz. Ed Roski, a multimillionaire Los Angeles real estate developer, also is behind the new project.

Funding Debate Foreshadowed

Before the city agrees to supply any funding, Wachs said, those private backers need to answer two questions: Why do they need it and why should their project be given higher priority than any other city need?

“How do we justify giving money to some of the world’s richest real estate developers when we aren’t fixing the streets, trimming the trees, picking up the stray animals?” Wachs asked.

Those remarks foreshadow the coming debate, but Staples officials have laid the groundwork for this fight better than they did in 1997, when the arena was first proposed. In that round, arena proponents tried to bulldoze their way through the City Council and then resisted attempts to make their proposed contract with the city public.

Chastened by that experience, Leiweke and his staff entered Wednesday’s meeting committed to striking a tone of cooperation. They stressed Staples’ friendly relationship with organized labor--the center just settled a wage dispute--and they paid personal calls on nearly all the City Council members who will be asked to decide the issue.

“We’re going to go with a very open mind,” Leiweke said. “We’re smart enough--or beaten up enough--to do it this way.”

City Council President John Ferraro announced that a special council committee will analyze the project, and City Hall sources said Chief Legislative Analyst Ron Deaton would be the central negotiator for the city. When Staples Center was being debated, commercial real estate broker Steve Soboroff played that role, but his allegiance to Mayor Richard Riordan and his fractious relations with Wachs fueled the intensity of the battle over public money for the facility.

“They made egregious mistakes before,” one council member said. “They’re trying not to repeat them.”

There were some signs that the groundwork was paying early dividends. On Wednesday, Councilwoman Rita Walters, who was an early critic of the sports complex proposal, expressed enthusiasm for this project, which is in her district.

“It’s not only exciting, but it’s hopeful,” she said. “It expresses a lot of hope in Los Angeles. . . . I’ll enjoy watching it go up.”

Still, it’s far too soon for the project’s advocates to declare victory. The issue of public financing promises to be the most politically volatile, and undoubtedly will become embroiled in the increasingly contentious jockeying to succeed Riordan.

Moreover, there are other concerns.

Carol Schatz, who heads the Central City Assn., expressed misgivings about some aspects of the proposed design. In particular, she noted that its public space is contained within a ring of buildings, largely cutting it off from the Figueroa Corridor that it is intended to enhance. Moreover, the project would eliminate parking that today is scattered throughout the area around Staples and consolidate it into a single, multistory garage. That might be convenient for conventioneers or others, but it could isolate the project from the rest of downtown, she said.

“The vision that was presented today was breathtaking,” she said. “But the devil’s in the details.”

Although the project has huge implications for the face of downtown Los Angeles, one person who will play no role in the outcome is Riordan.

The mayor, who has hinged much of his reputation on the revitalization of downtown, absented himself from the Staples Center debate several years ago and is doing so in this discussion because he owns a restaurant near the site, meaning that he stands to profit from its successful completion.

Asked whether Riordan or his staff would participate in any way in the debate over the new project, a spokesman responded: “Emphatically no.”

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Staples Proposal

A major development proposed by the owners of Staples Center would bring a 40-story convention hotel to the area next to the downtown arena. The hotel would sit at the center of a retail and entertainment area. Advocates say it could energize downtown; critics question its design and object to a request for public funds.

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The plan

* Total cost: About $1 billion

* Hotel rooms: 1,800 (2 hotels)

* Retail / entertainment / restaurants: 5,000 seats

* Office / sports medicine center: 300,000 square feet

* Residential units: 800

* Parking spaces: 4,700 in structure (would eliminate 4,000 spaces in immediate neighborhood)

Hotel Projects and Public Money

Here are some convention hotel projects that have been or are proposed to be partially financed by public money.

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Stage of Opening Total cost % of public Facility development date (in millions) investment Renaissance St. Louis proposed 2003 $245.0 81% Sheraton Atlantic City, N.J. open 1997 $81.2 47% Loews Miami Beach open 1998 $160.1 43% Loews under Philadelphia construction 2000 $115.0 35% Marriott Philadelphia open 1994 $211.0 20%

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Source: Staples Center