Agency Created to Pay for Hotel Downtown

The Los Angeles City Council voted Friday to create a nonprofit corporation to issue tax-exempt bonds and pay for a $280-million hotel next to the Convention Center, despite opposition from three council members who worry about the city undertaking a project shunned by private developers.

Under the proposal, city officials would make up most of the board for a new Downtown Revitalization Corp. that would issue tax-exempt bonds to build the 1,200-room hotel downtown.

The lack of a nearby hotel has been cited by Convention Center officials as a reason they have had difficulty attracting events. A sagging occupancy rate has hindered efforts to pay off the debt on the $525-million Convention Center expansion.

Private developers have not come forward to build the hotel on their own, and the Community Redevelopment Agency has estimated it may have to subsidize the project with $67 million to $80 million.

“What if it turns into a situation like the Convention Center where no one comes there?” Councilman Dennis Zine asked. “Who is going to pay the debt?”

Zine, along with council members Jack Weiss and Wendy Greuel, voted against creating the nonprofit corporation.

Chief Legislative Analyst Ron Deaton told the council that the hotel project would not go forward unless it can be shown that the hotel, with limited subsidies, would generate enough revenue to cover the bonds. Deaton said that creating a nonprofit agency would protect the city’s general fund from liability and that the tax-exempt bonds are necessary to make the project work.

“It cannot be financed otherwise,” the analyst said. “It is not economically feasible otherwise.”

Weiss said that should give the council pause. “The city will be involved at one level or another in a matter that strikes most of us as the job of private enterprise, sink or swim,” Weiss said. “Yet here we go again with insufficient public discussion.”

Councilmen Eric Garcetti and Ed Reyes defended the project, saying a hotel will allow the Convention Center to attract more business, lessening the drain on the general fund.

“We are hemorrhaging at the Convention Center,” Reyes said. “The only way to stop that bleeding is to begin this work today.”

Deaton said once the nonprofit is finalized, he will be able to negotiate with builders and hotel chains that would contract to operate the hotel. His goal is to negotiate a deal not requiring public subsidies.