First & Spring: AEG could play big role in backup plan if downtown stadium deal fails

You don’t need to care about sports to know Anschutz Entertainment Group, a big player in downtown L.A. development circles, is trying to land an NFL team.

But the machinations now playing out between AEG and City Hall go well beyond football. That’s because AEG, the company that built Staples Center and the adjacent L.A. Live entertainment complex, has been given a key role in helping the city figure out what to do should the stadium plan fall apart.

That involvement is triggering questions about whether the company’s private interests could run afoul of the city’s public interests. For Mayor Eric Garcetti and the City Council, the issue could soon boil down to this: Does AEG know what’s best for the city?

But let’s back up. L.A. officials have been hoping that AEG’s proposed 72,000-seat football stadium would generate much of the money needed for a pricey upgrade of the city-owned convention center next door. That venue diverts about $50 million from the city’s budget each year. A larger and more competitive convention center could produce more revenue, freeing up money for basic city services such as street repairs.

As the city’s NFL prospects began to dim last year, convention center officials got serious about a backup plan. In March, they floated the idea of putting a 1,000-room hotel alongside the convention center. In June, the council agreed to spend $600,000 on architectural designs depicting both a renovated convention center and potential hotel sites.

That work was ramping up in September when AEG asked for six more months to land a football team. As part of that announcement, company officials made it clear: They don’t think a hotel should be built next to the convention center. “We’re not sure that constraining future development there … is necessarily in the city’s best interest,” said AEG’s Chief Legal and Development Officer Ted Fikre.

AEG, it should be pointed out, has its own 54-story hotel tower at L.A. Live, one that serves convention-goers. If city officials decide not to follow AEG’s advice, a competing hotel could go up between the convention center and L.A. Live’s restaurants, concert venues and hotel rooms.

And it gets more complicated. AEG runs the convention center under a contract approved by the council. In the debate over where to put a hotel, what’s best for the convention center, and by extension its taxpayer owners, might not be what’s best for AEG.

Fikre has suggested that AEG build a hotel two blocks north, on land the company owns. That puts him at odds with Robert “Bud” Ovrom, the convention center’s executive director. Ovrom says a 1,000-room hotel on city land, developed by a private company following a competitive search process, would help the convention center attract more lucrative national events.

“It is widely accepted within the convention business that a hotel attached to, or immediately contiguous to, a convention center is far preferable than a hotel a block or two or three away,” Ovrom said.

Those diverging views highlight AEG’s overlapping, and potentially conflicting, roles as the city’s convention center contractor and owner of major private holdings in the surrounding area, said Kathay Feng, head of the watchdog group California Common Cause.

“AEG is going to be directly impacted by the decision that’s made one way or the other,” she said. “If AEG has other hotel interests that would compete with the convention center hotel, it would be in their interest to potentially nix a hotel adjacent to the convention center.”

AEG is used to getting its way at City Hall. The company and its employees have given not just to city officials’ election bids but also to ballot campaigns for their signature projects: tax increases, a housing bond and a measure to weaken term limits, among others. City officials, in turn, have approved AEG development projects and the recent contract to run the convention center.

Garcetti and the council signed off on AEG’s request for a six-month extension on the stadium deal after AEG agreed to pay the $750,000 cost of design work on the convention center backup plan. In exchange, Garcetti and the council made sure three of the six alternative proposals won’t include a new hotel immediately next to the convention center. They also agreed to put AEG on the city panel that will review the designs, according to a city report.

Feng says there’s “clearly a conflict” in letting AEG pick up the tab at the same time that it has a private stake in the outcome of the hotel decision. But City Administrative Officer Miguel Santana, who helped negotiate the agreement, doesn’t foresee a problem unless the city decides to put a hotel next to the convention center — and then AEG competes for the chance to build it. In that scenario, AEG might have more information than other bidders. “At that point, any conflict would have to be determined,” he said.

Fikre, for his part, acknowledged that there’s “an element of self-interest” for AEG in the hotel discussions. But he said the company was not concerned about a competing hotel.

“L.A. Live provides a wide variety of amenities,” he said. “And if those amenities are available to serve convention visitors, they will walk across the street.”

david.zahniser@latimes.com