Amid downtown revival, hotel builder seeks tax subsidy
Despite claims by business leaders that downtown’s hotel market is coming back strong, the developer of a proposed 23-story Marriott tower next to L.A. Live is in line to get up to $67.3 million out of City Hall over the next 25 years.
Williams/Dame & Associates and its partner, American Life Inc., would receive permission to keep up to half of the sales taxes, business taxes, room taxes, utility taxes, property taxes and parking taxes generated by their 392-room project once it opens, according to the proposal. That money would otherwise go to the city’s general fund, which pays for police, parks and other services.
Supporters of the deal say downtown needs more hotel rooms to make the nearby Convention Center competitive on a national scale. They contend that even with the subsidy, the project would generate $67.3 million for the general fund by 2039 — money that would not materialize if the developer walked away.
That argument has not convinced Los Angeles attorney Ron Galperin, who recently served on a city panel devoted to finding more revenue to balance the budget. He warned that such agreements threaten to sap the city’s tax base over the long term."Yes we want more hotel rooms, and yes we want more development around the convention center,” said Galperin, who is running for city controller. “But that does not necessarily mean you give away half the revenues that are going to be generated by this project and essentially sell out the next generation.”
The hotel subsidy agreement, which will come up for a City Council vote Wednesday, is only the latest to be offered downtown. Last year, the council agreed to provide up to $249 million over 25 years for the reconstruction of the Wilshire Grand Hotel five blocks north of Olympic. L.A. Live’s hotel tower is eligible to keep up to $270 million in taxes over a similar period.
Hotels near the Convention Center saw their occupancy rates reach nearly 74% for the four-month period that ended in April, compared to 67% during the same period last year, said Bruce Baltin, a consultant who has analyzed prior hotel subsidies at City Hall. Although those numbers are due partly to the temporary closure of the Wilshire Grand, the bookings are looking good on their own, he said.
“Downtown is having a very good convention year this year. You’re beginning to see some of the impact of L.A. Live” and its new hotel tower, Baltin said.
The Olympic Boulevard project is scheduled to open in 2014.
Representatives of Williams/Dame have warned that they would “reevaluate” their commitment to their hotel project if the city fails to come through with financial assistance. Homer Williams, chairman of Williams/Dame, said downtown hotel developers are still struggling to put together financing, even with the increased demand for rooms.
“The money out there is not adequate in the financial markets and so without some kind of help, these things just don’t get built,” he said.
The Grand Avenue project, which was planned across from downtown’s Walt Disney Concert Hall, stalled even after the council agreed to let the project keep up to $120 million of the taxes it generates.
Chief Legislative Analyst Gerry Miller, the council’s top policy adviser, concluded that the Williams/Dame project has a financing gap of $34.8 million. Once inflation and the decreasing value of a dollar over 25 years is factored in, the city subsidy would have a present-day value of $21.9 million, Miller said.
Councilwoman Jan Perry, whose district includes the hotel site, backed the proposed subsidy and said it would “continue to fuel the growth of downtown.” Now that Gov. Jerry Brown has eliminated redevelopment funds, “we don’t have much in terms of incentives to attract these kinds of developments,” she said.
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