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Council panel approves $67.3-million subsidy for downtown hotel

June 12, 2012 |  1:55 pm

A rendering shows a hotel tower planned by Marriott International next to L.A. Live. Developers are seeking permission to keep up to half of the sales taxes, business taxes, room taxes, utility taxes, property taxes and parking taxes. Credit: 901 West Olympic Boulevard Limited
A key committee of the Los Angeles City Council backed a $67.3-million subsidy for a new downtown hotel Tuesday, prompting a lawsuit threat from another hotel not far away.

The council’s Trade, Commerce and Tourism Committee voted 2 to 1 for an agreement that allows the developers of a new Marriott hotel complex on Olympic Boulevard to keep an amount equal to half of the new revenue -– sales taxes, property taxes, parking taxes, business taxes, utility taxes and room taxes -– that would be generated by the project over 25 years. That money would normally go to the general fund, which pays for police, parks and other basic services.

A lawyer for the Westin Bonaventure, located north of the Olympic Boulevard site, threatened to take the city to court, saying the subsidy would put them and other nearby hotels at a competitive disadvantage -– and force some to close for good. “We will do anything in our power to stop this project,” said Bonaventure lawyer Christopher Sutton.

Labor unions representing construction and hotel workers spoke in favor of the subsidy, saying it would create jobs during a deep economic downturn. The deal was also backed by the Central City Assn., a business group that focuses heavily on downtown development, and two members of the tourism committee: Tom LaBonge and Joe Buscaino.

The lone dissenting vote came from Councilman Bill Rosendahl, who said  “corporate America,” not the taxpayers, should take the financial risk of financing the hotel. “We barely can make ends meet. We can’t do the basic services of the citizenry right now. We have less staff as a city than we had back in the [Mayor Tom] Bradley days and yet streets are deteriorating,” he added.

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.

Chief Legislative Analyst Gerry Miller, the council's top policy advisor, said the project has a financing gap of $34.8 million and has warned that the developer will walk away if the city fails to provide help. 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, he said.

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-- David Zahniser at Los Angeles City Hall

Photo: A rendering shows a hotel tower planned by Marriott International next to L.A. Live. Developers are seeking permission to keep up to half of the sales taxes, business taxes, room taxes, utility taxes, property taxes and parking taxes. Credit: 901 West Olympic Boulevard Limited

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