The Los Angeles City Council on Friday approved subsidies worth up to $286 million to help finance a 1,100-room hotel next to the city's struggling convention center.
In a 10-0 vote with Councilmembers Ed Reyes, Greig Smith and Jack Weiss absent the city council approved giving the hotel's developers a $16 million loan from the Community Redevelopment Agency and a waiver from paying bed taxes on the finished hotel for 25 years.
Hotel consultants estimate the 25-year bed-tax waiver to be worth $155 million to the hotel's developers. However, its value could go higher if the hotel generates more usage than expected. City Council members voted to cap the total amount waived over the 25-year period at $270 million.
Supporters of the plan believe the hotel is needed to generate business at the city's convention center, which doesn't produce enough revenue to cover its debts and is draining about $25 million a year from the city's general fund.
Critics say they are ready to file lawsuits challenging the legitimacy of the subsidy and are considering a referendum campaign to strike down the measure.
Proposed by Staples Center arena owner Anshutz Entertainment Group, the hotel is part of a $1 billion retail, housing and entertainment project that will be built on surface parking lots surrounding the stadium.
"I think that was a resounding message from the city council today," said Tim Leiweke, president of AEG. "It shows the project is clearly standing on its own two feet now."
However, Westin Bonaventure hotel owner Peter Zen has said the subsidies are an illegal gift of public funds and he believes the convention hotel will ruin the hospitality business downtown.
Zen was traveling on Friday but his attorney, Christopher Sutton, said the Bonaventure will challenge the legality of the subsidies. Sutton also said Zen will decide next week whether to launch a referendum or initiative campaign to put the subsidy package before voters.
"We believe this is going to hurt the Bonaventure and all the other hotels in downtown L.A.," Sutton said. "It's a giveaway to the building trades and it's foolish."
Kris Vosbergh, executive director of the Howard Jarvis Taxpayers Association, agreed. "To add insult to injury, the taxpayers may be footing the bill for another white elephant besides the Convention Center," he said.
Leiweke, in response, said other downtown hotel owners support the plan, and AEG was prepared to spend millions on a campaign defending it.
"I know Peter Zen is a better leader than this," Leiweke said. "He must care for L.A. more than this. In his heart he has goodness there and I hope he'll do the right thing."
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