Kali Chaudhuri’s KPC Development and Lendlease are asking Los Angeles for help finishing the 184-room hotel envisioned for the lower floors of downtown’s most famous eyesore, Oceanwide Plaza.
The city is now studying the joint venture’s request for a hotel incentive agreement, according to a motion introduced Aug. 11 by Councilmember Ysabel Jurado and approved the following week, Urbanize LA first reported. Such agreements let developers retain a portion of the property’s future occupancy tax to help finance construction.
More hotel rooms will complement downtown’s entertainment district, “thereby improving the city’s competitiveness in attracting conventions, trade shows, major sporting events, and tourism activity,” according to the motion.
Plus, the developers promise to remove a “long-standing visual blight.”
But a long independent review process lies ahead, according to Jurado. “No incentive amount has been determined, and my motion does not approve one,” she said in a statement to the Business Journal.
A 2018 audit of past incentives the city has dished out to developers scrutinized their efficacy. Then-City Controller Ron Galperin reviewed five hotel incentive agreements worth a total of $654 million and found the city had been evaluating them “without a comprehensive citywide economic development strategy,” according to the audit.
Jurado added that she read the 2018 audit and plans to heed its advice.
“The Controller’s 2018 report called for stronger scrutiny of claimed financing gaps and promised public benefits,” Jurado said. “This motion begins that review. Any agreement I could support would need enforceable protections for public dollars and meaningful benefits for workers and surrounding communities, including prevailing wage, local hiring, job training, and strong labor standards.”
‘Feasibility gap’
Galperin specifically criticized reliance on developers’ claims of a “feasibility gap” – the argument that a project can’t be built without public assistance.
“There has not in all cases been adequate evidence to necessarily support these arguments,” the audit concluded. It recommended more rigorous evaluation of feasibility-gap claims and called on the city to review actual project outcomes and add “clawback” provisions to recoup public funds if promised benefits don’t materialize.
The debate resurfaced in recent years when Hillcrest Real Estate requested incentives for its 395-room expansion of the Hilton Universal City Hotel, though that project was shelved last year after Los Angeles raised hotel workers’ minimum wage ahead of the 2028 Olympics, the L.A. Times reported. The council later voted to push back the wage increase to 2030, as the Business Journal reported in May.
Watchdog groups also criticized proposed incentives for a 300-room hotel at South Park Towers, a residential project underway at 1600 S. Flower St. KPC and Lendlease’s request comes amid a ticking clock to secure financing for the long-stalled residential towers at 1101 S. Flower St.
