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LA WATCHDOG - The City’s Structural Deficit will average over $200 million for each of the next four years when adjusted for future labor agreements. These deficits will aggregate around $900 million through 2029.
But the City’s precarious financial situation did not stop Councilmembers Raman and Soto-Martinez from filing a motion supporting the efforts of the Hillcrest Real Estate, LLC, the owners of the very successful 500 room Hilton Universal City Hotel, to arrange a package of economic development incentives for the addition of an adjoining 395 room tower. Included are many resort amenities, including a roof top pool, additional meeting and conference rooms, restaurants, and underground parking.
Based on other Development Incentive Agreements, the requested economic assistance appears to be $80 million (or more), paid out over a fifteen-to-twenty-year period. This subsidy would be equal to less than 50% of the economic benefits to the City that are derived primarily from the 14% transient occupancy (hotel) tax and property tax.
These subsidies are not in the best interests of the City and Angelenos because there are other more important priorities. These include services to the homeless, affordable housing, the repair and maintenance of our infrastructure (streets, sidewalks, parks), and covering a portion of the City’s annual budget deficits.
And just imagine all the pet projects these subsidies could support!
Furthermore, the program for Development Incentive Agreements was designed to promote the construction of new hotels within walking distance of the Convention Center in DTLA, 11 miles and a 30-minute drive from Universal City.
As part of this process, the City will retain a consultant, at the expense of Hillcrest, to analyze the proposed Incentive Agreement, including the economics of the new tower, the benefits to the City, and the appropriate subsidies. However, in the past, these consulting agreements have been superficial which caused Controller Ron Galperin to recommend that the City retain independent industry experts.
If the City is foolish enough to provide a subsidy to this very profitable hotel, then it should also benefit from profitability of the operation, and in this case, it would include the 900-room complex. This would consist of the repayment of the subsidy, plus interest, plus an equity kicker if profits exceed the consultant’s projects.
The Venice Hope Hotel rendering
Proposed view of View of 670 Mesquit looking west from the 7th Street Bridge
There are two other hotel deals that are being considered by the City, the 300 room Venice Hope Hotel in DTLA and the 236 room luxury hotel at 670 Mesquit Street in the Arts District, three miles from the Convention Center. Anticipated subsidies for these two hotels are $60 million and $50 million, respectively. And like Universal City, both hotels are part of larger developments that are not in need of subsidies.
We need to ask Raman and Soto-Martinez: Is the $80 million subsidy for the Hilton Universal the best use of taxpayer money? And we need to ask the Mayor and City Council: Is the $190 million in subsidies for the three hotels the best use of taxpayer money? The answer is NO.
(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee, the Budget and DWP representative for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. He can be reached at: [email protected].)
