Los Angeles

Los Angeles Mulls Multi-Million-Dollar Hotel Subsidy

Payouts to developers are never a win for taxpayers.

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Los Angeles Convention Center
Cbl62/Wikimedia Commons

The City of Los Angeles is mulling a $67.4 million handout to the New York–based developer Lightstone to build a 1,000-room hotel complex in the city's downtown.

According to an economic analysis commissioned by the city, Lightstone's project faces a $67.4 million "feasibility gap" were the project to try solely on private capital. Rather than take this as a sign that the project is well, infeasible, the city has decided to make up the difference.

Under the terms of a rough agreement approved by the city council's Economic Development Committee, L.A. would pay Lightstone the money over a 25-year period once construction is completed. In return for this support, Lightstone promises the hotels will achieve and maintain an impressive 3-star rating from AAA and will provide a "Community Benefits Package" that includes hiring locals, paying a living wage, and offering room block agreements for conventions and the 2028 Olympics.

City officials claim the subsidy is needed because there aren't enough hotel options near L.A.'s publicly owned convention center. "The biggest complaint we get from people who want to bring conventions to Los Angeles are the number of hotels within walking distance of the convention center and the variety of price points for rooms," Doane Liu, executive director of the city's Department of Convention and Tourism Development, told the Los Angeles Times.

The city claims that the hotel will actually make money for taxpayers. In 25 years of operation, the complex's three hotels are supposed to generate $494 million in nominal tax revenue, or $160 million in today's dollars. But such promises always accompany big public payouts to hotel developers—and almost always fail to come to fruition.

For an example, look to Phoenix, Arizona. In 2005, the Downtown Phoenix Hotel Corporation—an arm of the Phoenix city government—borrowed $350 million to construct a 1,000-room Sheraton Hotel in the city's downtown. As with the prospective Lightstone deal in Los Angeles, the Sheraton project was supposed to breathe life into Phoenix's convention center by providing much needed hotel rooms to the downtown area. Instead, both convention attendees and hotel occupancy rates plummeted when the Sheraton opened in 2009, and the hotel required $47 million in further subsidies to stay afloat. This year Phoenix agreed to sell the hotel for a $200 million loss.

The City of Los Angeles is protected from a loss on that scale because it will not directly own the Lightstone project and because it isn't offering as big a subsidy for its construction. But that does not make it a wise use of taxpayers' funds.

The fact that private investors are not willing to fully fund the project as currently conceived implies that there are higher-value uses out there for that scarce capital, uses that could yield more benefits to Los Angeles residents than greater foot traffic to the city's convention center. The same can be said for the public money Los Angeles is willing to invest, which could go to much more valuable uses than building more $225-a-night hotel rooms.

The full Los Angeles City Council is set to vote on the financial aid package this Friday.

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  1. AHaha. Taxifornia’s woes are just getting worse and worse.

    Anyone who still lives in Commifornia is a fool.

    1. the real lovecon89 is gonna be pissed when he finds out you got hold of his login Mikey.

      1. Hugh doesn’t like it when you mock Team Blue. He’s a real libertarian

        1. I guess I’ll just read this as another instance of “everything everyone says is partisan signaling if you look at the world through partisan blinkers”.

          1. We know you, Hugh. You are in the top 10 of lefty partisans on here.

            1. The list of things you “know” is seemingly endless.

              1. Aw, poor Hugh hates when people have him pegged. He must run to other sockpuppet.

      2. Hugh does not like it when anyone points out the ridiculousness of Team lefty policies on states like Commifornia.

        1. Actually I was just making fun of your childish name calling.

          1. Aw, poor Hugh doesn’t even know the different between name calling and knowing that you’re partisan for Team Blue.

    2. I’m really rooting for the idea of killing the state tax deduction.

      It’s a moral hazard thing. It makes it easier for states to ratchet up income taxes when people can write that stuff off anyway.

      Get rid of that deduction, and the support for cutting those taxes (if not spending) will increase.

      1. Yup and some of these states really need a bigger dose of moral hazard.

        I also have emails ready to go to my Congressmen to prevent any state bailouts too. I see that as the next thing lefties will try after their welfare states fail.

      2. I live in California. I will be shocked if the SALT deduction is eliminated and it has any impact whatsoever on the Assembly’s propensity to spend. These people have no concerns about the consequences of their tax policies. I suspect the same goes for other deep blue states.

  2. Garrison Keillor just got fired for inappropriate sexual behavior.

    If they keep up at this rate, there won’t be any familiar liberal voices in the media anymore.

    I gotta think this is good rather than bad for Trump’s reelection chances.

    How’s the old saying go, “Familiarity breeds boredom”?

    1. What is it about progressives that makes them so grabby anyway?

      Grabbing money out of your wallet. Grabbing women . . .

      Maybe the motherfuckers just need some Jesus in their lives:

      “Thou shalt not covet thy neighbour’s house, thou shalt not covet thy neighbour’s wife, nor his manservant, nor his maidservant, nor his ox, nor his ass, nor any thing that is thy neighbour’s.”

      Some of that was prescient as all get out. How’d they know ass-grabbin’ and menservants would become such a big thing with progressives? It’s like they saw Kevin Spacey comin’ from 2,500 years ago with his grabby hands out.

      P.S. Ass-grabbin’.

      1. As distinct from grab-assing. Which is totally different.

    2. someone on twitter said…

      “We’re rapidly approaching a utopia where, when you move into a new neighborhood, you’re legally obligated to go door to door and admit you work in media.”

      1. Also, in follow up to the AM links when I was wondering what “appropriate sexual behavior” is….I’ve decided:

        inappropriate sexual behavior = fired
        appropriate sexual behavior = promoted

  3. Doing something similar here w/ a new hotel/convention center::

    Developer gets TIF financing for sidewalks, etc. …
    Developer builds project and sells convention center to city (getting construction profit)
    After buying convention center city gives developer contract to “manage” it (with a nice profit built in)
    City gets tab for maintainance (I’d guess.5 to a million yearly comparing it to a similar arrangement in Billings)

    PT Barnum would cream his jeans seeing our city clowncil approaching his enterprise.

  4. Sure glad those democratic socialists are lookin’ out for the little guy.

  5. If it’s not your money, you don’t care what you spend it on. This is what progressives and 60s liberals don’t understand. Government is not composed of angels, and no matter how many politicians and functionaries you throw into it, government will never result in angelic actions.

    What’s sad, is that conservatives are now on this path too. They see no danger in large government so long as they get to be the ones choosing the imperfect souls who make the rules.

  6. faces a $67.4 million “feasibility gap” were the project to try solely on private capital.

    Clearly, the big players in the business are missing a golden opportunity. Who are you going to trust? Us, or those “supposed experts”m

  7. If they have an extra $67 million laying around they might want to use that for some of their pension liability.

    1. They’re planning on foisting that off on federal taxpayers.

    2. It’s not lying around today. It will appear out of the tax windfall caused by this obviously worthwhile “investment.” LOL

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