City is giving hotel near Convention Center $17M in tax breaks

The Los Angeles City Council has approved a proposal to give developer AECOM $17.3 million in financial “incentives” to build a 258-room hotel in Downtown LA’s South Park neighborhood.

The incentives will come in the form of tax breaks. Tuesday’s unanimous vote will allow AECOM to keep some of the tax revenue it collects after its project is built—money that would otherwise go to city coffers.

“The project would generate new jobs, additional city revenue, new hotel rooms to support the Los Angeles Convention Center, and provide community benefits,” said the Economic Development Committee, which endorsed the project. “Therefore, providing financial assistance for the project would be consistent with city policy.”

The 16-story hotel at 1155 South Olive Street would rise within walking distance of the Los Angeles Convention Center, working toward the city’s long-standing goal of having 8,000 hotel rooms close to the venue.

A report compiled by city consultant RSG Consulting found that the project has a $50.6 million “funding gap” (the difference between its estimated value when complete and the cost to construct it).

Based on the amount of revenue it’s expected to generate for the city, the hotel qualifies for $17.3 million in financial assistance from the city over a 25-year period, RSG found.

The City Council has doled out tax breaks to multiple hotels over the past few years. That practice has come under fire from City Controller Ron Galperin, who argued last year that the city doesn’t have “a comprehensive strategy” to ensure the deals are “transparent and advantageous to taxpayers.” That report looked at five agreements—totaling $654 million—made with developers from 2005 to 2015.

Another project that could potentially get similarly styled tax breaks is the expansion of the J.W. Marriott at L.A. Live. That project would create 850 new hotel rooms and could potentially receive almost $100 million in incentives over 25 years.