By Jaboner Jackson 8 a.m. | As reported first by the The City Maven, two Marriott properties scheduled for groundbreaking across from LA Live and the JW Marriott-Ritz Carlton complex received unanimous approval Wednesday by the Los Angeles City Council for tax breaks. The vote allowed hotel developer Williams and Dame to keep half of the hotel tax revenues for the two planned Marriott properties. The development remains a bet by AEG and its strategic partners on the eventual expansion of the Los Angeles Convention Center and construction of Farmers Field.
In September, footballphds.com discussed the Marriott project in depth, especially as it related to AB 900, a bill passed by the California legislature in conjunction with SB 292, to expedite Environmental Impact Reviews for LEED infill site projects with construction costs ("minimum investments") of greater than $100 million. In the case of the Marriott project, a 22-story Marriott Courtyard and Residence Inn will be built on a current parking lot at an estimated cost of $118 million. AEG sold the parcel of land to Williams and Dame in the spring of 2011 as part of its ongoing efforts to build five new hotels around the LA Live complex and for helping to finance cost overruns for the AEG-built JW Marriott-Ritz Carlton complex. (Refresh your memory on SB 292, AB 900, and the Marriott projects here.)
The move by the City Council comes as no surprise to the Wonderful Readers of footballphds.com, who understood long ago the relationship between AEG and the City Council. Long before other news outlets understood the momentum of the Farmers Field stadium project, we were calling it a done deal on the city level. Furthermore, our readers remember the JW Marriott deal that AEG struck with the City of Los Angeles in which the City of Los Angeles allowed AEG to keep as much as $270 million in city taxes through 2035.
Nonetheless, the Marriott project remains a bet by AEG's strategic partners on the continued expansion of AEG’s LA Live complex, which currently contains Staples Center, Nokia Center, JW Marriott-Ritz Carlton, and dozens of restaurants and entertainment venues. And no bet is without risk. The current hotel structure in downtown Los Angeles is sufficient for current convention needs, particularly since Los Angeles ranks 15th in the nation for convention center business. Accordingly, the Marriott groundbreakings presuppose increased convention center business, which AEG and the City of Los Angeles hope are tied to construction of Farmers Field and a new convention center wing, commonly referred to as Pico Hall.
The risk concerns the flipside to the bet--namely the possibility that Farmers Field will not happen, a risk that increased when the NFL rebuffed AEG's financial and management model for Farmers Field this fall, an issue first reported on by Jason Cole of Yahoo! Sports. And since construction of Pico Hall is tied to construction of Farmers Field, the NFL's hesitation over AEG's stadium plans brought with it doubt about expansion of the Los Angeles Convention Center.
The City of Los Angeles, which has been left at the altar several times already by the NFL, might be thinking that history is repeating itself. Late last year, Mayor Antonio Villaraigosa met with AEG's owner, Philip Anschutz, to discuss the stalled progress on Farmers Field, particularly in light of a delayed Environmental Impact Report and the NFL's own concerns about the financial model and cost of the stadium. And such hesitation has seemed to have trickled into yesterday's Marriott vote, in which Williams and Dame has been incentivized to continue with groundbreaking on an already entitled project. The vote was odd to say the least. The Marriott projects had already reached significant developmental milestones. But there seems to a growing sense of unease by the City of Los Angeles. By keeping half of the hotel taxes, the Marriott projects become more financially palatable if Farmers Field and Pico Hall do not come to fruition.
Although Farmers Field has always been a done deal at the city level, it is the NFL that must finally make Farmers Field a reality. And the City of Los Angeles is realizing that once again the decision to return the NFL to Los Angeles is not theirs to make. The City of Los Angeles is getting antsy again.
AEG’s Missteps With Farmers Field (12/2011)
Farmers Field and the City of LA (06/2011)
Remembering the LA Live Deal (06/2011)
The City Maven (01/2012)