Los Angeles Corporate Welfare: Ritz-Carlton and AEG 

Rich entities siphon taxpayer money while real communities struggle

Wednesday, Oct 7 2009

It is everything a big-city corporate skyscraper could be — a thin, shimmering downtown tower, 54 stories high, wrapped in tints of blue, the nearly completed Ritz-Carlton Hotel & Residences and JW Marriott at L.A. Live. A short walk from Staples Center and the L.A. Convention Center, downtown’s newest asset is set to open in February 2010. From the days of Mayor Tom Bradley and through the years of his successors, Richard Riordan, James Hahn and Antonio Villaraigosa, L.A.’s political elite and city boosters have lobbied for what the Ritz-Carlton and its surrounding enclave embody: a long-sought luxury hotel for conventioneers, a centralized city, a populated downtown more like Manhattan.

But the luxury hotel and other large edifices built on once-decrepit lands where the poor rented aging apartments, and prostitutes and drug dealers once operated, also represent a tale of two cities. Miles from Ritz-Carlton’s concierge desk, in the hot suburbia of the San Fernando Valley, 100-year-old water mains are bursting. The city is reeling from budget nightmares, with the L.A. City Council and Mayor Villaraigosa overspending by $1 million — per day. The mayor has ordered firehouses to reduce the number of engine companies on duty on a revolving basis citywide. Unwilling to cut spending by laying off any of the city government’s 48,000 workers, the council plans to pay $15,000 to $33,000 to 2,400 of them — to retire early. In a controversial plan to fund its overspending, being pushed by new District 5 Councilman Paul Koretz, the City Council is thinking of raiding proceeds from a new tax that Villaraigosa promised L.A. voters would be spent to hire police.

L.A. Live is set to flourish, but the city is falling apart.

click to enlarge TED SOQUI - South Central Neighborhood Council budget expert Daymond R. Johnson: Less than impressed by the new, luxury, taxpayer-subsidized Ritz-Carlton
  • Ted Soqui
  • South Central Neighborhood Council budget expert Daymond R. Johnson: Less than impressed by the new, luxury, taxpayer-subsidized Ritz-Carlton

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“I call it environmental racism,” says Daymond R. Johnson of South Los Angeles. “The streets leading into downtown have always been taken care of, but as you cross the 10 freeway and come south of downtown L.A., you begin to see the difference in the environment.”

“Environmental racism” might seem like hyperbole, but Johnson is a thoughtful neighborhood council member named by the California Democratic Party as Democrat of the Year for Assembly District 48. Johnson has represented the South Central Neighborhood Council on budget matters for the last six years. He works as a safety officer at a respected charter school.

He says that even such simple quality-of-life services as the synchronization of streetlights are handled differently in West L.A. than in his own neighborhood. Thanks to those double standards, he claims, “My neighborhood council area is one of the most deprived in the city of Los Angeles.”

Johnson, who lives in Councilmember Jan Perry’s district, notes that sectors of the city that have been starved, like South L.A., felt the budget pain long before any recession hit: “There was never a lot of attention to the area — so it would be an understatement to say that there have been cuts.”

Yet the city has, and is, aggressively pouring money elsewhere. Beginning with a deal signed on October 31, 1997, City Hall lavished millions of dollars in subsidies and tax credits on companies owned by Denver-based billionaire Philip Anschutz to fund the politicians’ downtown dream. City officials forced the poor out of 27 “blighted” acres of downtown around Figueroa Boulevard and replaced the aging neighborhood with lucrative ventures.

Although AEG’s Staples Center/Ritz-Carlton/L.A. Live endeavor will pay increased property taxes and sales taxes thanks to an expected growth in visitors to the area and its upscale hotels, L.A. taxpayers, who have poured so much of their public money into the deals, will not recoup the revenue from the lucrative hotel bed tax for 25 years. Thanks to agreements City Hall made with companies controlled by Anschutz, the 69-year-old recluse will keep pocketing these “bed” taxes — money that would normally flow to city coffers — until he is 95 years old and Villaraigosa and the City Council are long out of office.

A city-solicited study once boasted that taxpayers would reap $1.7 million annually from the bed taxes; in fact, Anschutz will see the first $62 million.

Moreover, instead of requiring the wealthy developer to secure private financing for the 27-acre project encompassing Staples, the Ritz-Carlton and L.A. Live, the city — meaning the Los Angeles public — provided an Anschutz company a $70 million, 25-year loan, which is being repaid on a yearly basis through Staples ticket sales.

Anschutz will not pay off that $70 million loan provided by L.A. taxpayers until 2025, yet public documents filed with the Los Angeles County Recorder’s office reveal that an Anschutz company has already sold off three significant parcels within the project area.

AEG took the revenue from the resale of the three parcels, a transaction allowed by the redevelopment agency, and then the city shifted the planned projects on that land over to new owners. Yet at least one of those key parcels contained lots seized by the Community Redevelopment Agency from a private owner, using the eminent domain statute, purportedly to fight “blight.”

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