The Marriott Hotel chain, the nation’s second largest, has a market capitalization of $12.17 billion and makes a profit of $1.6 billion on revenues of more than $14 billion.
Family members, descendants of founder J.W. Marriott, own 23 percent of the company, holding 22 million shares each worth $36.85 as of 8 a.m. this morning. Most of the rest of the shares are owned by institutional investors like J.P Morgan, Goldman Sachs and Deutsche Bank or mutual funds like T. Rowe Price, Janus and Vanguard.
So why in God’s name do the taxpayers of the City of Los Angeles have to give these billionaires $67.3 million of our money for them to build a 23-story hotel tower at LA Live that will further enrich them even as we get poorer?
Didn’t City Hall already promise $249 million in tax dollars for Korean Air to rebuild the Wilshire Grand?
Didn’t City Hall already commit $270 million in taxes to subsidize the LA Live hotel project?
Isn’t the city facing $1 billion in budget shortfalls in the next four years and as much as $20 billion in unfunded pension liabilities and long-deferred basic infrastructure maintenance?
Hasn’t the city already slashed our core services and imposed exorbitant increases on fees, penalties and utility rates just to temporarily avoid bankruptcy?
And why is the deal being rushed through today at special meeting of the Council Trade, Commerce and Tourism Committee and going to the Council for final approval on Wednesday?
The answer is simple enough: When your policies over many years have chased away good-paying by the tens of thousands, actually reduced overall employment while the population soared by one million, and sent the poverty rate soaring while the quality of life has deteriorated, you try to cover your failure any way you can and you want as little public scrutiny as possible.
According to the LA Times, the developers (Williams/Dame & Associates and its partner, American Life Inc.) “would receive permission to keep up to half of the sales taxes, business taxes, room taxes, utility taxes, property taxes and parking taxes generated by their 392-room project once it opens … That money would otherwise go to the city’s general fund, which pays for police, parks and other services.”
City officials denied that today at the committee hearing, insisting the owners of the tower that would house Marriott’s Courtyard and Renaissance Inn hotels with 392 rooms would only get half the hotel tax worth $21.9 million in “present value” but $67.3 million over the 25-year life of the deal.
Freshman Councilman Joe Buscaino breathlessly joined the bumbling Tom LaBonge in supporting the deal in committee, proving he has already succumbed to the power structure without a fight.
Bill Rosendahl actually challenged why the subsidy is needed at all since downtown already has absorbed billions of dollars of the city’s wealth and ought to be able to stand on its own without more giveaways. He also questioned whether the Seattle developer of the project got the same subsidies in its hometown for similar hotels but the Chief Legislative Analyst’s office which claimed to have exhaustively examined the deal couldn’t answer his question.
Given his track record in supporting the Farmers Field/Convention Center deal and getting no answers to his 100 questions, it is hard to see Rosendahl putting up much of a fight.
According to the CLA’s report on this project. the developer still faces a significant “financing gap” to make the project pencil out because only half of the hotel tax can be used and it won’t generate enough tax revenue to close the gap.
What isn’t said is why, when city officials boast LA is the No. 1 tourist destination and has a new football stadium and rebuilt Convention Center in the offing, this hotel can’t pay it’s own way.
The reason the explanation is omitted has a lot to do with the costs the city imposes on developers: a project labor agreement that guarantees the 800 construction jobs only go to union tradesman and that the 250 permanent hotel jobs are paid the living wage of about $14 an hour, including health insurance.
In other words, the subsidy from tax dollars is only partly going to the developer; the rest is going to the workers.
That is the truth about all these hotel and other deals that the city cuts: We don’t just pay city workers more than we can afford, we also pay more than we can afford for every job derived from city contracts and actions.
This is all money that could be used to improve the quality of life, revive blighted neighborhoods, create a healthy business climate, turn LA into a vibrant city where residents feel things are getting better instead of worse.
It is the money that buys the support from unions, developers, contractors and other special interests who keep this creaky political machine in operation.
The real bankruptcy of LA isn’t just financial; it’s the moral bankruptcy of the city’s leadership, civic and political, who think this is the road to progress.