June 21 (Bloomberg) -- Los Angeles taxpayers are footing an annual bill of almost $14 million for a convention center expansion that was projected to be self-supporting 26 years ago.
America’s second most-populous city pays $48 million in annual debt service on $417 million in outstanding bonds for a 1985 addition to the Convention Center, though only $34.2 million in taxes are allocated to the center. The $14 million difference is picked up by the city’s general fund, which faced a deficit of $485 million this year.
The cost came to light as the City Council is being asked to issue more debt for a $1.4 billion football stadium and convention center expansion. Anschutz Entertainment Group Inc., the company controlled by billionaire Philip Anschutz, wants to to tear down part of the convention center to make way for the stadium and build a new addition, paid for with $350 million in bonds sold by the city.
“We stand by our commitment that this project will not cost the taxpayers or the city’s general fund any money,” Michael Roth, a spokesman for the company, said in an e-mail.
When the 1985 bonds were issued, it was projected that hotel taxes and revenue from the facility would cover operating and debt costs, according to a June 17 response to questions from City Council Member Bill Rosendahl by Miguel Santana, the city manager, and Gerry Miller, the chief legislative analyst. The city subsequently increased its hotel levy, with 3.5 percent of taxable sales allocated to paying the debt, and directed center revenue to pay operating expenses only.
The city’s past experience with convention-center financing prompted him to ask the questions, Rosendahl said in a telephone interview.
‘Pig in a Poke’
“I don’t want to be sold a pig in a poke,” he said, referring to the AEG proposal.
The $350 million convention center expansion will cost the city approximately $25 million in interest expense, according to the Santana letter. AEG said new revenue from the stadium and additional contributions from AEG will be enough to repay the bonds, according to Roth.
The AEG plan for a 72,000-capacity stadium is aimed at attracting a National Football League team to Los Angeles for the first time since 1995, when the Raiders returned to Oakland and the Rams moved to St. Louis.
A committee of five City Council members has been holding hearings on the AEG proposal, with the next set for June 30. AEG has given the city a July 31 deadline to decide on its proposal, a date Rosendahl called a “negotiating tactic.”
Anschutz, 71, is ranked 34th in the Forbes Magazine list of richest Americans, with a net worth estimated at $7.5 billion.
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