Efforts renewed on hotel project.

Growing increasingly weary of long-stagnant plans for a 1,200-room convention center hotel, the majority owner of the Staples Center is floating an alternative proposal with city and union officials that would still require public participation but leave developers paying much of the tab.

The proposed hotel is seen as essential to revitalizing the city's decimated convention business--as well as to serve as a pillar for a retail/entertainment complex envisioned by the Staples owner, Anschutz Entertainment Group. But funding plans have been stalled by litigation involving the city and county, along with reluctance by local officials to help fund a private development at a time of such fiscal hardship.

AEG officials would not disclose details of its new funding scheme. But based on interviews with local officials and developers, it is believed that AEG, which owns the land being considered, would finance construction of the estimated $300 million hotel. In earlier proposals, AEG would have leased the land to a separate public entity that would have issued bonds to finance construction.

A key facet of the new plan, however, would involve public incentives or tax subsidies to service the debt on the hotel's construction costs. Among the possibilities being discussed is waiving the 14 percent transient occupancy tax that is collected on hotel rooms in the city of Los Angeles for a certain amount of time. Instead of passing the tax revenues along to the city, the hotel would use them to help pay off the debt service.

Under the new plan, AEG, along with the hotel's developer and operator, would be on the hook for any necessary additional funds above the amount generated from occupancy tax money.

Both Starwood Hotels & Resorts Worldwide Inc. and Marriott International Inc. have been named as possible operators of the hotel. Tishman Construction Corp. is believed to be the leading candidate to develop it.

A formal proposal could appear before the Los Angeles City Council within six months. say city and AEG officials. It's unclear how the full council, whose makeup has become more business friendly since the convention hotel proposal first surfaced several years ago, would receive a revised development plan.

"The political will is there," said Councilwoman Jan Perry, whose 9th District includes the proposed hotel and who is working on the AEG funding proposals. "Things are aligned this year to get all these projects done. We just need to move on it, and the way market conditions are, we can't wait much longer."

Chief Legislative Analyst Ron Deaton has had a preliminary discussion with AEG officials about their proposal, but he said that more details need to be worked out before he could comment. Still, Deaton said both sides have a common interest in seeing the development become a reality.

"It appears there is a real strong interrelationship between their project getting done and our need to improve our convention center business," Deaton said. "But we'll have to see how the numbers come out to know for sure."

AEG officials say the project's future hinges on building the stalled convention center hotel. Without the hotel in place, they claim that other aspects of the project cannot proceed.

"We need to put a deal together this year," said Ted Tanner, AEG's senior vice president of real estate, who is overseeing the convention center development. "(This) is a make-or-break year for this project."

Anschutz push

AEG officials said they are also talking with various unions whose members would benefit from the construction and hotel jobs about using pension fund money to help partially finance the project.

Philip F. Anschutz, the Denver billionaire who founded Qwest Communications International Inc. and who is chief executive and president of Anschutz Co., has focused on getting the project built and pushing AEG to move faster, according to Tanner.

Much of that interest, Tanner said, is based on downtown's recent housing boom. Within a five-block radius of Staples Center, Tanner identified 3,200 housing units that are existing, under construction or approved. When AEG first proposed its project, it wasn't clear housing downtown would be successful.

Three years ago, the City Council gave AEG the green light to develop a $1 billion-sports and entertainment complex on a roughly I-square-mile site surrounding Staples Center. The city approvals cover two hotels with 1,800 combined rooms, nearly 1,000 housing units, a retail/entertainment complex and a 7,000-seat theater called L.A. Live. The only development moving forward is the housing.

AEG's original plans to lease the land to a public financing entity led to a lawsuit brought by Peter Zen, president of FIT Investment Corp., which owns the downtown Westin Bonaventure Hotel and would presumably compete with the new hotel. Zen argues it's unlawful for the city to own and operate a hotel, and subsidies would constitute an illegal gift of public funds.

In August, a Superior Court judge ruled that the city couldn't own the hotel through its public/private organization, although it could provide tax incentives to help build it. Zen and city attorneys are appealing the ruling and a hearing on the matter is expected by March.

Zen, who said he has not seen AEG's new funding proposal, noted that he would likely oppose the city providing any type of subsidies. He stopped short of saying he would file another lawsuit to block AEG's new plans.

"If they can do this with private equity and private funding, then I'm OK with it, but if they are going to get a tax subsidy then I think we should all get one, too," Zen said. "Everybody that has to compete with the convention center hotel should be on a level playing field. Every body needs to play by the same rules and have the same competitive advantages."

Hotels and housing

Tanner said AEG can't begin construction on the 200,000-square foot theater or the 150,000-square-foot entertainment/retail center before the hotel is in place because all three structures share a two-level subterranean parking structure. Without the shared underground parking, the cost of the project would balloon by several million dollars.

More than cost, having the $70 million theater's anchor tenant--the Academy of Television Arts 8,: Sciences' Emmy Awards show--is contingent on the theater and the convention center hotel being ready by December 2006, Tanner said.

Tanner estimated it would take 18 months for AEG to build the theater and the hotel. To meet those deadlines, AEG would have to start construction by mid-2005--a feat Tanner said the company could accomplish.

"We built the Staples Center in 18 months," he said, "and that's a much bigger project than this."

Planning for the theater, which is being coordinated with Academy of Television Arts & Sciences officials, is nearly complete and a final version could be ready by the middle of the year, Tanner said.

"From our standpoint, the Emmy deal is very central to our plans," he said. "It's certainly one of the key drivers of this whole thing."

AEG has already sold off or leased much of the land dedicated for housing under its project to developers who are moving forward with construction, and the company may ask that the two office buildings approved under the plan be converted into a mix of apartments and condominiums.

"The primary focus has to be on getting this built," Perry said of the convention center hotel. "For those without that vision, we have to keep moving this along, because this is here to benefit everyone. Having this hotel will benefit all the hoteliers downtown and drive business at the convention center."