DOWNTOWN LOS ANGELES - For the last several years, Los Angeles’ hope for a revitalized Convention Center, and the hundreds of millions of dollars in annual spending that would come with it, have been hitched to Anschutz Entertainment Group’s $1.4 billion Farmers Field proposal. In addition to building a football stadium, the plan, pushed most aggressively by former AEG President and CEO Tim Leiweke, calls for razing the older of the Convention Center’s two buildings and erecting a new structure contiguous to the more modern edifice.
The contiguous space, along with new South Park hotels, say project proponents, would allow Los Angeles to better compete with regional convention powerhouses such as San Diego and Anaheim.
The loss of momentum on Farmers Field has put those plans in doubt. Though AEG continues to pursue a stadium and a deal with the NFL, city officials recognize that they can no longer rely solely on that vision. Thus, they have begun exploring an option, fittingly called Plan B, to modernize the Convention Center without a stadium.
The timing is right, say project supporters. AEG, which developed Staples Center, L.A. Live and the 1,001-room Ritz-Carlton/J.W. Marriott, hotel, took over management of the Convention Center on Jan. 1 after winning a contract from the city. The company is already working to bring in more revenue while also making operations in the massive complex more efficient.
At the same time, AEG’s contract with the city to bring a football team to L.A. and begin the Farmers Field plan expires Oct. 18. While the company could receive an extension, city officials say that the need to begin a Convention Center upgrade means the deadline is serious and won’t be extended indefinitely.
“We’ve been waiting a long time to get going on these Convention Center improvements,” said Bud Ovrom, executive director of the Los Angeles Convention Center. “We can’t keep twisting in the wind, losing conventions because of uncertainty about football.”
In fact, the initial work is already underway. The city Bureau of Engineering has begun reaching out to prospective architecture firms to design a revamped Convention Center. Eventually, three firms will be selected and each will receive approximately $200,000 as part of a design competition, Ovrom said. Between that and an environmental assessment, the city could spend $700,000 on Plan B even before AEG’s contract deadline hits.
“The argument for spending that money before the contract deadline is that if we don’t get a football team, we need to be able to dive into renovations fast, since we can’t afford to lose more conventions,” Ovrom said. “Then again, we could spend $700,000 for naught if AEG does figure it out by mid-October. When we spend the money is for City Council to figure out.”
The Convention Center was built in two phases approximately two decades apart. Today the more than 40-year-old West Hall and the younger South Hall, which fronts Figueroa Street south of Staples Center, are essentially split, and connected only by a long concourse. The buildings have a combined 720,000 square feet of exhibition space.
In both the city and AEG plans, the upgraded Convention Center would have a new hall that passes over Pico Boulevard. AEG’s proposal also includes using parts of the football stadium for the largest events.
Although Farmers Field lacks the profile it had during the Leiweke era, AEG officials say they have not stopped working on the plan. Architecture firms Gensler and Populous have been tapped for the design of the stadium and Convention Center renovation, respectively.
“The plan is shovel-ready at this point,” said AEG’s Brad Gessner, senior vice president and general manager of the Convention Center. “If and when we do start construction, the first 24 months would build the additional space connecting the South Hall to the West Hall. Only after that’s done would we tear down the West Hall and begin Farmers Field work.”
Both plans would also create new ballrooms and meeting space for a total of about 1 million square feet, making a new local building larger than the convention centers in San Diego and Anaheim.
Even with Farmers Field still up in the air, AEG is working on upgrades for the building. The company has submitted a capital improvements plan for the fiscal year starting July 1 to freshen up the existing space.
AEG is asking the city for about $16 million for both high-priority enhancements, such as updating surveillance systems, parking equipment, carpets and moving-wall systems, as well as long-term additions such as a solar power array to help cut the venue’s $4 million-a-year power bill.
“The city’s funding for improvements has been limited, so there’s been a lot of deferred maintenance of the Convention Center,” Gessner said.
Other enhancements have evolved from the new operating structure. AEG’s contract to run the venue put it in a partnership with the Los Angeles Convention Center and the L.A. Tourism and Convention Board (formerly L.A. Inc.). That has allowed AEG to receive advance payments, execute licensing agreements and oversee the operating account for the Convention Center without prior approvals from a public governing board; that process often caused delays and turned off potential event planners in the past.
As for bookings, L.A. Tourism continues to spearhead the pursuit of large conventions, while AEG works to lure smaller shows geared more toward locals.
Whatever happens with the Convention Center won’t be cheap. AEG’s estimated construction budget for the upgrade is approximately $300 million, according to company Chief Legal and Development Officer Ted Fikre. AEG’s plan involves the city floating about $350 million in bonds that would be paid back over 30 years, Fikre said. Several revenue streams, including rent on the stadium and parking garages, along with parking and property taxes and signage rights, would pay for the bonds.
If AEG cannot bring a team to L.A., the city has identified several financing plans to pay off the $200 million-$300 million the renovations would cost. It would be paid back over 30 years.
However, there remain plenty of challenges. The city still has nearly $322 million in outstanding debt on the existing facility. Since the final debt payment would be in 2023, the city could decide to defer new payments until then, which would provide more budget flexibility to the city, but would also potentially cost more in the long run.
The alternative is to begin debt payments on the new building in 2016. That would be cheaper in the long run, but would put greater stress on the city’s coffers in the short term.
The city is spending about $48 million for its 2013-14 debt payment on the Convention Center. While that payment will decrease by approximately $100,000 each year, the city would still have to find additional revenue streams to support payments, according to a report from city’s Chief Administrative Officer.
Potential options identified in the report include leveraging tax revenues off of new hotel development as part of the Convention Center update, an increase in the Transient Occupancy Tax rate (paid by hotel occupants), and a sale of Convention Center naming rights.
Many of the design and financing details will be hammered out when the city’s Convention Center plan goes before City Council within in the next two months, according to the Chief Legislative Analyst’s office.
© Los Angeles Downtown News 2014