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NO BUDGET - Just as smoke spirals up to the sky, so does the cost of renovating and expanding the Convention Center in downtown Los Angeles. In fact, there is a link between the smoke and the projected expansion – the burning of public funds.
Last week the LA City Council was told that the overhaul of the Los Angeles Convention Center, would cost $2.7 billion, more than seven times of the cost of the discarded plan in 2016.The newer cost reflects an added $483 million from a March estimate, in spite of the cost -cutting proposals, including the elimination of the Gilbert Lindsay Plaza., proposed by the city-hired consultant.
In April, I wrote in this space that tossing good money after bad is an old truism widely understood, but strikingly enigmatic for Los Angeles’s political leadership. Tens of millions have been spent for consultants on the expansion and renovation of the Convention Center,
In 2015, I served on Mayor Eric Garcetti’s jury selecting the Convention Center architect for a $350 million expansion and renovation. The panel selected HMC Architects and Populous. who had designed an exciting, practical and visionary plan. Meanwhile, the City Council had approved a $470 million bond to fund hard and soft cost.
But the city leaders inexplicably abandoned that plan in 2016, after wasting millions of dollars, and chose to negotiate a public-private partnership (P3) with AEG /Plenary. As proposed by the then CAO Miguel Santana the investors would renovate and expand the Convention Center, then operate it. In exchange the investors would get an annual operating fee and the right to develop up to 14 acres of city- owned land in the booming South Park.
It should be noted the scuttled plan included an easement controlled by AEG, that was part of the land acquired by eminent domain for the construction of the Crypto.com Arena and LA Live. That land was sold a few years later for 20-30 times of the purchase price.
Stuart Marks, senior vice president of Plenary, told council members that he is “highly confident” the work will be done on time, saying there is flexibility in the schedule. The proposed timeline is to start construction later this year, pause that work during the Olympic Games, and then finish once the event is over.
I have heard many such grandiose promises but never fulfilled over the last 20 years, having been invited to oversee mega infrastructure projects for the City and County. that were alarmingly over budget and with serious delays.
Renovating and expanding the Convention Center, which opened in 1971, was a high priority because the archaic layout prevented Los Angeles from capturing major conventions. The coming Olympics had judo, wrestling, fencing, table tennis, and other events planned there and this provided an added impetus for its remodeling and expansion.
“It would be really bad to pay such a premium on such a project and not be ready in time to host the Olympics,” said Chief Legislative Analyst Sharon Tso, who advises the council.
Despite the guarded optimism, city hall has grown nervous of the project completion and the possibility of jeopardizing the Olympic status of the convention center. Additionally, city officials have begun worrying publicly that Gov. Gavin Newsom might not support a state bill permitting the installation of two digital billboards that would face the busy 10 and 110 Freeway interchange. The prospects for this bill grew grim last week.
The two large digital billboards planned to overlook the busy freeway interchange are expected to generate most of the project’s advertising revenue, according to city budget officials. However, if state and federal approval for these signs does not come through, City Administrative Officer Matt Szabo has warned that the city’s general fund would need to allocate an average of $111 million per year through 2058 to pay for the Convention Center expansion. In 2031 for example, an estimated $167 million in taxpayers' funds would go toward the Convention Center`s debt and operations.
Councilmember Katy Yaroslavsky, who chairs the influential budget committee, emphasized that renovating the Convention Center is crucial for downtown economic growth. However, she also noted that with the city already facing challenges in funding essential services like policing and street maintenance, the proposed plan’s cost is simply too high. “Unless we get the revenue from the billboards, the financial risk to the city’s budget is enormous and unsustainable,” she told the Los Angeles Times.
Councilmember Ysabel Jurado, who represents the vast majority of downtown, sounded nervous and said, “I hear some of my colleagues saying, ‘Do we want a very beautiful Convention Center but a bankrupt city?”
The City Council cannot continue to fund failure, Councilmember Monica Rodriguez has said, arguing that it does not make sense to allocate money for the proposed renovation while it is planning to cut employee positions because of its budget deficit.
The true cost to the city, I had pointed out, which comes from a report on the new expansion plan released last year by Chief Legislative Analyst Sharon Tso and Szabo, was estimated to be $4.78 billion over a 30-year period, which includes debt on any loans.
This issue, like so many others, proves how gullible city officials are, having accepted without deep analyses and thought recommendations from unreliable city departments.
And the ingenuousness of the City Council and the Mayor becomes even more pronounced when union bosses sound the “more jobs” catchphrase.
The "jobs" argument is constantly raised for dubious projects.
In my article in this space last July regarding the moribund High-Speed Train I pointed out that the unions are pushing to continue funding the ill executed project because it will create jobs. However, the money that benefits the bevy of contractors and consultants working on the project could instead be productively spent in creating good jobs by building affordable housing, green energy, water infrastructure, desalinization to name a few worthwhile projects.
Similarly, in the case of the Convention Center instead of spending billions to enrich AEG and a couple of contractors while the city is broke, it should fund its departments to fix the crumbling infrastructure, sidewalks, roads, streetlights neglected parks, My LA311, and parking meters. Oh yeah! Those neglected, antiquated, malfunctioning, broken parking meters, which cause such great pain and frustration to all of us, except to those privileged few who drive city cars.
These issues must undergo tougher scrutiny, as well as rising construction costs which have been traced recently back to the city’s Department of Water and Power. Here again we have another example of the Modi Operandi of city departments, when the right hand does not know what the left is doing. The LADWP has "recently" projected steeper expenses for relocating utilities beneath Pico Boulevard and laying several miles of new cables and conduits According to Szabo’s memo, they also warned that prioritizing the convention center could delay other critical infrastructure efforts – such as the new rail line in the East San Fernando Valley ( Metro be aware)– since staff would be pulled from those projects to meet the new demands. The East San Fernando Rail Line has been planned for years, and it is under construction, but the LADWP heard of it: "recently". And if history repeats itself, Metro will pay for the cost overruns and the delays regardless whose fault it is, because Metro has "deep pockets".
The city leadership had an opportunity to execute a fiscally sound plan ten years ago. Unfortunately, poor judgement, flawed decisions influenced by special interests sabotaged that plan. I hope next week the Council will reject the present plan, stop the wanton waste of the city resources before it`s too late and we are forced into bankruptcy.
The convention center expansion and renovation is a clear example of our parable, the camel sneaking into the tent, taking up all space and attention, and leaving no room and enough time for the decision makers to conduct deep examination of the real facts reasonably, timely and unbiasedly.
(Nick Patsaouras is former board member of Metro and the Los Angeles Department of Water and Power. He is the author of the book " The Making of Modern Los Angeles" and a regular contributor to CityWatchLA.com.)
