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Reason Foundation

Los Angeles Daily News

What If LA Spent Its Billions in the Valley?

Tax dollars head downtown instead

Geoffrey Segal
May 19, 2002

You'd better have Lakers season tickets or want pro football to return to Los Angeles because your tax dollars are headed downtown - even if you aren't.

Nearly $2.4 billion will be funneled into downtown to spur redevelopment around Staples Center and the Convention Center. The Community Redevelopment Agency is handing out subsidies for a new anchor hotel near the Convention Center and potentially a new football stadium.

During these tumultuous political times, and with the threat of secession around the corner, the city continues to ignore the Valley and insists on pouring more and more money into downtown redevelopment that likely will only make the rich richer. While not asking for it, the Valley itself could certainly use the $2.4 billion in tax money or subsidies - and would probably put the money to better use.

Infrastructure is a key to economic development and activity. The Valley continues to thrive despite being home to some of the most dilapidated infrastructure in the city.

Just think what the Valley could do with a couple of billion dollars.

The Valley boasts some the slowest response times from the Police and Fire departments in Los Angeles. Transportation infrastructure could also use a boost - roads could be better maintained and buses could be purchased and operated. Even schools and libraries could get a boost.

But, the council continues to turn its back on the Valley. The huge investment downtown is sending a message to the secession movement - the city is more interested in improving downtown than keeping the city together.

In many respects the council continues to ignore Valley residents altogether, except when it comes to collecting (and wasting) their tax dollars.

The logic behind the downtown investment is inherently flawed. It is based on an old-school model of urban development that doesn't work in today's economic climate. Downtown redevelopment projects around the country are failing to live up to expectations.

For downtown developments to work they have to attract people, make them want to live in the downtown area and become part of the community. Hotels and football stadiums not only won't attract new residents, but also will actually uproot communities and the economic activity that is already there.

The CRA's real motive is to make downtown more attractive to visitors, not for the residents already there.

With so many problems in the city and a still recovering economy, shouldn't our tax dollars go to improving services for residents? We shouldn't be fooled into believing that the development is meant to serve residents of Los Angeles, but rather Staples Center and the Convention Center and their visitors.

For years the Convention Center has been promising big returns on investments. Even after a $500 million expansion, L.A.'s most expensive publicly financed building ever continues to do the same level of business it did in the 1970s and '80s.

City officials blame the poor performance on a lack of hotel rooms. Planners had long envisioned a facility that would attract new hotels and restaurants. But, even the lure of Staples Center, with scheduled events almost every night, hasn't been able to fulfill the planners' dreams.

The CRA's solution, throw hundreds of millions of dollars in subsidies to developer Ed Roski and Denver billionaire Philip Anschutz (the two behind the Staples Center development). The plan includes building a marquee hotel near the Convention Center and the potential for a downtown football stadium. The city is propping up a deal that couldn't stand on its own weight.

Any development plan centered on the Convention Center is destined to fail. Roski and Anschutz know this, which is why they have been hesitant to invest their own money. If it were a sure bet or even a reasonable economic risk, they wouldn't need so much taxpayer support - in fact, they probably wouldn't want it.

The fact is that the convention business is struggling. Before Sept. 11, only two convention centers in the United States made money or broke even - Orlando, Fla., and Las Vegas. Since then, both have reported drops in attendance and revenue and Orlando needed an operating subsidy for the first time in years.

Furthermore, several prominent expansions in Southern California have saturated the market, making the prospects of a successful Los Angeles Convention Center even more unlikely. Space has been added or upgraded in Long Beach, San Diego and Anaheim - supply has ballooned even as demand has continued to drop.

The downtown redevelopment crowd is wedded to the idea of a top-notch hotel near the Convention Center, a football team in L.A., and visions of a vibrant downtown. They have continued to push forward with these plans despite the political climate and the potential benefits of incorporating the Valley more. Instead the CRA is asking the Valley to subsidize downtown development that is destined to fail.

Clearly the CRA and City Council are stuck in the old-school model of urban development. It is a relic and needs to be shelved. Economic activity is no longer centralized around traditional downtowns, with convention centers and attractions.

Because of technology, economic activity is more decentralized and dispersed than it was just 20 years ago.

Take the Warner Center in Woodland Hills, for example. Twenty years ago it didn't exist. Now it is a vibrant center of economic activity that several large firms call home.

What happened in that same time in downtown? In the past 20 years, every Fortune 500 company headquartered in downtown Los Angeles has relocated to other areas.

The Valley itself should be heralded as the model of future economic activity.

The Valley boasts several urban centers dispersed across the region, each uniquely serving its nearby residents. The Valley's economic resilience is more astonishing considering it has been almost completely ignored by City Hall.

The council missed a golden opportunity to quell some of the secession talk by not bowing down to the CRA's dreams. Unfortunately, Los Angeles residents will be paying for this costly mistake for years. The only question that remains is whether the Valley has finally had enough or whether it will continue to subsidize these mistakes.

Geoffrey Segal is the Director of Privatization and Government Reform at Reason Foundation



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