Plan to Add to Staples Center Gains

Construction of a $1-billion addition to Staples Center in downtown Los Angeles is a step closer to getting underway with the completion of a proposed agreement between the developers and the city.

Both sides agreed on the outline of a memorandum of understanding that will go before a City Council committee within two weeks. Among other things, the agreement would sharply limit taxpayers’ financial exposure to the project, which would include a 1,200-room hotel.

If city officials and the developers can work out the details, construction of the 4-million-square-foot entertainment, shopping and residential project would begin in May, said Timothy Leiweke, president of AEG, the entertainment and development unit of Anschutz Corp.

The hotel developers, Wolff Urban Development and Apollo Real Estate, also announced that the 55-story tower would be operated by Hilton Hotels Corp. Beverly Hills-based Hilton would not have an ownership stake in the hotel, but would provide a $30-million loan to the builders.

“We’ve been working with the developers and trying to balance all the interests of stakeholders” downtown, said City Councilwoman Jan Perry, who supported the preliminary agreement.

“I am extremely enthusiastic,” she said.

Key elements of the proposal include:

* A $22-million loan from the city to the hotel developers to help pay the estimated $350 million to $400 million cost of construction. The loan would be paid back within 30 years with an interest rate of about 5% and would be secured.

* The developers would be allowed to keep millions of dollars in transit occupancy taxes -- sometimes known as bed taxes -- paid by hotel guests for the first 20 years of operation. The current city rate is 14%

* The city or Community Redevelopment Agency would spend $10 million on infrastructure improvements in the area, upgrading freeway access, roads, sidewalks, lighting, parking and utilities.

* The city would defer for up to five years most of the fees it ordinarily charges developers and waive those fees altogether if the developers complete the project as planned. That would save the developers $3 million to $5 million.

The city would not defer or waive its sewer, parks or arts fees, or any fees that the city collects for other governmental agencies.

“That’s the lowest level of public assistance of any hotel being financed in the country,” said Renata Simril, deputy mayor of economic development. “It protects the city better than any deal out there today.”

The developers are trying to piece together financing that will prevent them from facing heavy debt in the first few years of operation as the hotel waits for the local convention business to improve, said Lew Wolff of Wolff Urban Development.

AEG has agreed to accept deferred payment for the land that is now being used for parking.

“There’s not going to be a huge demand for a 1,200-room hotel tomorrow,” Wolff said. Still, he said, “Things are coming together a little better and a little faster than I thought. We want the City Council to tell us we are going in the right direction.”