"This expansion is unrealistic, unaffordable, and fiscally irresponsible"

Los Angeles desperately needs a new convention center. No one disagrees with that fact. But a disastrously conceived $2.7 billion plan for the deteriorating facility that attempts to leverage the Olympics as a completely disingenuous deadline would nudge the city even closer towards financial catastrophe. And LA's City Council just approved this plan by a vote of 11 to 2.

One year ago, I wrote about the misguided proposal to expand — not renovate, not replace — our "I Love the '90s" convention center. I don't really need to go over the details again; everything I wrote then still holds up. Except one thing: the plan that the council green-lit today is worse.

One of two "no" votes came from Councilmember Katy Yaroslavsky, the city's budget chair. As she masterfully steers LA through a fiscal crisis, Yaroslavsky gave one of the best speeches I've ever seen in council chambers in an effort to explain the danger and persuade her fellow councilmembers not to approve what they themselves admitted was one of the most consequential decisions the city has made in decades.

I asked Yaroslavsky for her prepared remarks — any all caps are hers, and there were some choice ad libs, as I've noted below; you can watch the whole thing here — because I felt they captured this particular moment in LA so perfectly.

Yaroslavsky's words are about the city's convention center — but they are really about the city.

Thank you Council President.

Colleagues, we all want a stronger downtown. We all want Los Angeles to host world-class events. The Convention Center plays an important role in that vision.

But the question before us today is not whether to invest in the Convention Center. The question is whether we commit to a nearly $3 billion expansion on terms that put our city’s finances and our basic services at risk for decades.

This expansion is unrealistic, unaffordable, and fiscally irresponsible. It puts our city at severe risk, and I want to explain exactly how.

We spent a lot of time in committee trying to get all the facts on the table. And the facts we have are clear.

This project is being forced into an Olympic-driven deadline that is unrealistic on its face.

Over the next 910 days, crews would have to work six days a week, every week, with only 20 days of float days and several more for bad weather and other contingencies. Approximately 5 weeks of slack in a 130-week schedule. Even the smallest disruption — supply chain delays, weather, labor shortages, or the City’s own approval delays — will push us off schedule.

The contract identifies 27 relief events — which are reasons for delay not covered by the contract and for which we as a City are financially responsible for cost increases. 15 of them hinge on the City meeting its own obligations in time.

This means that if and when DBS or BOE or DOT moves too slowly to issue a permit, or when LADWP’s work interferes with the contractor’s construction work, the liability falls squarely on us. Taxpayers carry the cost of delay.

And the risks don’t end there.

If the project slips past March 2028, Olympic and Paralympic events already booked at the Convention Center will have to relocate. LA28’s incremental additional costs of relocating and any additional costs or lost revenues from, say, reduced ticket revenues, fall on the City. At the same time, we are prepared to waste an additional $30 million on a start-stop construction plan, clearing the site for the Games and then resuming work later. All of this is supposed to happen while LADWP is still trying to design and deliver new power infrastructure, which will take DWP staff away from priorities like reconstruction of the Palisades, housing projects across the City, and priority Metro projects.

The schedule just does not work.

We are gambling billions of taxpayer dollars on a best-case scenario that everyone in this chamber knows is highly unlikely to come to pass.

This is not careful planning. It is dangerous wishful thinking.

And I haven’t even mentioned the cost.

The price has ballooned from $1.4 billion to $2.7 billion in less than two years. Now we are hearing as of this morning that it might be $2.6 billion. That tells you all you need to know about one the main issues with this contract, which is that it is not a firm fixed-price contract. This means that the cost we pay can rise, and I’m telling you as a former land-use and real estate attorney, it will.When you account for the life of the bonds, we are looking at a minimum of $5 billion in taxpayer money.

This is only going to go up.

That’s on average around $100 million a year from the General Fund for the next three decades. And that figure factors in all the revenues the project will generate. That’s our annual NET general fund hit. In the early years, it’s closer to $160 million. That obligation will eat up ALL PROJECTED GENERAL FUND GROWTH for the foreseeable future.

I’m not making that up.

It comes directly from the CAO’s report.

What does that mean?

It means when we want to accelerate the hiring of police officers or expand the fire department, there will be no money left to do it.

If you want to repair the sidewalks that are costing us more than $100 million a year in liability, or build new bike lanes and walkable communities to comply with HLA, there will be absolutely no money left to do it. When members want to start a public bank, restore funding for senior meals, pay for immigration defense or hire more crossing guards to protect kids walking to school, there will be no money left to do it.

If you think city services are bad now – and I think all of us would agree they are [note: see below, she actually said I THINK ALL OF US WOULD AGREE THAT THEY SUCK] — and you thought maybe one day we would have funding to restore service, I have bad news. It's going to get worse.

We aren’t going to be able to afford even the level of service we have right now.

Every. New. Dollar. Of growth. In our General Fund will already be committed to paying for this project for years to come. And that assumes growth. It assumes we don’t hit a recession. We know recession – or even a downturn – is a real possibility.

And the plan depends on revenues that are shaky at best. State legislation authorizing freeway signage made things worse. There is no agreement with Caltrans. Federal regulators or AEG may still block signage altogether, or even penalize the City for trying.

Without those revenues, the gap between costs and revenue only grows wider.So even under the best-case scenario, this project consumes every bit of financial flexibility we have. And if revenues come up short, or if costs escalate further — which we all know they will — the General Fund takes the hit.

The cost of this project doesn’t exist in a vacuum. We are already starting next year with a $91 million structural deficit before we even see our first Financial Status Report. The budget cycle we just went through was not an aberration. It is the new normal unless we get serious about our fiscal responsibility to this City.

At Housing and Homelessness Committee Wednesday, we heard that the City faces a new $220 million gap in homelessness services without new state dollars. We are on the edge of a fiscal cliff JUST with regard to homelessness alone.

And remember, Los Angeles is also on the hook for Olympic overruns. The first $270 million comes from the City, the next $270 million from the State, and then anything beyond that is ours again — a blank check. The Convention Center bill starts coming due the very same year we could be forced to absorb those Olympic overages.

And by taking on the debt that this project requires, we are in effect running up our credit card, limiting our ability to borrow to pay those bills or anything else we decide is worth investing in for decades.

We literally will have to put City Hall, the LAPD headquarters, your local LAPD and LAFD stations up as collateral.

We just closed a billion-dollar budget gap. To do so, this council made really tough tradeoffs, but we weren’t the only ones. Our city employees — INCLUDING OUR SWORN police officers — stepped up too. City employees agreed to sacrifices to keep this city running. They accepted furloughs and unpaid days to protect services.

So how can we ask our workforce to take unpaid time, and in the same breath claim we have enough money to spend at least $5 billion on an expansion we know we cannot afford?

And here is the kicker: every one of those labor contracts is up for negotiation in 2028 — the very year we start paying debt service on this project.At the exact moment when our workers will be seeking raises and better benefits, the City will have locked itself into massive new obligations that squeeze out room for anything else.

What’s more — we are facing ballot measures that propose to END our gross receipts tax, that’s more than $800 MILLION ANNUALLY — or nearly 10 percent of the General Fund. Another ballot measure could strip away the document transfer tax. These are two of the seven major revenue categories in the City’s budget.

You’ll notice I haven’t yet mentioned the Trump administration — in part because we can’t even fathom how bad the federal cuts are going to be. A "yes" vote will tie our hands financially for decades while our existing obligations are about to explode.

Colleagues, I have heard the arguments about the opportunity costs of inaction. Those are valid. But one of the arguments that seems to be carrying the day is that our predecessors failed to act for years and if we don’t act now, the price will only go up. That’s true. But when you can’t afford something, you don’t buy it because it’ll be more expensive later. You buy what you can afford.

We HAVE to weigh the very real costs and risks right in front of us. These are not hypothetical. They are enormous. They threaten our ability to deliver the most basic services for Angelenos. None of us want to say no to downtown. I certainly don’t. But there is a difference between saying no to this expansion and saying yes to a smarter path.

That is what your Budget and Finance Committee recommended on Tuesday. Yes to upgrades and modernization. Yes to addressing deferred maintenance. Yes to making the Convention Center functional and beautiful for the Olympic and Paralympic Games.

And yes to expansion after 2028 through a competitive bid that allows us to manage costs, secure revenue, and deliver the project responsibly.

That is exactly what the Budget and Finance Committee recommended. This path invests hundreds of millions of dollars in downtown. It protects the City’s finances. And it preserves our ability to meet the needs of our neighborhoods.

I’ve heard some questions about where this report comes from. That it feels rushed and last minute. I will tell you exactly where this comes from. Back in April, 13 members of this council voted for a motion asking for a value engineered, less expensive version of this project. We asked for a version of the project that “brings the net general fund obligation as close to zero as possible.” We didn’t put restrictions on what that could be, we just asked what would a version of this project look like if it kept costs within a reasonable range of projected revenues.

We never got a real alternative. The CAO came back with a more expensive project with minimal value engineering. I find that completely unacceptable.

This is a difficult decision. I recognize that. This is again why your Budget and Finance Committee sought to put this alternative modernization plan before us.

It is a real shame we are not voting on that today. This has been hard, and I have the deepest respect for my colleagues and community members who are advocating passionately for this project.

I also recognize where the council is on this, and I just want to close by saying that I, as much as all of you, hope that this is a success.

I mean that. Truly.

And no matter what, we as a body are in this together, and I will do everything in my power working with all of you to make sure it is. To find cost savings, and keep things on track.

If I have to call the head of BOE or DWP myself to get a permit approved, I am going to do it.

Because this has to succeed. There is no other option. 🔥