Questions about subvention?

Do you have questions about the City’s role in the Village at Westfield Topanga Project? So did I. That’s why I worked day and night to help craft a fair deal for taxpayers that will create jobs and economic opportunity here in the San Fernando Valley. Below, please find some of our most Frequently Asked Questions about the project and subvention.



What is a “subvention”?

A subvention agreement provides for a mechanism by which site-specific tax revenue can be used by the City to provide financial assistance to a project to bridge the feasibility gap in its construction cost to help build the project. As per City policy, up to 50% of the net new tax revenue (general fund revenue) generated by a project may be used to assist a project through subvention.

Net new revenue? What does that mean?

Net new revenues refer to tax revenues the City would not get unless such a project was built.

Okay, got it. What’s a feasibility gap?

A feasibility gap is the difference between what the project costs to build and the revenues expected to be earned. Put another way, it is the additional financing needed to make the project viable.

What is the construction cost of the project?

Approximately $335.6 million.

How much revenue will City get from the project?

The project is estimated to generate over $41.9 million in net new City revenues (in today’s dollars) over 25 years including property taxes, sales taxes and other new funds. This does not include most revenues from the Costco, nor does it include indirect revenues caused by the multiplier effect. Nor does it include all of the public benefits that the developer has to pay for as part of the deal such as street widening, sidewalks, a community center and $3.25 million (net present value) in additional community infrastructure/benefits.

So, how much will the project receive?

The project may get up to 50% of the net new revenues, estimated to be half of $41.9 million or $20.9 million in net present value (in today’s dollars). Some news stories have cited a top-line figure of $59 million, but that number is based on the projected rate of inflation over 25 years. The total amount they can receive is capped at $25 million in today’s dollars, but that is contingent on the project generating revenues in excess of the $41.9 million projection.

What if the project doesn't generate as much new tax revenue as projected?

If the project makes less tax revenue than estimated by the City’s economic analysis, then the project will receive less money.

What if it's more?

The project can only receive 50% of what they generate, up to $25 million net present value (in today’s dollars). This is true even if the net new revenues outperform the economic projections that were conducted by the City.

Who supported this?

This agreement was supported by local groups and many business organizations such as the Warner Center Association, Woodland Hills – Tarzana Chamber of Commerce, Valley Industry Commerce Association, Los Angeles Area Chamber of Commerce, Los Angeles and Orange County Building Trades Council, Unite Here Local 11, and the Los Angeles County Business Federation, to name of few.

What are the benefits of the subvention for jobs and economic activity?

  • 1,102 construction jobs
  • 1,597 permanent direct jobs
  • 492 permanent indirect jobs
  • Approximately $458 million in economic output to the regional economy over 25 years.

Could the City have realized those benefits without the revenue sharing subvention?

This public investment accelerated the construction of this project, creating jobs and economic activity that would otherwise have taken over 25 years to realize. Certain benefits, such as the $3.25 million infrastructure/benefits fund, were directly tied to the subvention.

I heard that they are not building a hotel, does that mean it will never be built?

Councilmember Blumenfield, sharing this concern, added a requirement that Westfield must provide an update to the City on an annual basis to inform the City of their timeline to construct the hotel.

Westfield representatives have said they will not pursue the construction of the hotel and office portion of the project in this first phase, but have publicly confirmed  that they intend to build a hotel in future project phases.

How do we know the City, and the taxpayer, are getting a good and fair deal?

To guarantee the best value for the City’s investment, Councilmember Blumenfield pushed for strict new accountability measures to ensure that the City does in fact receive and can accurately track new revenues generated by the project.  

These measures include:

  • A reconciliation of the actual construction costs upon completion to verify that costs are within acceptable projections and that a financing gap exists.  
  • An annual “true-up” that requires Westfield and its tenants to provide verification of sales and other taxes paid to ensure that the annual disbursements to Westfield are justified by the net new revenues.   

These unprecedented disclosures will enable the City to be accurate and precise so that Westfield only receives the net new revenue subvention dollars to which they are entitled. Not a dollar more.

Additionally, he insisted on strong provisions to ensure that the project would not “cannibalize” other retail or restaurants in the area or get credit for existing City revenues. For instance, if a business (such as a store or restaurant) relocates into The Village, those tax revenues are excluded from the “net new revenue” calculation. Under this model, Costco’s store and gas station revenue are not factored in.

Does it really make sense to give tax dollars to private developers?

The City continues to struggle with a down economy and has very few tools to use to stimulate local investment. This is particularly true with the loss of the Redevelopment Agencies (RDA) and the more traditional tax increment financing they employed. The City has previously used subvention nine times in other parts of the city. As the Los Angeles Daily News’ editorial board wrote in 2013, “[if] this is a tool that the city leaders are using to spur new development in other parts of the city, the Valley deserves a piece of it.”[1]

When can I expect to see the project construction completed?

Due to the subvention, the project should be completed in late 2015.

[1] “Yes to Westfield Mall tax breaks.” Editorial. Los Angeles Daily News. 25 Jun. 2013.

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