By Hillel Aron
By Joseph Tsidulko
By Patrick Range McDonald
By David Futch
By Hillel Aron
By Dennis Romero
By Jill Stewart
By Dennis Romero
How did Los Angeles city leaders turn $1 million intended to help downtown’s homeless and low-income denizens into a proposed subsidy for the global architecture firm designing downtown’s proposed NFL football stadium?
Mayor Antonio Villaraigosa has decided to spend $1 million in federal grants — money that had been avidly sought by residents of Skid Row — to instead help out San Francisco–based Gensler, a 2,800-employee giant that enjoyed $463 million in revenue last year.
The mayor has vowed that the NFL stadium won’t get a dollar from taxpayers, but the $1 million would go to the lead architectural firm for the stadium.
Gensler plans to move from Santa Monica to downtown L.A., where it will use the $1 million in federal community-development block grant funds to create a hip, new atmosphere for its relocated employees at the “jewel box,” a three-story building nestled between two skyscrapers at City National Plaza.
In a February press release, city officials bragged that they lured Gensler and its 250 employees from Santa Monica by granting the company a three-year tax holiday on revenues. City leaders were far quieter about the $1 million subsidy.
“There’s no way, shape or form that the money should be going to a multinational corporation,” says Mark Lewis, a former federal Housing and Urban Development employee who also worked for several years for the Los Angeles Department of Neighborhood Empowerment.
“The city is really pushing the envelope on this,” Lewis says, “and hoping that nobody will notice.”
Villaraigosa and City Council members since February have claimed that enticing Gensler from Santa Monica to downtown L.A. is a job creator. But that’s debatable. Some temporary jobs will be created for the jewel box renovation, but Gensler is moving its offices just 20 miles. Many economists would describe L.A.’s action as merely shifting jobs within an intricately intertwined economic area.
Critics say that of about $2.2 million in community-development block grant (CDBG) funds earmarked for downtown’s City Council District 9 — an area including the very rich and very poor, represented by Jan Perry — $1 million will go to Gensler.
The subsidy will be funneled out of the city’s CDBG funds, which are supposed to target homelessness and blighted slum areas, help low-income people or meet an urgent need, such as after a natural disaster.
The Villaraigosa administration, keen to show that City Hall is business-friendly, engaged in similar “job creation” when the L.A. Community Redevelopment Agency set aside $6 million in subsidies to bring D&J Sportswear — and its small workforce — a few miles from working-class South Gate.
Economists call this sleight of hand “negative sum” or “dead weight loss,” says Mark Calabria at the libertarian-oriented Cato Institute think tank in Washington, D.C., because there’s no real net job gain from the subsidy — the jobs are simply being shuffled to a new location, and the subsidy bids up the cost of those jobs.
According to city documents, Gensler has agreed to a modest, and very vague, payback: In return for the $1 million in renovation funds, it will hire an unspecified number of temporary, low- to moderate-income workers to do the job.
However, Calabria, a former senior staffer on the U.S. Senate Banking Committee, says, “Rarely are the jobs ever created, and rarely are the agreements ever enforced.”
Villaraigosa stood by his decision — through an aide, who issued a prepared statement: “The direct and indirect job growth will ensure that the city receives a favorable long-term return on this one-time investment,” wrote spokeswoman Sarah Hamilton.
City Council members Jan Perry, whose district includes the jewel box, the proposed stadium and much of Skid Row, and Herb Wesson, who heads the City Council’s Housing, Community and Economic Development committee, did not respond to repeated phone calls seeking comment.
But Richard Benbow, the general manager of the city’s Economic Development Department, which administers federal block grants for poor and low-income people, concedes that the Gensler subsidy was never part of a citywide “consolidated plan” that prioritized where grants would be spent.
"It was not a project we anticipated when we developed the plan,” Benbow says, adding that the contract to award the $1 million won’t be drawn up until his office determines Gensler’s eligibility.
Jeremy Rosen, policy director of the Washington, D.C.–based National Law Center on Homelessness and Poverty, acknowledges the Gensler subsidy “is perfectly legal. But at a time when there are so many great needs, there would seem to be better uses for the money. It should be spent to provide a longer-lasting benefit to the low-income community.”
City officials have wide latitude on how to award the federal cash — and that leaves it up to citizen watchdogs to monitor where the block grant money goes. HUD spokesman Brian Sullivan insists this approach is “entirely healthy.”
But a wealthy architectural firm seems an unlikely recipient for such funding. Gensler travels in the top circles. The firm designed the bending, green mixed-use skyscraper near Staples Center that contains the Ritz-Carlton and Marriott hotels and luxury condos; CAA’s headquarters; and offices for power law firm Latham & Watkins.
Over the past six months, city officials held several public meetings around town, seeking input on how to spend L.A.’s block grants. That’s when Skid Row residents sought their share — but were ignored.
Members of the Los Angeles Central City Church of the Nazarene persuaded city officials to set up two meetings for the area. Total attendance exceeded that of any other such meetings in L.A. — 80 people at the first, 56 at the second.
Church members proposed wide-ranging ways to use the federal block grant dollars, including helping Skid Row residents start a car wash, creating rooftop gardens, offering parenting classes and decontaminating former industrial sites in Skid Row.
City Hall rejected every idea.
Rev. Jeffrey Thomas, pastor of the L.A. Central City Church of the Nazarene, says, “We got involved late in the process, but I don’t think people are discouraged. Turning 80 people out for a meeting on Skid Row is a significant achievement.”
But Beth Mueller, a Claremont School of Theology graduate who attends the church and is married to Lewis, sees the $1 million subsidy as a political gift to Gensler — thanks from City Hall for agreeing to design the NFL stadium proposed by Staples Center owner AEG.
“Almost half of the money [for block grants in Council District 9] is going to an architecture firm to design a $1 billion football stadium,” Mueller says, “rather than going to build low-income housing.
”She still looks forward to working with city officials to help Skid Row tap its do-it-yourself spirit, using block grant funds. For example, she’d like Skid Row included in the city’s tree-planting program, with low-income youths hired to plant trees. And she wants city officials to set up one of L.A.’s new “business source centers” in Skid Row to help people start small businesses.
But as of now, Mueller says, Villaraigosa is not living up to his commitment to use block grants to help the vulnerable.
“Eighty people got up and made a clear statement of what they would like to see” in Skid Row, she says. With Gensler getting the money instead, Mueller says, “you couldn’t tell that we were there.”
The 1st line of this article is a sensationalist fabrication. Author should check his facts. The budget to attract businesses to downtown is a separate one to the one for social programs. This company took the decision (like others) to accept an incentive offered by the city. No money was taken from low income people. If the author does not like the budget allocation of the city, then vote for a new mayor, don't write inflammatory articles.
The issue here is not public funds being used to encourage private enterprise.. this happens all of the time and in a lot of ways is representative of our country. The issue is a misappropriation of CDBG funds, 70% of which are to be used specifically to assist low- and moderate-income families. For more information on CDBG, visit: http://www.hud.gov/offices/cpd...
Non-profits and affordable housing developers depend on this money to do their work in the community.
If the city wants to do something, it should implement property tax breaks for the building.
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At least Mr. Berg wrote a factual, non-inflammatory piece where his personal opinions and agenda were left out. #not
Federal HUD funds have limited uses.
"Entitlement communities develop their own programs and funding priorities. However, grantees must give maximum feasible priority to activities which benefit low- and moderate-income persons. A grantee may also carry out activities which aid in the prevention or elimination of slums or blight. Additionally, grantees may fund activities when the grantee certifies that the activities meet other community development needs having a particular urgency because existing conditions pose a serious and immediate threat to the health or welfare of the community where other financial resources are not available to meet such needs. CDBG funds may not be used for activities which do not meet these broad national objectives."
Moving an existing multi-million dollar company 20 miles does nothing for the Federal Government, does not help low and moderate income persons, does not eliminate slums or blight, and is not a serious and immediate threat the health and welfare of the community. Therefore Federal HUD CDGB cannot be used.
In San Diego, a HUD Audit found the San Diego Redevelopment Agency was misusing their Federal CDBG funds. The City has to payback the poor over $220 million for the poor and homeless.
Congrats Martin! Not even LAist or Fox News could combine forces to make a sensationalist, factually incorrect story. The only thing that could make it any better is if Dr. Evil would say $1 milllllllllion dollars.
Gensler is just one of hundreds of downtown groups/organizations benefiting from over $30 million in CDBG block grants. The the city awards this federal money as it sees fit. There was no money was taken from the homeless.
Here are some things to consider that were left out of your piece.
After 20 years in Santa Monica Gensler is moving into a building that aside from the ground floor food court, has sat vacant for nearly a decade. Their 250 employees will now be spending money (lunches/dinners/errands/shopping/etc) in Los Angeles rather than Santa Monica, not to mention the fact a number of employees are already looking purchase homes downtown. (My partner is in real estate and he's shown a few loft spaces to people who if it weren't for the relocation of their work place, wouldn't even be considering downtown.)
Sorry Martin, the just the tax dollars the will reap from Gensler's relocation will far exceed this grand.
First of all, Gensler were subsidized to move into their new downtown location, both by the city and by the building owner. Second, CDBGs can go to anything as the city sees fit... but how exactly can they justify prioritizing a football stadium over the redevelopment of any project in Downtown that benefits decentralized urban redevelopment? $1 million might not be a lot, but it's enough to encourage facade renovation on Broadway, organic job growth on Skid Row, or funding to plan better transit allocation.
Over the course of 70 years, billions have come to Los Angeles in the form of block grants which have been won through proposals for the redevelopment of blighted areas. So much of that money has been spent on pet projects for billionaire developers (particularly on Bunker Hill) that it's sickening at this point to see it happen again.
What a load. Mr. Berg misses the rather key point that the City will obviously recover this money (which is not exactly a fortune anyway... the price of an average house in an average LA neighborhood, really) many times over during the ensuing years of Gensler's tenure downtown, both through taxes and work brought to the district. Has he any idea of the revenue that the design and construction of a stadium alone will generate? Duh, of course not. Poor effort, LA Weekly.
The same scenario is happening with Google moving from Santa Monica to Venice and any business moving into LA. While the subsidy up front is good for a scandalous headline, after a year the city of LA will start reaping the tax dollars from having a new business within the city limits.
In this case, Santa Monica's loss is LA's gain.
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I'm sure that Santa Monica citizens are pleased to see that federal funds are being used to entice Gensler away from their community.
We can thank Beutner for this creative subsidy. May be a reporter will ask him to justify this insanity at the next press conference where he touts " job creation"
Who edits this? Calling a business that employees less than 3000 people and generates only $463 million a year a "giant" is beyond stupid. A "giant" what?