Hollywood's Catered Stimulus
“I don’t discuss my personal finances,” Tony Garcia says, sitting in his spacious photography studio on Melrose Avenue. In these hard times, with boarded-up storefronts lining the length of Melrose, Tony Garcia Photography seems to be a rare patch of prosperity. At the moment, the main studio is set up for work on a Sprite advertisement. The kitchenette is littered with half-eaten cake and bottles of booze.
Yet what Garcia refers to as “personal finances” are federal-government funds designed to combat what is routinely called the worst economic catastrophe since the Great Depression.
Tony Garcia Photography Inc. received a small loan courtesy of stimulus funding from the American Recovery and Reinvestment Act of 2009 (ARRA). The company is one of 881 entities in the County of Los Angeles that have received a total $4.14 billion in loans, hiring funds and outright grants from the American Recovery and Reinvestment Act.
Los Angeles County’s take of stimulus funds is by far the largest in California, which has received $18.5 billion in ARRA funds, intended to create 110,219.36 jobs statewide — a pricey rate of $168,264.08 per job.
But Hollywood is a different story entirely. Hollywood — the geographic Hollywood as found on Thomas Guide map page 593 — has received $23,338,327 in grants, loans and contracting. This money has created just 20.57 jobs. That’s $1,134,580.80 per job. And as interviews with recipients reveal, even that tiny jobs claim is clearly false, with many of the claims of newly created positions either impossible to verify or lower than reported.
Not even 20 full-time jobs have been created in Hollywood proper.
In fact, Hollywood’s portion of the stimulus package reveals an important factor of the Recovery Act: The money is not going to areas that would more directly stimulate the economy but instead to provide ongoing life support to deficit-ridden federal, state and local agencies.
All of these figures, which come from recovery.gov — a site set up to provide transparency in the spending of $787 billion approved when the stimulus package passed in February — are subject to substantial revision. Local investigations around the United States by Associated Press and other media continue to turn up steep discrepancies between figures being announced by the White House Office of Recovery Implementation, which runs recovery.gov, and verifiable reports of growth and jobs delivered.
Broad claims about saved or created jobs by Council of Economic Advisers chairwoman Christina D. Romer and others are increasingly subject to substantial skepticism, with the respected Rasmussen Reports poll showing that only one-third of likely voters now believe the stimulus has helped the economy.
Los Angeles differs from the national trend in two respects: Official claims of jobs created are more modest in L.A. County, and a wide range of recipients here reflects L.A.’s unique economy. Cal Tech’s Jet Propulsion Laboratory is getting $53 million to “establish preliminary designs for key elements of the Soil Moisture Active/Passive (SMAP) Project,” as well as a $220,000 grant to analyze software development.
Some $52.5 million is going for concrete barrier construction and roadbed widening in the city of Bell Gardens. A $50,000 loan has been made to Wild Boar Media, a company that “develops, produces, co-produces, adapts, writes and dreams up new animation, stories, comics and toys.”
The Metropolitan Transportation Authority is getting $850 million for projects ranging from Gold Line East extension to HOV lanes on the 405. Hollywood’s Elegance International makeup school is getting an $80,000 grant. Garcia’s photography shop got a $45,000 loan.
Stimulus spending in Los Angeles also shows how the federal government has rewritten its original claims about the need for the legislation. In February, it was sold as a way to create jobs by making smart, targeted investments in green and, especially, “shovel-ready” projects.
President Obama raised the possibility of high unemployment and continuing mortgage foreclosures if the stimulus package failed, predicting that without it, millions more Americans would lose their jobs. Since then, the economy has shed another 2 million jobs, and unemployment is now at 10.2 percent, higher than the 9.7 percent that the White House economic team predicted if the stimulus package failed.
L.A. has been an epicenter of the problem, with California unemployment at 12.2 percent and, in the city of Los Angeles, now at a staggering 12.7 percent. But as more and more voters turned sour in polls about the stimulus effort, Washington responded by altering its claims about what the money is really for.
In May, the Council of Economic Advisers in Washington introduced the concept of a program that would “save or create” jobs, predicting that 3.5 million jobs would be saved or created by the end of the stimulus. But with more than half of the $787 billion sum spent, the council reports that the stimulus is responsible for 640,239 jobs.
This all comes back around to Hollywood and its 21 jobs for $23 million in this way: Secretary of the Treasury Tim Geithner is now referring to the stimulus act as “only a bridge” to a recovery “led by the private sector.”
Viewed as a “bridge,” the money spent in Hollywood begins to make more sense, since it is aimed mostly at maintaining public services, not at creating jobs or growth.
The area from Franklin Avenue south to Beverly Boulevard and from Western Avenue west to Robertson Boulevard, which includes the Hollywood area and most of the city of West Hollywood, has grabbed $18 million in ARRA grants, along with $5.2 million in loans and a $78,232 contract.
Of that total, $4.4 million goes to a very rich and upscale recipient, Cedars-Sinai Medical Center: one grant for research on stem cells from the intervertebral disc and another to look into tumor targeting with protein-DNA drug carriers. Despite the weighty sound of the research, and the possible value of it years down the road, the research saves or creates only seven jobs.
The city of West Hollywood is getting $1.5 million for highway infrastructure and energy efficiency. The energy-efficiency piece, which accounts for only $161,000 of the total, would create a mere two jobs.
That’s why in all, page 593 of the Thomas Guide is promised 20.57 jobs. Other purported engines of job growth include $708,591 in rental-assistance payments to Hollywood Limited Partnership, which is listed as creating just three jobs.
How do rental-assistance payments create three jobs? L.A. Weekly was unable to find any company operating under the name “Hollywood Grove Limited Partnership,” and there is no Hollywood Grove apartment building operating on the stretch of Lemon Grove Avenue listed at recovery.gov.
Another three-job creator, according to the Office of Recovery Implementation, which operates under Vice President Joseph Biden, is a $25,000 grant that is said to be going to Techentin Projects at Hollywood Boulevard and Wilcox Avenue, in the heart of unemployment-ravaged Hollywood proper.
“I wish!” says architect Warren Techentin, when asked about the grant. “Techentin Projects doesn’t exist anymore.”
The grant is legitimate, but it is actually going to Los Angeles Forum for Architecture and Urban Design, a nonprofit for which Techentin used to serve as president. (The confusion arose from paperwork errors by the National Endowment for the Arts, which awarded the grant.)
Esmeralda Ward, L.A. Forum’s vice president of finance, explains that the funds will be used for administrative support and to bring in a consultant to do some recording of its institutional memory. Asked how $25,000 will create three new jobs, she explains that in fact, it won’t: “They’re all part-time jobs; we’re not creating any full-time positions.” The Office of Recovery Implementation, however, lists these as three full-time jobs.
But Hollywood’s two biggest stimulus-money recipients, the very rich Legacy Partners Hollywood & Vine and the nonprofit Swansea Park Senior Apartments, are not creating any jobs with their federal stimulus funds.
Legacy Partners is the developer of the massive W Hotel project at Hollywood and Vine. The W project, which has been attacked for a deal in which the city allowed it to include very large billboard spaces, is nearing completion and does seem like a shovel-ready project. Yet according to the White House, the $10 million investment will create zero jobs.
Legacy Partners did not respond to interview requests regarding its take of federal stimulus funds in the amount of $10.2 million.
Zoe Ellas, who applied for Swansea Park’s $8.8 million grant, explains that this is a “cash-in-lieu” fund designed to replace tax-credit funds that would have been coming to the owners of the 120-tenant, low-income, senior housing complex on Kingsley Drive — that is, before the recession severely hurt that form of investing in such housing.
The nonprofit management of the Swansea Park complex had been selling tax credits to investors, as well as lining up financing for several years, but the lengthy recession scared away many investors.
“In an ordinary year,” Ellas says, “a tax-credit investor will say, ‘We’ll give you this much cash in exchange for 10 years of tax credits.’ ” But, she says, in the last year and a half, the typical offer from an investor has “gone from 96 cents on the dollar to 70 cents on the dollar if you’re lucky. So it translates directly into less money.” The stimulus funds, she says, are being used to cover that gap.
Again, there is confusion from the feds as to the nature of this spending. Ellas says the stimulus money is a loan, but the Office of Recovery Implementation lists it as a grant.
As these examples indicate, the quality of the information available on stimulus funds flowing to L.A. projects and jobs creation is unreliable. But while the claims from Washington about the “unprecedented” transparency afforded by recovery.gov are exaggerated (similar systems have been in place to track earmarks, for example, for several years), on the other hand, the stimulus payments are being subjected to a relatively high level of public scrutiny by local officials in Southern California and other areas.
“This was a monumental logistical task,” says Scott Wiles, special assistant to L.A. County Deputy CEO Ellen Sandt. “They got the recovery.gov site up, and got the federal reporting site up, which allows you to categorically search the material. It was a lot of work for us to get ready for it. All the departments receiving stimulus funds have had dedicated staffs. It has also been a challenge to handle the changing measures. Initially we were reporting how many jobs you created and how many you retained — then they collapsed those data matrixes into each other.”
The L.A County government is getting $356.4 million of the total $4.14 billion awarded to the L.A. region. The vast majority of that, some $285 million, is going to social services, with smaller amounts to capital projects, public health and safety, and a $15.4 million grant to make energy-efficiency loans to homeowners, to be paid back through property taxes.
Although Los Angeles County government does not have any central office to handle stimulus funds, Wiles says it is working on an interdepartmental Web site that will allow tracking of local stimulus funds in the manner of recovery.gov.
It’s not clear if increasing public knowledge of where the money is really going will be a good thing back in Washington. The Council of Economic Advisers under Obama has been claiming since early 2009 that stimulus funds are creating more jobs than they really have, claims that have been easily knocked down, and not just in Hollywood. Last week a Boston Globe report spot-checked from among 12,374 jobs that were reportedly saved or created in Massachusetts. The newspaper found scores of jobs that did not exist. An Associated Press investigation earlier this month found that two-thirds of the 14,506 jobs credited to one federal office were actually pay raises wrongly counted as jobs saved.
So far, the Recovery Act’s clearest achievement is the help to federal, state and local agencies facing shortfalls. Money has gone to help local governments pay for unemployment checks, subsidized housing, politically favored development projects like the W Hotel in Hollywood, and welfare programs. Los Angeles County is spending its stimulus grant not on job creation but largely on social services.
The public is increasingly torn because the idea of providing emergency funds for cash-strapped agencies is not, even among California voters, viewed as a good reason for massive government intervention in the economy. But voters do support maintaining entitlements and government assistance during hard times.
A small pay-out to an architecture nonprofit in Hollywood, for instance, is an uncontroversial public investment, and some of these funds may even stimulate economic activity.
“Food stamps are incredibly stimulatory,” says L.A. County’s Wiles. “You get the money, you spend it right away. I think the green jobs, too, once we get that, will be stimulatory.”
But in L.A., that kind of spending does not create jobs — not at the level the White House is claiming.
In Hollywood, where $23 million won’t get you 21 jobs, stimulus disbursements have included such wild cards as $16,822 for the visual-effects school Gnomon Inc., and $237,238 for the Musicians Institute. Yet Musicians Institute general manager Tak Sakimoto is unaware of the school’s having received any stimulus funding at all, and speculates that the money may be part of a student-loan program.
In the words of the photographer Garcia, the money going to Hollywood may mean that the “personal finances” of the beneficiaries do not get squeezed too badly. But is it creating any growth?
Despite billions poured in by the Los Angeles Community Redevelopment Agency, and Hollywood’s new reputation for late-night clubbing, Hollywood is still a tattered business district filled with barricaded empty storefronts.
It might have been a good candidate for job-intensive stimulus funding, with its struggling Business Improvement Districts, enterprise zones, special hiring areas, and woeful streets and water infrastructure. That was not to be.
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