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MTA's $1 Billion Development Scheme

IT WAS ONE OF THOSE strange, somewhat sleazy situations that seem to plague the Los Angeles County Metropolitan Transportation Authority. Two weeks ago, 11 of the 13 powerful board members who control the MTA cited personal “conflicts of interest” preventing them from legally voting on an up-to-now obscure, $1 billion, high-rise development project in North Hollywood. Yet a few minutes later, a quorum made up of prominent politicians including Mayor Antonio Villaraigosa and County Supervisor Gloria Molina voted anyway.

The public may be virtually unaware of the massive density planned for the 15.6-acre site in the NoHo Arts District, but press reports tout it as the most expensive and biggest mixed-use venture in the history of the MTA. Sprawling across about the same amount of land as the Grove, the NoHo Artwave would be far more dense, including the biggest skyscraper to hit the low-rise San Fernando Valley in decades, with nearly a half-million square feet of space. If the economy doesn’t bottom out, it would make at least a few people much richer.

Beyond the lack of any real debate over the project — a trademark of the current rush to transform many L.A. neighborhoods into high-density corridors whether residents want it or not — is the bizarre way in which powerful MTA board members veered around a state law that prevented their voting on a project by Lowe Enterprises, from whom 11 of the 13 have accepted money.

To get around state anti-corruption laws, Villaraigosa and the other board members used a so-called “lottery-based vote” — essentially drawing straws to randomly select five conflicted board members to achieve a quorum. Claiming that a special state law written just for the MTA existed for such embarrassing moments, the five conflicted members, including Villaraigosa and Molina, joined the two non-conflicted board members — and voted for Lowe.

After the vote, an MTA spokesman, media reports and some board members claimed that the loophole was written by former state Senator Tom Hayden of Santa Monica. But when contacted by the L.A. Weekly, Hayden was stunned to hear that his name had been invoked as the author of a voting loophole, saying he never pushed through any backdoor mechanism.

“There’s nothing in that law that mentions anything about a lottery-based vote,” insists Hayden. The practice, he said, is “bordering illegal, if not illegal.”

In fact, the Weekly has learned, the MTA has been citing Hayden for more than seven years. Three of the seven prominent leaders who voted for the North Hollywood project, in interviews with the Weekly, gave muddled explanations of the alleged loophole, with two of them pointing to Hayden. An MTA spokesman was surprised to hear of Hayden’s consternation, insisting that Hayden’s law created the MTA loophole.

But that spokesman, after seeking advice from an MTA ethics officer, called the Weekly back twice, abruptly abandoning the MTA’s longtime claim that Hayden had created a loophole for them — and offering confused answers as to why the board thinks it can ignore state anti-corruption law.

THE GYRATIONS at the MTA stem from 1997, when Hayden authored Senate Bill 89 in response to the MTA’s flawed history in constructing the underground Metro system. Workers were injured during unreported construction mishaps, stretches of Hollywood Boulevard sank due to subway tunneling, and accusations flew that contractors improperly gave money to MTA board members.

Hayden came up with a strict law to cap those contributions as well as to force construction firms to report injuries. Under Hayden’s bill, board members could not accept more than $10 from companies seeking a contract from the MTA. The bill came with a tough, four-year ban on participation in any contract decisions by any MTA board members who “knowingly accepted” any gift over $10 from those same contractors.

“I’ve always believed the MTA is a gravy train for contractors,” says Hayden. “The law is meant to attack obvious conflicts of interest.”

Two weeks ago, Hayden’s law collided with 11 board members who took money from Lowe, and whose conflicts of interest prevented them from voting on the “NoHo Art Wave” — the largest development project ever by the MTA. Lowe Enterprises plans 562 apartment units, a skyscraper and two shorter towers, a YMCA (Robert Lowe, the firm’s founder, happens to be chairman of the board of the Los Angeles Metropolitan YMCA), community buildings, and space for 6,200 cars, all to be erected above and around the last stop of the Red Line subway near the Orange Line busway at Lankershim Boulevard.

The vast parking facilities would dwarf the parking lots at infamous car magnets like the Hollywood & Highland Center (3,000-plus spaces), Westside Pavilion (3,350 spaces) and the Grove (3,500 spaces). The 6,200 parking spaces signal to critics that MTA board members, rather than addressing Valley congestion, are in fact creating a new hub for gridlock, mirroring the nightmare at Hollywood & Highland — another “transit-oriented development” with a subway line and ample bus service that has nevertheless jammed up the streets with cars.

 

Yet MTA board member David Fleming, an influential Valley lawyer and former city fire commissioner, insists, “NoHo has been looking for development for 20 years. This is a piece of the puzzle that’s been missing.”

According to Fleming, 10 of his colleagues took money from Lowe Enterprises. Fleming, who made number 11, was also conflicted because he is “of counsel” to the politically well-connected law firm Latham & Watkins, which had represented Lowe Enterprises.

A quorum of seven board members was needed to push the project forward, and only Villaraigosa’s appointee Richard Katz, a former state legislator, and John Fasana, a city councilman from suburban Duarte, were totally free of entanglements with Lowe. So an MTA staffer suggested a loophole they had used for years without much notice: the lottery-based vote, which, says Fleming, staffers actually call “The Hayden Procedure.”

On September 27, a board secretary placed the 11 names of the conflicted members in a box: Villaraigosa, Molina, Los Angeles County Supervisors Mike Antonovich, Yvonne Burke, Don Knabe and Zev Yaroslavsky, Santa Monica City Council Member Pam O’Connor, Long Beach Vice Mayor Bonnie Lowenthal, Glendale Mayor Ara Najarian, Los Angeles City Councilman Bernard Parks and Villaraigosa appointee Fleming. She then randomly pulled out the names of Villaraigosa, Fleming, Lowenthal, Molina and Najarian.

Those five joined Katz and Fasana, voting unanimously to award Lowe Enterprises the exclusive right to negotiate the $1 billion project with the MTA. The developer must hold public hearings, complete an environmental-impact report, and win further approvals — but Lowe is in the catbird seat now, with the connections to push it through.

Hayden suggested to the Weekly that MTA lawyers likely dreamed up the loophole, and in a subsequent e-mail stated, “I’d like to see someone question the legality of [MTA’s] counsel advice. [It] seems to me the [drawing] straws vote still allows the MTA to be totally dominated by interest groups using contributions to drive funding.”

MTA spokesman Dave Sotero, informed that Hayden insists his law does not create a special MTA loophole, went quiet. Then he said he was “just repeating” what MTA’s legal eagles had told him and promised to “look into it further.”

Board member and attorney Fleming, told of Hayden’s denial, declared, “That’s news to me.” Fleming then complained about the law’s “low threshold” of $10, and the need for politicians to raise cash to stay in office. “What are you going to do? Not have a board with elected officials?”

Fleming says the 13 board members receive e-mails from MTA staff a week before every board meeting, informing them of their upcoming conflicts of interest. “We know several days in advance who’s conflicted,” the attorney says. “It’s no mystery.” Over the past two years, Fleming remembers the controversial loophole being used “two or three times.”

“The problem is,” he says, “what do you do if you don’t have the vote?”

Hayden retorts: “There’s ample room to appoint [MTA] board members who have nothing to do with contractors. You’re telling me there’s no one in Los Angeles who can’t fill that seat? Of course not.”

AT THE POORLY PUBLICIZED September 27 meeting, only MTA watchdog John Walsh disagreed with the plan. “This [project] is a traffic nightmare,” says Walsh, who has been credited over the years with blowing the whistle on the MTA’s blunders. “They’re plopping a project the size of Warner Center into the middle of NoHo, and there is no mitigation for the traffic, other than the Red and Orange lines.”

Walsh believes the Valley is set to become the next Westside with its endless bumper-to-bumper traffic. “The Westside is gridlocked out,” says Walsh, “so now the big projects are going to North Hollywood and other places in the Valley, and the same thing will happen there.” Although two related studies, conducted by UC Berkeley and Cal Poly Pomona, showed that 78 percent of residents who move into “transit-oriented” housing never use the nearby bus or subway, and merely add more cars to local congestion, board member Fasana counters, “Unlike the Westside, you have rail and buses” in NoHo.

There is, in fact, another motive turning the MTA into a big-time land developer rather than simply a less-than-successful people mover. “The MTA is operating at a deficit,” says Fleming, “so it’s very important to get the dollars we can by building these projects.”

According to Roger Moliere, chief of development for the MTA, Lowe Enterprises will pay $11 million in “guaranteed” ground leases to the transit agency.The MTA’s conflicted role, as a developer drawing thousands of cars into neighborhoods, and the entity that is supposed to relieve congestion, could explain why spokesman Sotero and MTA ethics officer Karen Gorman stumbled around for hours trying to explain who dreamed up the so-called Hayden Procedure.

 

Gorman, chief ethics officer for Metro, vaguely explained that “case law” — she couldn’t cite an actual case — as well as an obscure section of the California government code, specifically allows a “lottery-based” vote.

Gorman admitted the loophole was not “written in Tom Hayden’s law.” Yet she flatly dismissed Hayden’s suggestion that MTA lawyers may have fashioned it. “No,” she said, “it’s absolutely not true. It’s state law.” Board members Fasana of Duarte and Lowenthal of Long Beach gave different answers. Fasana cited Hayden’s law — as “explained” to him by MTA staff — and Lowenthal suggested that a ruling by the California state attorney general had created the loophole. (Attorney General Jerry Brown’s office couldn’t find such a ruling.)

MTA board member Yaroslavsky’s press deputy, Joel Bellman, when told that ethics officer Gorman had admitted the loophole didn’t come from Hayden, said he would try to resolve the confusion. Two hours later, Gorman and Sotero contacted the Weekly. “I’m sorry for not making myself clear,” Gorman said. She cited Title 2, Division 6, Chapter 7, Article 1, Section 18708 of California’s Code of Regulations. In a subsequent e-mail, Sotero cited yet another justification — “the long established common law Rule of Necessity,” upon which he says the MTA has relied.

It will be news to those who have long cited the “Hayden Procedure” that the regulation in Section 18708 is not a special law for the MTA, does not mention the MTA — and might not even legally supersede Hayden’s anti-corruption law. The regulation states that “a random means of selection may be used” to produce a quorum for a vote. “The lottery-based vote,” Gorman said, “was our ‘random means of selection.”

The MTA’s topsy-turvy claim that they could draw straws thanks to a special MTA law by Tom Hayden has arguably discouraged legal challenges against the MTA’s practice. While not commenting on the MTA case, professor of law emeritus Michael Asimow of UCLA Law School, an expert in state administrative law, said that “If the regulation is inconsistent with [state law], the regulation is invalid.”

“It sounds suspicious,” says professor Greg Keating, who teaches legal ethics at USC’s School of Law, of the MTA’s tortured explanations. “And it’s definitely a loophole that undermines [Hayden’s] law.” Keating notes that if deep-pocketed developers know a lottery-based vote can be conducted when board members have ethical conflicts, developers may contribute money to every board member to cover their bets when names are pulled out randomly. “It may be expensive,” says Keating, “but if you have the money . . .”

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