In 2009, Goldman Sachs had a very good year. The bank, bailed out to the tune of $10 billion in 2008 by American taxpayers, reaped a record $13.4 billion profit. While many Los Angelenos lost their houses, the bank's chairman, Lloyd C. Blankfein, took home $68 million in salary and a $9 million bonus.
On Friday, March 26, the Los Angeles City Council sweetened Goldman Sachs' pot — substantially. In a vote of 12 to 2, with Westside council members Bill Rosendahl and Paul Koretz opposed, the council handed the big firm significant additional development rights on 111 acres of property it co-owns at Playa Vista.
The vote allows Playa Vista's final build-out phase to dispense with land-use rules that permitted just 100,000 square feet of commercial space — about the size of a single Costco warehouse — to allow about 2.6 million square feet of luxury housing, a smattering of senior housing and about 341,000 square feet of retail, offices and public buildings — significantly more square footage than is contained in Chicago's 92-story Trump International Hotel and Tower.
In pure dollar terms, the new rights substantially boost the value of Goldman Sachs' property — by $145.6 million, according to land-use consultant Bill Christopher.
Because of city-government rules, the council must reconfirm its vote on April 6. Rex Frankel, an environmentalist who played a key role in protecting a large area of the nearby Ballona Wetlands from Playa Vista developers, calls it a “massive upzoning” and “giveaway to the wealthiest Wall Street 'banksters,' who, a year ago, wrecked the economy.”
The dollar figure was determined by Christopher, who has consulted for Bear Stearns & Co. Inc. and developers Legacy Partners and Trammell Crow Company, and is a principal at Urban Concepts. He was commissioned in 2009 by environmental opponents to evaluate the additional development rights the City Council was weighing. He determined that without the bump in square footage, the land was worth about $5 million but would jump in value to $151.5 million with the new rights.
The agreement approved Friday goes far beyond what zoning and the city's Community Plan allow at Playa Vista, located between the federally recognized wetlands and the 405. Charles Rausch, a city planner, says the City Council's actions essentially “reenact” 2004 actions that were overturned by courts. In 2008, a Los Angeles County Superior Court judge tossed out the council's planned expansion due to an inadequate Environmental Impact Report, which has since been updated.
Before the vote, Koretz asked about mitigation being undertaken to deal with the property's methane-seepage issues, and wanted to know whether simple extra measures could be taken to protect the area's extensive wildlife from being harmed by Playa Vista's traffic. “I couldn't get a straightforward, thoughtful answer,” he says, “because it was so much of a done deal. They knew they had the votes.”
The crowd at last week's hearing included Playa Vista opponents furious about the construction that will cover a major portion of the Ballona Creek floodplain, as well as Playa Vista supporters who live in or near the first phase — a dense, upscale development in which Playa Vista failed to provide a grocery store and other amenities that had been widely expected. The supporters living in that first phase hope the developer will finally include in the second phase services such as a grocery store.
Playa Vista President Steve Soboroff seemed less than pleased, even though he won the right to erect one of the largest mixed-use projects contemplated on the West Coast. He complained to the Los Angeles Times that Rosendahl changed his mind in voting against the expansion. In fact, the surprise switch by Rosendahl altered nothing.
Emotions on both sides point up the continuing controversy over how land speculators drive up the value of their investments by persuading the City Council to toss out land-use rules and grant major upzoning — a process that Los Angeles City Planner Gail Goldberg has publicly denounced as rendering L.A. zoning protections meaningless.
Community activist Jack Humphreville says that, setting aside the debate over whether Playa Vista is good for Los Angeles, taxpayers should get a piece of the pie when the City Council grants investors like Goldman Sachs such huge boosts in property values through upzoning. Humphreville equates such sweetening of land rights to a direct investment by City Hall.
He argues that in the business world, investments are rewarded with financial dividends. “We're giving [the developer] something, and in return we want 20 percent of the increase in value.”
Playa Vista's politically connected president, Soboroff, who participated in a “kitchen cabinet” that recommended Austin Beutner as Mayor Antonio Villaraigosa's new jobs czar, would not take calls, referring inquiries to Playa Vista spokesman Steve Sugerman. Sugerman says he does not know the dollar value of Friday's decision to Goldman Sachs and its partners, Morgan Stanley Real Estate Funds and union pension funds.
But, he says, “I don't believe there is an estimate, because it's not the way land-use planning” is done. Cities “don't look at land-use requests in terms of what they bring to the property owner.”
Sugerman says elected leaders look at whether the land use and development fit within the general plan and provide tax benefits to the community. According to Sugerman, “Playa is generating millions of dollars for the city, jobs for local people and $100 million in transportation improvements in the area. It's a significant stimulus for the area and the entire city.”
Yet West Los Angeles planning activist Barbara Broide says residents of Los Angeles don't see the benefits that purportedly flow from such projects. She cites the continued deterioration of Los Angeles city parks, libraries, roads and traffic conditions — even after a booming development period. “We don't see the tax revenue,” she notes. “That's why people start to fight development.”
One person who agrees with Sugerman is Cyndi Hench, a retiree and president of the Neighborhood Council of Westchester-Playa, who lives in Westchester. She's a supporter of Playa Vista and lists a litany of Playa Vista contributions to the area. However, the company was often forced to agree to those contributions following litigation, protests and political pressure.
“They pay for a lot of improvements in our community that they never have gotten credit for. Why don't they toot their own horn?” she asks. She sees the development as an example of “the vision of 'live, work and play' ” — echoing a Playa Vista marketing tagline. “This city continues to need housing, and absolutely it would be a great spot for a little town center. You have to go to the Marina to go to the grocery store.”
Sabrina Venskus, an environmentalist and the attorney whose legal fight over the flawed EIR stopped the expansion in 2008, says the new deal is so vague it doesn't even bind the firm co-owned by Goldman Sachs — known as Playa Vista Capital Company LLC — to actually develop the stores, markets or other promised retail.
Venskus points to page 59 of the agreement approved on Friday, which states: “Developer agrees that it will use its best efforts, in accordance with its own business judgment and taking into account market conditions and economic considerations, to develop the Project in accordance with the terms and conditions of this Agreement and the Project Approvals.”
Venskus says, “This provision is basically saying that the developer can decide whether or not it's going to do the project in accordance with what's set forth in the agreement . … It binds the city, so that the city can't get out of stuff, but it lets the developer get out of stuff.”
According to Terry Kaufmann Macias, a deputy city attorney specializing in land use, the deal was reviewed as to “form and legality” by the City Attorney's Office but was negotiated under former city attorney Rocky Delgadillo. She said that in the future, City Attorney Carmen Trutanich will take a “more active role to ensure that city obtains the maximum public benefits obtainable under these types of agreements.”
By then, thanks to Los Angeles City Council's actions, Goldman Sachs and its partners can probably count on that $145.6 million as cash in the bank.