LOS ANGELES COUNTY GOVERNMENT, no stranger to the concept of the looming financial crisis, has had a decent couple of years. The booming real estate market has left the county practically swimming in property-tax revenue, allowing it to hire hundreds of nurses and reduce overcrowding in its jails.
But the county also has one consistently dark corner — its health system, which faces a $1.1 billion shortfall by 2010, even after the county supervisors closed a dozen health clinics.
That complicated financial picture served as the backdrop for Monday’s unveiling of plans for a luxury hotel, upscale condos and pricey boutiques on Grand Avenue. Standing next to County Supervisor Gloria Molina and Los Angeles Mayor Antonio Villaraigosa, celebrity architect Frank Gehry showed off plans for a 47-story high rise, 25-story condo tower and a cluster of glass-enclosed shops, all across the street from the swooping curves of his masterwork, Walt Disney Concert Hall.
So why does the county matter? For one thing, it owns the block where the developer, New York–based Related Cos., plans to construct the project, which serves as the $750 million first phase of the Grand Avenue makeover. For another, the developer has already agreed to sign a 99-year ground lease for the county-owned block, which currently houses a rickety-looking parking garage used by the poor souls pressed into jury duty each day.
You might think that with such a prime piece of downtown Los Angeles real estate the county would direct at least some of the lease payments into county coffers over the next, oh, century. Instead, Related will make a single, upfront rental payment of $50 million, which the city and county have already committed to spend on public improvements that will accompany the Grand Avenue projects — a park and a reworked parking garage.
The plan annoys critics like urban historian Joel Kotkin, who argued that at least a portion of the lease money should have gone toward health clinics for the poor, overcrowded emergency rooms or reducing blight in the city’s many other neighborhoods.
“If this was Dick Riordan and he was doing these deals, the left wing and the academics would be screaming bloody murder,” said Kotkin, author of The City: A Global History.
County financial analysts said the Grand Avenue project will eventually generate another $54 million in ground-lease revenue from other city- and county-owned properties. That money won’t arrive until Related builds the second and third phases of its downtown Los Angeles megaproject, which are at least a few years away. For now, the county will have to rely on a tiny cut of the hotel revenue, rent and retail sales — $9 million spread over 99 years.
Gerry Hertzberg, Molina’s appointee on the Grand Avenue Committee, argued that the lease-funded park will make the condo/retail project more appealing to a broader range of residents. “It’s creating an amenity that can be used by everyone in the county,” he said.
Villaraigosa launched his own preemptive strike against the Kotkins of the world, touting the creation of thousands of new construction jobs and telling the crowd at Disney Hall that there is “no taxpayer money involved here.” The mayor, who famously told Angelenos to dream big on his first day in office, said critics of the project are not following his instructions.
“All the critics and the naysayers and people who just don’t want to dream and just hate the dreamers, you know they said, ‘This is impossible. We can’t subsidize the millionaires,’ — all the negative stuff you hear from the same naysayers all the time,” Villaraigosa said. “This is a city of dreams. This is a city where these kinds of projects can take place.”
AS IT TURNS OUT, Related did bring up the issue of taxpayer money, saying in negotiations that it wants its 275-room hotel to keep its hotel-tax revenue for a certain number of years — money that would otherwise go toward police and other city services. Related also plans for the tax increment — growth in property-tax revenue generated by the project — to fund the public improvements on the project site.
Those pesky details weren’t discussed during the unveiling. But then, to call Monday’s event an unveiling is a bit of an overstatement. The folks who make up the Grand Avenue Committee shrewdly gave the Los Angeles Times, the city’s largest daily newspaper, an exclusive preview of the project days earlier.
The move outraged the competing Los Angeles Daily News, who heard that the committee hadn’t liked their editorials against the project. Not surprisingly, the Daily News focused on aspects of the project that are more likely to make the citizenry grumpy — like a multimillion-dollar tax giveaway.?