City Hall bureaucrats and a board of political appointees will have the final say on a proposal to pay $5.6 million in public funds for a 0.8-acre parcel of property to be turned into a park in the heart of a recently gentrified section of Downtown Los Angeles.
The situation appears to relieve elected officials of direct responsibility for the deal on the 400 block of S. Spring Street — and has now raised questions about the politics of the transaction in addition to skepticism in some quarters about the $5.6 million price tag for the land.
"The transaction must be approved by the Board of Recreation and Parks, and the General Manager of both General Services and Recreation and Parks," according to David Roberts, property manager for the Asset Management Division of the city's Department of General Services.
The procedure described for an approval of the deal led to a stinging critique of City Hall by Ron Kaye, the former editor of the Los Angeles Daily News who is now leading a grass-roots civic watchdog organization. Kaye called the reliance on career bureaucrats and a board of commissioners appointed by the mayor and confirmed by the City Council as a smoke screen that could allow elected officials to exert influence behind the scenes while maintaining a perception of distance from the actual decisions on such deals.
"The theory of the system of citizen commissioners is that they provide a watchdog role, but that's been corrupted in Los Angeles over a long period of time, and never more so than today," said Kaye, whose Save L.A. Project is based at ronkayela.com on the Internet. "The commissioners know that they are political appointees who will be fired if they stand in the way."
Kaye raised similar concerns about City Hall's bureaucracy.
"The bureaucrats themselves have been systematically politicized — they know that their jobs are on the line if they go against what elected officials want them to do," said Kaye. "Everything is political in this city these days, and when it's political like that the special interests are feeding on every deal."
The office of Los Angeles Mayor Antonio Villaraigosa had not returned calls seeking a response to Kaye's comments, as of presstime.
Questions about the politics surrounding the deal for the park on Spring Street come in addition to others raised by some local real estate professionals and community members who have wondered about the price of the land, the timing of the deal, and the decision by staffers of Department of General Services to use an appraisal commissioned by the seller's bank. Additional questions stem from the use in the appraisal of a comparable deal that never went through on a piece of property with an asking price that is currently 25% below the total listed in the appraisal. City officials now say that they did not consider that property as a "comparable sale" in figuring the price they have offered for the parcel on Spring Street. A review of the appraisal indicates, however, that the cancelled deal was listed as "under contract" and did figure into various calculations used in the appraisal's estimate of the value of the land on Spring Street.
Meanwhile, the apparent 25% drop in value of the land in the comparable deal has raised questions about whether the $5.6 million price tag for the parcel on Spring Street — which has been touted as a 12.5% discount — is actually a premium when viewed against the ongoing economic crisis and sagging condition of the local real estate market.
The appraisal took a number of comparable deals into consideration in figuring the price of the land on Spring Street, including a 0.73-acre parcel at 850 S. Hill Street, currently a parking lot behind the Eastern Columbia residential condominium complex. The land on Hill Street appears to be the closest of all the comparable deals listed in the appraisal in terms of its similarity to the parcel on Spring Street. The Hill Street and Spring Street parcels are nearly the same size, both are currently parking lots, and each is owned by a developer with a residential condominium complex next door — Kor Development owns the 0.73-acre parking lot on Hill Street and the Eastern Columbia, while Downtown Properties owns the 0.8-acre parking lot on Spring Street and the recently completed Rowan Lofts immediately to the south, on 5th Street.
Pasadena-based EastWest Bank commissioned the appraisal of the Spring Street parcel on behalf of Downtown Properties, a customer of the financial institution, according to city officials. The appraisal is dated September 23, 2008, and lists the Hill Street parcel as "under contract" for a price of $8.75 million at that time.
The parcel on Hill Street remains on the market at a much lower price, however. Mark Tarczynski, a senior vice president with real estate brokerage CB Richard Ellis, which represents Kor Development on the Hill Street land, recently told the Garment & Citizen that the current asking price is approximately $6.5 million.
A similar 25% discount applied to the parcel on Spring Street would peg its value at $4.8 million. That would bring a savings of $800,000 for the city from its current offer of $5.6 million, twice the discount that public officials claim to have gotten. And those projections assume that the land on Hill Street will be sold for its current asking price. Some industry professionals have said that the price could drop further amid the current economic uncertainty.
9th District Los Angeles City Councilmember Jan Perry announced the deal for the parcel on Spring Street on January 14, citing the $5.6 million price as a 12.5% discount from the appraised value in September. Perry's timeline raised red flags among some observers because neither she nor other city officials mentioned the economic crisis that led to steep declines in the real estate market, a wave of home foreclosures, and massive job losses in Los Angeles and throughout the U.S. in the months following September.
The deal to buy the land on Spring Street comes as the real estate slump has apparently hit the seller of the land, too. Downtown Properties recently conducted an auction for units in its nearby Rowan Building, just south of the proposed site of the park. Those units were advertised at discounts of 45%, and while that does not amount to a perfectly even comparison to the land for the proposed park, it does offer an indication of the severity of the downturn in the real estate market. So does an earlier decision by Downtown Properties executives to cancel plans for a hotel on the proposed park site.
EastWest Bank, meanwhile, offers its own example of the severity of the current economic slump. The bank has received more than $300 million in taxpayer assistance since September under the federal government's Troubled Asset Relief Program (TARP), also known widely as the "bank bail-out."
City officials initially said that the purchase of the parcel on Spring Street would likely close sometime in March.
City officials recently told the Garment & Citizen that the deal had not gone through, as of press time, adding that they did not have a firm timeline for its completion.
Related articles:
Phantom Sale Figures in Price of Downtown Park Land
How Much is Too Much for Inner-City Park Land?
Spring Street Land Buy Calls for New Appraisal of City's Deals With Developers
Jerry Sullivan is editor of the L.A. Garment & Citizen.
Photo of South Spring Street in Downtown L.A. from Google Maps
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