Landlords’ pullback puts L.A. Toy District at risk

This being the yuletide season, I made my way to the downtown Los Angeles Toy District the other day, because nothing says “Christmas” to me so much as stepping over piles of garbage to cross the street and shouldering my way past overflowing dumpsters in busy alleys.

The Toy District is in a bad way. Established by immigrant entrepreneurs in the 1980s as the center of a thriving wholesale import-export trade in toys and other gewgaws mostly from Hong Kong and China, it has been losing its verve for several years.

Business is down sharply again this year, continuing a trend that surfaced even before the economic freeze of 2008. Global margins on low-end merchandise, the district’s stock in trade, have been cut to the bone. And what was once the district’s near monopoly on such goods nationwide has evaporated, as competing wholesale centers have sprung up everywhere from New York to Vernon.

Today the district still has a melting-pot atmosphere and a generic inventory. Although many of the storefronts announce they’re “wholesale only,” during the holiday season the streets and alleys teem with retail bargain-hunters and with churro and sausage stands.

To say the merchandise is various is an understatement. From a sidewalk vendor I picked up an “unofficial” DVD copy, so to speak, of the movie “District 9,” which isn’t in retail release yet was perfectly playable on my home machine. I wouldn’t be entirely shocked to go back this week and find “Avatar” on sale for five bucks, cash.

Yet rents have collapsed, from a high of $5 a square foot or more during the Toy District’s heyday in the late 1990s to $2 or less now. Many of the merchants I met while ambling through the district -- which covers 15 blocks roughly bound by Los Angeles, San Pedro, 3rd and 5th streets -- say they’re hoping for further rent breaks from their landlords.

“We’re waiting for better times,” a merchant paying $4,500 for 2,600 square feet told me. “I need a reduction.” Like other tenants, he asked that I not use his name for fear of ticking off his landlord.

Now the district is poised to experience a big jolt downward. This year the property owners refused to renew the neighborhood’s 10-year-old business improvement district, or BID, which has been paying for trash pickup and security patrols through special assessments on the properties.

The BID expires Dec. 31, but the trash problem has been growing worse for weeks. The reason is that the Central City East Assn., the nonprofit organization that manages the BID, has been trying to husband the district’s dwindling funds.

That means sticking firmly to its contractual duties -- hauling away pedestrian trash, not commercial trash such as discarded cartons, which is the landlords’ and tenants’ responsibility. As a result, garbage is already piling up. Come New Year’s Day, when no one will be responsible for emptying corner trash cans -- watch out.

The expiration of the Toy District BID has neighboring districts fearful of blight spreading. The Fashion District last year shed the block on Los Angeles Street between 5th and 6th, which abuts the Toy District, in an attempt to create a buffer zone.

“We knew the cost of providing services on that block would escalate dramatically,” the Fashion District’s executive director, Kent Smith, told me, “because once the Toy District expired, they’d just be shoving their trash and their problems onto our block for us to take care of.”

Other downtown pros say the Toy District’s overall future is uncertain. Brady Westwater, who works closely with the downtown historical district, thinks eventually it will be swallowed up by healthier adjoining retail districts where space for expansion is already in demand. “Its long-term future is bright, but not as a toy district,” he says. That transition depends on its remaining clean and safe, however, which may not be in the cards.

“It’s going to be a mess for a while.”

Others say predictions of its death are premature. Pouya Abdi, a district landlord who favored renewing the BID, says the district needs concessions from the city, such as a relaxation of parking regulations.

“This is an area where a Third World mentality thrived,” he says. “Then the city started enforcing rules. A customer would buy items that cost 50 cents and get a $35 ticket for loading. So he wouldn’t come back anymore.”

The collapse of the Toy District BID illustrates one of the real drawbacks of providing municipal services on a block-by-block basis. The health of the entire downtown depends on cleanliness and safety, but one cluster of strapped or recalcitrant property owners can rip a hole in the fabric.

Unfortunately, in Los Angeles providing trash pickup and security patrols through BIDs is a necessity, because Proposition 13 has left the city without the resources to deliver specialized services to downtown neighborhoods without special assessments.

But creating and funding a BID requires a majority vote of its property owners. Downtown executives say that BIDs are a hard sell for some property owners even in good times and in upward-bound neighborhoods.

“Unless we can prove that we’re increasing property values and rents, it’s hard to justify those additional assessments,” Smith says.

In districts where rents are on the downward slope, owners start to see the BID as just another revenue drain.

“Our cash flow is very bad,” says Saeed Farkhondehpour, the largest property owner in the Toy District. He says he opposed renewing the BID because “the work they were doing wasn’t making a big difference.” Farkhondehpour, whose under-construction Medallion project will be partially within the Toy District, told me his portion of the BID’s roughly $500,000 annual budget came to $150,000. He believes he can get trash collected for less. “We’re going to handle it internally.”

But unless he can get his fellow landlords to come together, there still won’t be services for the whole Toy District.

The landlords as a whole haven’t shown themselves to be the most proactive bunch thus far. Many tenants occupy spaces without access to commercial trash service or even basic sanitary facilities. Some say their landlords tell them to dump their stores’ refuse in the nearest pedestrian trash can.

“The tenants don’t have a clue,” says Estela Lopez, executive director of the Central City East Assn. “That’s a multilingual, multicultural area. Some of them have been told by their landlords that we are their trash service. We ended up being the de facto commercial refuse service simply to keep the area clean because if we didn’t we’d have a vermin infestation and worse.”

The city hasn’t been very proactive either. Jan Perry, whose City Council district encompasses the area, says she steered clear of the efforts to renew the Toy District BID because these districts are “a form of self-governance, and it’s not appropriate to exert undue political influence.”

She says it’s “shortsighted” for the property owners to let the BID expire, and that come Jan. 1 she’ll seek a special detail to keep the district clean, but it will be “a full cost recovery operation,” meaning it will be paired with stepped-up code enforcement -- and fines.

In other words, an answer to the Toy District’s future isn’t on the horizon. But the broader question is how to find a solution to the city’s powerlessness. “This is the system working as it should, in sort of a perverse way,” Lopez says. “It is up to that community to decide for itself where it wants to go.”

Michael Hiltzik’s column appears Mondays and Thursdays. Reach him at michael.hiltzik@latimes.com, read previous columns at www.latimes.com/hiltzik, and follow @latimeshiltzik on Twitter.