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Park del Amo Builder Denied Tax-Free Bonds

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Times Staff Writer

The City Council’s unanimous decision this week not to provide tax-exempt bond financing for an apartment project that would set aside units for low- and moderate-income residents left unanswered the question of when new rental housing will be built in this city.

It has been more than 10 years since a major apartment complex has been built here, Planning Department officials said, and residents--particularly the elderly--have been clamoring for years about the need for more rental units. Rentals are desirable partly because of the high cost of buying a home in Torrance. The average house cost about $130,000 in 1980, the most recent year for which figures are available, according to the Planning Department.

“Maybe we are not ready to admit that this is the only way we can get rental units,” Mayor Jim Armstrong said after the meeting.

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130 for Low-Income

CoastFed Properties of Beverly Hills had proposed building a 650-unit apartment complex at Park Del Amo and setting aside 20%, or 130, of the units for low- and moderate-income people, as required by the federal government on projects financed with tax-exempt bonds.

Will Smolen, a spokesman for CoastFed Properties, argued unsuccessfully that because of high interest rates and high property values, the only way apartments can be built today is through tax-exempt bonds.

Tax-exempt bonds are sold by the city to the public and the funds are made available to the developer at interest rates 2% or 3% lower than conventional loans. The developer repays the bonds through revenues generated by the project. Usually the city would be responsible if a developer defaulted on the loan, but in this case the developer arranged for a financial institution to issue a letter of credit as collateral for repaying the bond.

That financial institution, Coast Savings & Loan Assn., and the Casden Co., a Beverly Hills real estate development firm, are general partners in CoastFed Properties.

Smolen sought to have the council approve the method of financing, the first step necessary to obtain the bonds. He said approval of the project would still be conditional upon obtaining zoning and building permits, and would not bind the city to any further action.

Sell Well in November

Smolen said it was necessary to get city approval now for up to $70 million in bonds because those types of bonds typically sell better in November. He also said pending federal legislation could eliminate the tax-exempt feature of such bond financing program next year. Congress is looking into the housing bond program to see if it is has been worth the millions of dollars in lost tax revenues.

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But Councilwoman Katy Geissert said approving bonds now would be “putting the cart before the horse,” and questioned the developer’s motivation.

Geissert said the low- and moderate-income apartments could not be set aside specifically for the elderly, for whom the city is trying to find affordable housing. Geissert said the request was “highly unusual . . . merely a vehicle to get favorable financing.”

Smolen acknowledged that there was no way his company could assure that those units would go to elderly residents of Torrance, but said he had developed a plan to help achieve that.

Local Advertising

He said initial advertising of the rental units would have been limited to a sign outside the project and to ads in local newspapers.

“We would like nothing more than to be able to do that,” Smolen said of the council’s desire to provide housing for the elderly. “We would hope to attract a preponderance of local people. There’s no question that you already have a number of people who would qualify.”

The bond program requires a developer to set aside 20% of the units for low- and moderate-income people. Residents must earn no more than 80% of the median income for the Los Angeles-Long Beach area to qualify. Currently, that would be no more than $23,000 a year for a family of four.

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According to city planning officials, 40%, or about 20,000 of the city’s 50,000 housing units, are rentals. The average one-bedroom apartment rents for about $500 a month, a two-bedroom unit goes for about $650. The apartment set aside for low- and moderate-income families would be $461 for a one-bedroom, $519 for a two-bedroom. There is currently less than a 2% vacancy rate in the city, officials said.

Open to All Who Qualify

The 130 units that would have been set aside in the proposed apartment complex would be open to anyone who qualified. Although no council member would publicly agree, one of the developers said that was a factor in rejecting the request.

Larry Schimdt, president of Park Del Amo Builders, the development company for whom CoastFed would have built the apartments, called the council decision political.

“It’s a political issue,” he said. “The council doesn’t want what happened four or five years ago to happen again. They didn’t want to risk that. Voting residents here are opposed to any type of housing that has any hint of low- and moderate-income units.”

In 1979, four council members, including Armstrong and Geissert, were served with recall notices after they voted to include low- and moderate-income housing in a housing development and assistance plan required by the federal Department of Housing and Urban Development. No specific plans had been approved, but many residents said they feared that “undesireables” would move into the city.

Recall Averted

The four council members averted the recall election when HUD requested additional action by the city and the city withdrew its plan. The city lost about $1.5 million in community development block grant funds for low- and moderate-income housing for failing to file the plan. Since then, the city has not applied for such funds, which it had previously used for public works projects in existing low- and moderate-income areas.

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Schimdt said his company will have to reevaluate what type of housing will be built, but said it is now not likely to be apartments.

Council members said they are still hopeful that apartments can be built without tax-exempt bonds and asked city staff to look into other ways developers could be encouraged to build apartments.

CoastFed, which claims to have built or have under construction more than 5,000 apartments with more than $400 million in tax-exempt bond financing, would have built the apartments for developer Ray Watt as part of the Park del Amo residential and commercial project.

Earlier this month, Park del Amo, which will have 1,482 residential units and 850,000 square feet of office space when it is completed in 1990, was split into two separate projects by the developers.

Watt purchased 62 acres of the 182-acre parcel on Sepulveda Boulevard and Madrona Avenue and will develop the residential portion alone. Torrance Investment Co. will develop the commercial portion.

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