Political Nuance Causes County to Hold Back Loan

Openly nervous over appearances of favoring a major political backer, Los Angeles County supervisors Tuesday retreated from a $25-million low-interest loan to private developer Alexander Haagen that would have led to the reopening of seven abandoned Gemco stores.

The proposed deal was scuttled despite warnings that it could not be duplicated and also could mean the loss of jobs to nearly 1,000 low-income or moderate-income workers, many of them laid-off Gemco workers. Also presumably lost was about $2.5 million in interest that the county would have received when Haagen repaid the loan in 18 months.

Haagen, who is also the president of the Los Angeles Coliseum Commission, when notified of the board’s action, said he would try to salvage the county deal. If that is not possible, he added, his company would try to reopen the closed stores as similar retail outlets under alternate financing. He added that he would also attempt to provide as many low-income jobs as possible.

Basis of Concern

Individual board members clearly backed the Haagen loan, but Supervisors Deane Dana and Ed Edelman, in particular, expressed concern that the public would get the wrong idea because Haagen had been the only private source who had been aware of the money’s availability. The $25 million would have come from a $35-million line of federal government credit that is available to the county for development of economically depressed areas.

Dana also expressed reluctance to vote for the deal because Haagen has repeatedly been described in news accounts as a major backer of his. Since 1981, Dana--who faces reelection next year--has received nearly $19,000 in political contributions from Haagen’s development firm, campaign disclosure reports show.

“We have an opportunity for $2.5 million (which) I assume you can use for low income housing, all sorts of things of this nature, right?” Dana asked county officials recommending the loan. “It would be great for the people of this county and we ought to do it.”

However, because of the appearance of special treatment for Haagen, Dana said he was not prepared to cast a vote in favor of the loan.

Wondering About Hahn

“Is there any chance of getting Supervisor (Kenneth) Hahn back here?” Dana asked. “This is an important project; since I don’t want to vote for it, is there any chance you could call him on the phone and wheel him in here so he could vote for this?” Hahn, who suffered a stroke in January, is recovering at home and is not expected to return to work until sometime next month.

Dana also vented frustration over recent news stories in which Haagen, as commission president, has resisted plans by Los Angeles Raiders owner Al Davis to modify the Coliseum’s seating and build luxury suites on the stadium’s rim. Dana, along with Supervisors Mike Antonovich and Pete Schabarum, also sit as members of the Coliseum Commission and have backed Haagen.

“There’s a perception there that, boy, we must really be in bed with Haagen, we’re backing him in not going along with that great man, Al Davis,” Dana said sarcastically.

Edelman also was uncomfortable with the proposed deal, although he said he had no doubts that Haagen could fulfill the obligations of the loan contract.

Uneasy About Process

“I have no problems with this developer,” Edelman said. “The problem I have with the process is that it has not been publicly known that we even have these kinds of funds available. . . . The county could be accused--I’m not saying correctly--of favoritism.”

Haagen said that while he believes the loan deal was a “no-lose situation for the county” because of built-in default guarantees, “I don’t question the wisdom of the supervisors” in balking at the proposal.

Haagen said he neither spoke to any of the supervisors about the proposal nor actually participated directly in the discussions with county officials.

“We’ve tried to keep personal relationships with the supervisors out of any particular negotiations,” said Haagen. “Unfortunately, you can’t contribute (to elected officials) without throwing a shadow of suspicion over (them).”

Alerted by Consultant

David Lund, executive director of the county agency that arranged the rejected loan package, said that a Washington-based development consultant alerted the county about Haagen’s interest in such an arrangement.

“The Haagen deal was brought to us,” Lund said. “We didn’t solicit the Haagen deal.”

Lund said that “at no time” were any of the supervisors involved in the loan’s negotiations, although, he added, their staffs were briefed about it.

Lund said the county began negotiating with Haagen only after it was unable to line up a similar development deal with eight area cities that contract with the county for specific services.

Conditions of Loan

Lund said that he does not believe there is much chance that any other developer would agree, as Haagen had, to the various loan conditions rejected Tuesday.

Under the proposed loan, Haagen, who has developed several shopping centers, would have received the $25 million at 2 1/2% under the prime rate, or about $500,000 in interest less than the going commercial rate, according to county officials. Haagen would not discuss details, but he said that had the loan gone through, he would have remodeled and reopened as retail outlets the seven vacant or abandoned stores, offering the same type of grocery and department store goods that Gemco had sold.

Haagen would have leased the stores within 60 days and would have worked with local job training agencies to hire at least 965 low- and moderate-income workers.

Gemco, which had operated 37 of its 80 stores in Southern California, closed in December after it was bought out by Lucky Markets. The seven stores that Haagen was interested in reopening were in Pomona, Downey, Glendora, Culver City, Bellflower, Torrance and Lancaster.