Bus Shelters: : Why Aren’t They Where They’re Needed the Most?

It seemed there was an untapped gold mine in Los Angeles’ sidewalks when the lobbyists and promoters descended on City Hall several years ago pitching a new public service that would pay --not cost--the city millions.

About 2,500 stylish shelters would be built free of charge at bus stops throughout the city, giving tens of thousands of RTD riders protection from the sun, rain and wind. To finance the project and turn a handsome profit, the contractor would sell advertising on colorful, back-lighted panels on the earth-tone, metal and tinted glass structures. And the city would get a cut of the revenues--about $14 million in 10 years.

City officials were interested, but they had two major worries: Would the developer ignore low-income neighborhoods in favor of upscale areas popular with advertisers? Would the city’s interests be protected should the contractor go bust? Satisfied that the city, not the contractor, would determine location of the shelters and that the city could take over the shelters if the company went under, the Los Angeles City Council gave the go-ahead in 1981 for Shelter Media Associates to begin construction.

But six years later, despite those contractual assurances, the politically well-connected builder has neglected some of the city’s poorest and most transit-needy black and Latino neighborhoods--at least in part, company officials acknowledged, in pursuit of advertising dollars. The firm built only about 700 shelters--fewer than a third of those promised. And, rather than reap a huge windfall, or attempt to enforce the original terms of the agreement, the city took the unusual step four months ago of rewriting the contract to rescue the firm from bankruptcy.

An investigation by The Times also found that in the rescue effort, the city negotiators by-passed normal contract bidding procedures, ignored failure-to-perform penalties that the city could have levied and failed to notify the City Council of new investors who had been brought into the venture.

While the bailout agreement of last March extended the contract up to 20 years and eased the terms for Shelter Media, it made no demands on the major unfulfilled goal of the first contract: that the shelters would be placed uniformly throughout the city. Consequently, although the company was kept afloat, the public service it was performing remained lopsided. There continued to be a concentration of shelters in Westwood, Century City, West Los Angeles and upscale sections of the San Fernando Valley--at the expense of the many bus riders in South-Central and the Eastside where shelter construction was spotty at best.

A Times analysis showed that an affluent 25-square-mile area of the West San Fernando Valley, where bus ridership is relatively low, has more than twice the number of shelters found in a similar size area in South-Central, where low-income residents are heavily dependent on bus service.

The contrast is obvious in the streets, as it was to Ruby Jones as she waited for a bus out in the open on a hot, smoggy afternoon with her month-old baby and her 4-year-old son at Century and Avalon boulevards in South-Central. The intersection is a busy inner-city transit connection point with no bus stop shelters. Jones has no car and must use the bus for shopping, doctor’s appointments and to visit relatives. She beamed at the thought of a shelter, but then added, “I haven’t seen many. . . . Maybe it’s the area.”

RTD records show the number of people who board buses each day at Avalon and Century is eight times higher than daily boardings at Balboa Boulevard and Saticoy Street in the heart of the San Fernando Valley. But there are three bus shelters at Balboa and Saticoy.

One two-mile stretch of Ventura Boulevard in Woodland Hills has eight bus shelters for about 1,170 boarders a day, RTD records show. An equal length of Avalon Boulevard in South-Central Los Angeles has more than 2,800 daily boarders, but no shelters.

Large areas of heavily Latino El Sereno and Highland Park on the Eastside have virtually no shelters. “I’m wondering if people (here) even know if they exist,” said Father Bill McLean, a community activist assigned to El Sereno’s Our Lady of Guadalupe Catholic Church.

Some City Council members whose approval of the renewed agreement with Shelter Media allowed the imbalance to persist said they simply were not aware of the problem.

In a recent interview, Councilman Zev Yaroslavsky, whose upscale Westside and Valley district has reaped a large number of the shelters, said, “The intent was not just that the affluent neighborhoods would have them, but all neighborhoods would have them in equal amounts.”

Another council member, Robert Farrell, said that he did not realize the contract was being renegotiated when it came up for a vote in March. Had he known, he said, he would have questioned the lack of shelters in some areas of his South-Central district. Farrell said he agreed to allow more shelters in lucrative areas in the first place only on the promise that additional shelters would be built later in lower-income, transit-needy areas.

“We bought into an argument in good faith,” he said, adding that it now appears “we are stepping back from a public commitment.”

Added Councilwoman Joan Milke Flores, “I never would have gone ahead and approved this if I had known there was going to be a void in any area of the city.”

Public Works Department officials who administered the contract, as well as officials on city Chief Administrative Officer Keith Comrie’s staff who negotiated the bailout agreement, admitted they had not kept track of where shelters have been built. Records show the Public Works Department gradually surrendered the time-consuming location chore to Shelter Media.

The head of the Public Works Board, Maureen Kindel, acknowledged that her department compromised to allow advertising demand to become a criteria in selecting shelter locations. But she insisted that all along it was “absolutely” the responsibility of City Council members to oversee the distribution of shelters.

Commercial Consideration

With the company’s concerns increasingly taking priority, most placement decisions became a commercial consideration. Christopher J. Culver, Shelter Media’s senior vice president of marketing, said, “There’s a hundred times more advertising dollars in Century City” than South Los Angeles.

Sandra Williams, a manager of the firm who with her husband has overseen selection of shelter locations, cited the company’s financial struggle and said, “We were so determined to get some revenues into this and we were told by the salesmen to get everything in the saleable areas that you can possibly do. . . . If we had any choice . . . we would put every single shelter in (West Los Angeles).”

She added, “The Valley is very popular. . . . We’ve got a lot of malls out here. They (advertisers) love to be around malls.”

Bruce Williams, co-president of Burbank-based Shelter Media, said some black areas are served and he cited the high-traffic areas near USC and the Coliseum. As for the Eastside, city memos and Shelter Media officials said few shelters are there because the company has been unable to find Hispanic advertisers.

Vandalism Cited

Williams said the firm’s top priority for any new shelters probably will be at bus stops along the beaches. One of the problems in South-Central, he said, is vandalism. He complained that a shelter placed near Jordan High School--in response to community pressure--was like “giving one to a war zone.”

Gilbert Lindsay, the powerful black councilman whose Public Works Committee recommended the Shelter Media bailout, said he sympathizes with the company’s point of view. “Why put something out there in Watts where a few hundred people will see (the advertising) when you can put it downtown where thousands (will see it)?” Lindsay asked. “If I’m going to spend money for advertising, I’m not going to put it out there in the boondocks.”

Shelter Media officials defend placement of the shelters, saying that the high concentration of them in the downtown, Wilshire and West Los Angeles office districts, although admittedly good for advertising, are also along high-ridership bus lines.

Financial Trouble

Despite the maximum exposure it gained, Shelter Media said it had difficulty breaking into the advertising market. By late 1984, three years after obtaining its first Los Angeles contract, the company was in such financial trouble that it had shut down construction after completing about 700 shelters and laid off most of its work force. For the next two years, even though advertising picked up, the company merely operated its existing shelters.

According to a number of investors and city officials, Shelter Media’s fundamental weakness was a huge capital indebtedness, at rates of 21% interest, which it could neither refinance nor pay off, even when bus shelter advertising began to sell well.

Bruce Williams said the city could have seen the seeds of the debt problem from the start, but he said it was not a major consideration. “Come on, guys,” he protested when questioned about the company’s finances. “The point at that particular time was that the program was being backed by people with reputations, not only in the community, but in City Hall.”

Management Questions

Some investors said they believed Shelter Media’s financial problems also related to poor management, particularly the Williams’ lack of experience in the advertising business. Bruce Williams acknowledged a limited advertising background, but denied the firm was badly managed.

In its financial bind, Shelter Media in June, 1986, began asking the city to rewrite and extend the contract to attract new investors.

City administrative officials, persuaded that a new deal for the company was in the city’s best interests, presented the new contract proposal in a favorable light to the City Council. For example, when the contract renewal came before the council, staff analysts did not remind council members that the company was two years behind schedule in completing its last construction phase. The council was likewise unaware that hundreds of thousands of dollars in penalties had been waived because, according to other city documents, the assessments would have been “ruinous” to the company.

Payments Shrink

Under the new contract--and also not explained to council members--minimum guaranteed payments that the city was to receive if advertising income declined were less than under the old contract.

To justify contract changes and up to 15 years added to its terms, staff reports projected increased revenue for the city, going up to 18% of Shelter Media’s advertising income, for a total of about $17 million by 2002. Later, city staff analysts acknowledged that the projections were supplied by Shelter Media. The Times found that for the first 10 years of the new contract, the projected revenue gains were overstated by as much as 18%. In the end, the city agreed to even less. As requested by company co-president Williams and influential City Hall lobbyist H. Randall Stoke, the City Council voted to reduce the share of its revenue from the company to 13%.

The city also earned less than first projected under the old contract. Using a different formula, the city received $1.4 million over six years instead of the $14 million originally estimated that it would collect if all 2,500 shelters had been built over the 10-year life of the contract.

Well-Known Names

Among the partners of the original faltering firm, and who remain minority partners today, were former Green Bay Packers football star Willie Davis, who is also one of the city’s best-known black entrepreneurs and contributed more than $6,000 to Mayor Tom Bradley in the past three years; Nikolas Patsaouras, an RTD board member and Bradley appointee to the city Board of Zoning Appeals who has contributed $8,300 to Bradley and City Council members in the past two years; Jack McGrath, a former aide and campaign manager to Yaroslavsky and one-time City Hall lobbyist; and developers Peter Sidlow and Dennis Devine (son of the late actor Andy Devine) who have contributed more than $8,000 to Bradley and council members in the past two years.

Key council members and top officials deny that political influence was responsible for the bailout.

“I tell you right now, I’d never be a part of hanky-panky,” said Lindsay, chairman of the committee that recommended the bailout agreement.

“The intent was to keep them from going belly up and keep building bus shelters,” said Comrie, whose staff negotiated the bailout. “These were the terms (Shelter Media) had to have to survive. . . . We represented what we thought was the maximum for the city and still keep them in business.”

Davis Influence

However, noting that Davis’ business complex is one of the biggest employers in South-Central Los Angeles, Flores said that the “political thing with Willie (Davis)” may have influenced City Hall decisions to help Shelter Media. “(He is) close to (some) council members” who would be “a little less likely to want to take it away from him. . . .” Flores, who received $3,000 in campaign contributions from partners in Shelter Media, primarily Davis, said she too “want(s) to help Willie Davis if I can.”

The bailout agreement of last March, which city officials acknowledge was drafted by company officials, transferred the monopoly to build and manage bus shelters from Shelter Media Limited Partnership, a tax shelter-type investment group, to a new firm with mostly new investors, Shelter Media Communications Inc.

Although the old contract specifically required the City Council to approve any ownership change exceeding 5% of the company’s holdings, Los Angeles officials said they bypassed normal procedures and never investigated the ownership or financial capabilities of the new investors. Relying on information provided by Shelter Media representatives, city officials told the City Council that the new Shelter Media Communications is 95% owned by one new investor, New York Subways Advertising Co. Inc., an 80-year-old firm with annual sales of $30 million. The old partnership retained 5% ownership in the new firm.

A Second Firm

But The Times found that New York Subways actually owns only 47.5% of the new Shelter Media. An equal percentage is held by an Arizona limited partnership, SunVen, whose principal partners include former billboard and newspaper entrepreneur Karl Eller, currently chairman of the Circle K convenience store chain, and his son, Scott Eller.

City Council members were not informed of the SunVen firm’s involvement in the agreement the city signed in March. Nor were they told that the New York Subways company changed hands three years ago and that its owners say that Los Angeles is their first venture into operating bus shelters. Most of the firm’s earnings come from selling advertising on New York City subway cars and stations.

Had the city looked, it probably could have found other bidders. An executive with Gannett, the huge media conglomerate where, incidentally, Eller once served as a top executive, informally told The Times the company would have considered seeking the Los Angeles contract if competitive bids had been sought. Gannett is breaking into the U.S. bus shelter market and recently outbid Shelter Media for a contract in San Francisco.

Comrie said the chief aim in the negotiations was to prevent Shelter Media from failing and leaving the city with hundreds of unmaintained and vandalized bus shelters. He said that the city was not “in 100% strong position” to dictate terms of a new contract or find Shelter Media in default and rebid the job.

‘Just the Opposite’

But Councilman Marvin Braude, who was active in awarding the original contract, said he specifically had been assured by Comrie and other city officials in 1981 that the city could take over the shelters and send the project back out to bid if financial troubles threatened to bankrupt the builder.

“This (bailout) is just the opposite of what I envisaged,” he said. “You’ll never know if you could have gotten a better deal or not. . . . My hard-nosed view is it’s always better to put it out (to competitive bid) and start all over again.”

But Bruce Williams and many of the city officials he has dealt with over the years say the bus shelter program should be viewed as a success because more than 700 well-maintained shelters are on the streets--one of the largest such programs in the country.

“We really think we’re doing a good job and it’s going to get better and better,” Williams said.