$1.5-Million CRA Loan to Nightclub Stirs Up a Ruckus

Homeless groups and the Legal Aid Foundation of Los Angeles, in a mounting feud with the Community Redevelopment Agency over its role in downtown Los Angeles, are assailing a $1.5-million loan the agency made to complete work on the glitzy Stock Exchange nightclub and to renovate the floors above it.

The loan, including $500,000 to complete a sprinkler system and make other safety renovations to prevent the club’s imminent closure by the Fire Department, has sparked criticism by a coalition known as the Campaign for Critical Needs.

The groups, angry over the CRA’s policy of spending taxpayer funds on office towers and other upscale downtown improvements, are demanding that the agency spend a far greater portion of its budget on affordable housing, homeless programs and services for working-class people, such as a downtown day-care center.

“Half a million dollars would house hundreds of homeless people during severe (weather) periods, or you could feed people, help keep a trauma center open, open an entire day-care center,” said Bob Erlenbusch, co-chairman of the Health Access Coalition of Southern California.

‘Hundred Other Ways’

“I can see a hundred other ways to go, and frankly we’d like to see them spend their money on something a little more legitimate than dancing the night away,” he said.

Gary Blasi of the Legal Aid Foundation said the loan to the club--a favorite with Hollywood celebrities and visited by England’s Prince and Princess of York during their trip here--”would prompt street demonstrations by angry people in some cities but not in L.A. People seem to be unaware where their tax dollars are going.”

However, CRA officials said Friday that the flap over the Stock Exchange, located in the Spring Street Historic District several blocks south of City Hall, is unjustified.

Barbara Kaiser, CRA’s project manager in the historic district, said that without the office towers and upscale businesses that have been built downtown as part of redevelopment, the CRA would not receive the extensive property taxes generated by such projects. Those taxes, she noted, go in part to finance the CRA’s programs for the homeless and poor.

“We would not be able to do our housing program unless we had these office towers paying for it,” she said. “That is where the taxes are coming from.”

Complete Work

Brian Potashnik, owner of the nightclub and the building that houses it, said the money is not a bailout for the club, “which is very, very successful,” but will be used to complete work throughout the 12-story building. The building consists of the club--a vaulting, six-story-high dance room--and six floors of office space above it.

“The loan is not to the club but to the whole building, and the club is just 25% of that building’s square footage,” he said. “I have office tenants waiting to move in who cannot do so until we complete renovation. The club brings in enough money to continue to operate . . . but it cannot support the whole renovation job.”

Kaiser said a low-interest 8.5% loan was granted because Potashnik was “unable to find conventional funding” to complete safety renovations and the club faced an imminent shutdown.

A report to the CRA commissioners in June said the building was considered by conventional lenders to be a high risk because of its incomplete interior work, its failure to get a certificate of occupancy from safety officials, its litigation with a former contractor who has not yet been paid in full and a “negative attitude toward Spring Street” by lenders.

Kaiser said the CRA has, “targeted funds so that buildings vacant on Spring Street can be renovated and used. . . .”

“Traditional banks have not been willing, and we are trying to restore the economic life,” Kaiser said.

Gaudy Storefronts

However, despite CRA-assisted renovations of many historic buildings and the opening of the Los Angeles Theatre Center in 1985, change has been slow to come. Spring Street is still lined with gaudy storefronts, and the littered sidewalks are the domain of panhandlers.

Potashnik said, “I’m not trying to come out as a philanthropist, but there are things we do because we know the area has troubles. Our whole kitchen staff and sweepers have come from the local base of downtown people who needed jobs, and we hired a guy off the street, a musician, to occasionally play here.”

In addition, he said, the Stock Exchange donates food to a nearby mission on holidays and after large catered events when food is left over.

CRA officials have said that unless upscale businesses like the Stock Exchange are encouraged to remain downtown, the area’s financial renaissance could flounder.

However, critics say that such businesses are getting undue attention from the CRA in an era of growing homelessness and other problems facing the city’s poor and low-income families.

Blasi of Legal Aid said, “I think its clear that the downtown has its own momentum now, and its time to let the luxury apartment towers and Japanese banks invest in downtown on their own.”

Erlenbusch pointed out that while the CRA often boasts about its record of building low-income housing, the CRA has demolished so much housing in the downtown and south of downtown for its other projects, that the agency “has barely replaced what it has taken.”

“Meanwhile, the need for affordable housing has mushroomed incredibly,” he said.

New Housing

Although the CRA has helped build more than 12,000 new units of low- and middle-income housing, it has destroyed 11,200 apartments and homes, according to the CRA’s own figures.

“All you have to do is drive downtown to understand what I am talking about,” Erlenbusch said. “We shouldn’t be subsidizing street lighting for banks, or sprinkler systems for nightclubs, period, when there are homeless people downtown.”