Bernson Drops Support of Bill on Joint CSUN Development

A proposed Cal State Northridge project that has attracted national attention because of an ambitious state university partnership with a private builder has run into a major snag that could delay construction more than a year.

Los Angeles City Councilman Hal Bernson, whose district includes CSUN, said he is reversing his position and will not support pivotal state legislation that the developer said is needed to keep the $150-million project on course.

Now, in the home stretch of seven years of planning, the developer, Watt Investment Properties of Santa Monica, has been unable to secure financing because of ambiguities over land-use issues that the bill would have resolved.

But CSUN President James Cleary, who has lauded the project as a means of bringing about campus expansion at no cost to the state, expressed optimism that the delay would not harm the development in the long run. “There is so much universal support . . . it’s a matter of bringing everyone together and working it out.”

Closer Public Scrutiny

The legislation, which was initiated by Watt Investment and sponsored by Assemblywoman Marian R. La Follette (R-Northridge), called for the massive 100-acre development, which would include office buildings, restaurants and university-owned athletic facilities, to be exempt from Los Angeles city zoning ordinances.

La Follette, who had sponsored the bill because of Bernson’s initial support and her own commitment to the project, dropped the legislation last week after it became clear that other lawmakers thought it needed closer public scrutiny.

The measure would have stripped the city of legal recourse to stop or control what is built in the commercial portion of the development.

Bernson changed his mind after staunch opposition was voiced by the city’s legislative analyst and the powerful League of California Cities, which represents municipalities across the state. Both said it would set a dangerous precedent in jurisdiction issues involving private development on state land.

At issue is whether the city or the state has the authority to control what is developed on state university-owned land when some of the buildings are private, commercial ventures and not strictly public education facilities.

The question emerged in the raucous final days of the 1988 legislative session, which ended Wednesday.

Watt Investment representatives said they will seek to have the measure reintroduced when the Legislature reconvenes in January.

Annoyed at Timing of Measure

James Wadsworth, president of Watt Investment, said he needs the measure to obtain financing for the project, which had been scheduled for ground breaking next month at Devonshire Street and Zelzah Avenue.

Bernson said he supports the planned university expansion, as does a citizens advisory committee he set up, but added that he was annoyed because the developer attempted to have such sweeping legislation “snuck through” at the last minute. The measure was introduced Aug. 26.

Even Cleary said he was taken aback by the swift introduction of legislation that neither he nor the California State University trustees had a chance to review. For this reason, he said, the university is neutral on the issue.

“It was a little awkward,” Cleary said. “There was some misunderstanding that we were a part of it when we did not know from day to day what the language of the bill was.”

Bernson said Friday that the legislation has made him suspicious that the developer “may want to proceed with offices and uses that we would have problems with.”

“There is not going to be legislation,” he said. “They are going to have to work this out with the city.”

Without city approval, it is uncertain whether Watt Investment will be able to muster support. La Follette said her support would continue only if the city and Bernson endorsed the idea.

“It’s very frustrating for us that we are in this predicament in spite of a project that is not perceived as controversial,” Wadsworth said.

Indeed, the project has created an excited stir within public university circles.

Never in the history of the Cal State University system has a developer teamed up with the state to build such a large public-private project on university-owned land without taxpayer money, state officials said.

Similar, but much smaller projects involving hotels, conference centers and athletic stadiums are being developed at Cal State Fullerton and UC Davis. Also, the joint development of university and private business parks is not uncommon.

But the size and scope of the CSUN development has attracted the attention of other universities as the wave of the future for financially strapped public colleges.

“It has a tremendous amount of potential,” said Allan Ostar, president of the American Assn. of State Colleges and Universities. “Any time an institution does something creative, we want to monitor it so we can let other universities know what works and doesn’t work.”

Under an agreement approved by Cal State University trustees in 1987, the state will lease its land to Watt Investment to build the North Campus-University Park Development.

Profits generated from six office buildings, two restaurants and a 200-room hotel and conference center will be used to fund a sorely needed university stadium and sports complex, a theater and 5,000 parking spaces.

Student housing projects already under way are not affected by the delay because they have already been financed.

80%-20% Split

When the commercial phase of the project is built and leased out, the developer will earn $2.4 million a year, Wadsworth said. The university will reap $600,000 a year, which will be used to finance construction of the university facilities, he said.

The profit margins, which represent an 80%-20% split between the developer and university, could grow if business is brisk and commercial leases increase over the years, Wadsworth said.

The commercial portion of the development could be delayed up to 18 months if it had to go through normal city planning procedures, which could require lengthy examinations of the project’s environmental impact, city officials said.

This would hurt chances to line up major tenants for the offices and hotel, Wadsworth said.

Without the profits from the commercial venture, the university facilities--especially construction of a 30,000-seat outdoor stadium--would not be able to go forward. They are expected to take five years to build.

“If the whole project is delayed, it is serious,” said Dorena Knepper, CSUN’s director of government and academic affairs. “If we do wait, there will be all kinds of questions that arise. What will the economy be like? How many new homeowners associations will there be?” she asked in reference to concerns raised by nearby residents.

Insurance Refused

The current obstacle emerged three weeks ago when Continental Land Title Co. of Universal City refused to issue title insurance for the project. Title insurance guarantees bank lenders that the project complies with zoning regulations and is legally free and clear for development.

Under California law, the state has the authority to develop public buildings on its own land, overriding local government zoning ordinances. But the CSUN development is a hybrid of sorts because of the commercial buildings.

“Because part of the development is commercial and not particularly related to the university, we see definite problems,” said Edward Beierle, vice president and general counsel for Continental.

Bruce Richardson, associate general counsel for the 19-campus Cal State system, said that all through the planning stages, the land-use authority question has been a gray area.

Burden Shifted

The university never gave a legal opinion on the issue, but instead “shifted the burden to the developer” to meet all the requirements for local zoning and other ordinances, Richardson said.

But Watt Investment’s financial and legal advisers determined that a special provision in their commercial development made it public education-related and thus protected under the authority of the state.

The provision calls for 50% of all the office space to be leased to tenants who will allow students and faculty to participate in their businesses or use their facilities. This includes offering internship programs or allowing use of business computers and conference rooms.

Wadsworth said Watt Investment was surprised by the refusal from the title insurers because “we had taken the position that we didn’t need clearance from the city.”

He said the only reason that the firm sought state legislation was because it was the quickest way to keep on track a project that has been embraced by the university and community, and the fastest way to reduce the risk of financial losses in the future, in light of rising interest rates.

The legislation failed only because lawmakers did not have time to hear the “full merits of an outstanding project,” Wadsworth said.