With his swank new Westside hotel sitting empty and losing a reported $800,000 a month, developer Sheldon Gordon struck a desperate deal.
Gordon wrote a check for $250,000 to a group of Los Angeles homeowners that had dragged the project through months of tedious hearings. He also dropped $800,000 into a bank account--to be controlled by him and the homeowners--to find more parking.
The homeowners, in return, consented to leave the Ma Maison Sofitel alone. Within weeks, Gordon was entertaining celebrities at his $50-million hotel, and the homeowners were setting up a "neighborhood preservation fund" with their pot of gold.
'Seen the Light'
"They have seen the light," Harald Hahn, one of the homeowners, proclaimed after signing the agreement. "We made them see the light."
Gordon, speaking later to a reporter, was contemptuous.
"If that's the American way, I am crazy," he said. "It was blackmail."
However appalling to developers, the pay-out in Los Angeles last fall reflects the increasing boldness with which community groups across the state are pushing builders to dig deep into their pockets in the name of neighborhood peace.
The legacy of development disputes in the 1980s, many builders and residents say, can now be measured in dollars and cents. The old compromises--a shorter high-rise or a smaller condominium project--are often no longer enough for residents, who say they cannot rely on unresponsive local governments to look out for their neighborhoods.
"There seems to be very little give and mostly take," said one Los Angeles attorney who represents developers in negotiations with community groups.
The Legal Tab
Frequently, developers are being asked by residents--and they are agreeing--to subsidize their own opposition. It has become an unwritten rule in many areas that builders pick up the tab when they reach an agreement with residents who have hired attorneys, consultants and other experts to dissect their proposals. The bills can run into the tens of thousands of dollars.
In discussions that end less amicably, residents sometimes use money paid to them by one developer to take on another. For example:
- Hahn and his group have already received requests from several homeowner organizations--including one near the controversial Westside Pavilion shopping mall 4 miles from the hotel--to spend Gordon's money in their neighborhoods.
- In the San Joaquin Valley, a small Tulare County citizens group opposed to a proposed cogeneration plant in Hanford last year settled a lawsuit against the developer for $100,000 and is using the cash to pursue a separate suit against the same developer. "We have money now, so people are quaking in their boots," said Marcie Williams, who heads Citizens for a Healthy Environment.
- San Franciscans for Reasonable Growth, a residents group concerned about downtown expansion, reportedly received more than $500,000 from developers several years ago in exchange for settling separate lawsuits over proposed skyscrapers. The group paid its bills but also used the money to prepare for the next developer, founder Sue Hestor said. "You kind of just recycle your money," she said.
- In West Los Angeles, the Friends of Westwood homeowners group collected $150,000 for attorney and other costs when it sued to block construction of a high-rise on Wilshire Boulevard. Having already raised some money from its members, the group had an estimated $20,000 to $40,000 from the settlement left over for other causes. Among other things, Friends of Westwood donated $2,000 to a Hollywood group that sued to block the city's redevelopment project there.
Throughout the state, there is a widespread perception among community groups that government has not been doing enough for residents--leaving them to fill the void. Many trace the phenomenon to government cutbacks after Proposition 13, the tax-cutting measure of 1978.
With state and local governments spending less money on things like streets and parks, there has been "a trickling down" of responsibility, as one Sacramento observer explained it.
"It has become very expensive to do what we do," said Sandy Brown, co-founder of Friends of Westwood and a signer of the agreement with Ma Maison Sofitel. "It is something homeowner associations never had to contend with before. . . . I don't think the development community should have to give money to anybody, but on the other hand I don't think the residential community should have to hire experts to defend itself."
Hahn, vice president of the Westside Civic Federation, a coalition of homeowner associations, said community groups have had little choice but to look out for their own needs.
"We don't want to be perceived as being here to milk the developers," he said. "But on the other hand, the city isn't doing a whole lot to protect us, so we have to protect ourselves. It points out a real weakness in our political system."
Faced with income losses, city and county governments statewide have pressed builders to pick up some of the tab by imposing various fees and requiring them to install such things as traffic signals and left-turn lanes.
But in many instances, influential developers twist arms at City Hall and wind up providing fewer amenities than local residents would like. In other cases, tax-hungry cities and counties approve projects despite local opposition because they see them as moneymakers. In these cases, residents complain, they have been abandoned by their elected representatives.
"What the citizens realize is that in the relationship between developers and elected decision makers, there aren't really any good safeguards that assure the citizens have in fact gotten their due," said Mike Remy, a Sacramento land-use attorney and former professor of environmental studies. "This gives citizens an incentive to take things into their own hands."
And that has been expensive for many groups. Many builders, recognizing that residents often cannot afford this watchdog role, often do not mind picking up the bills in friendly negotiations. The added costs, developers say, are eventually passed on to consumers in everything from higher meal prices in hotels to more costly homes and offices.
Pushing for a Solution
"By definition, the community would not experience the cost but for the developer's project, so the developer ends up saying, 'OK,' " said Douglas R. Ring, a Century City attorney who represents developers. "The developer is always pushing for a solution that does not require him to reduce the size of the project he has planned, because the economics, if you will, flow with the larger project."
Across the state, community groups find they have extraordinary leverage with developers who have large amounts of money wrapped up in a project or strict deadlines to meet. Residents can delay projects for months--if not years--by tying them up in government hearings or in court. And in the building industry, delays mean more attorney fees, higher interest payments, lost revenues and, in extreme cases, bankruptcy.
"Every day that passes is a costly day for the developer," said Kenneth B. Bley, who represented the developer in the Friends of Westwood case. "So you have to look at the bottom line. It makes more sense to try to resolve a matter quickly even if it means paying a few extra dollars. And both sides know this."
Even so, community groups angling for cash have not always found it easy. Such deals have offended developers and residents alike, particularly when the agreements receive great scrutiny because of widespread publicity.
In the San Joaquin Valley, Williams said her group faced "a lot of hard feelings" over the $100,000 settlement. An editorial in the Hanford Sentinel newspaper suggested that the Tulare County group change its name to "Citizens for a Healthy Environment Except When the Price Is Right." The editorial charged that the settlement showed the group's "true interest lies not in the warm green shades of nature, but in the crisp green color of folding cash."
In San Francisco, Hestor's group has been accused by some developers of "legal extortion" and, at one point, former Mayor Dianne Feinstein asked the district attorney to look into the allegations. Hestor said the "smear campaigns" have made her think twice about asking for money.
"I don't believe it is extortion, but I don't want to take the heat," Hestor said.
In Los Angeles, both Gordon and the homeowners he negotiated with have taken a thrashing in the Ma Maison Sofitel case.
"To me it stinks," said Ethel Shapiro, a West Hollywood homeowner who lives near Gordon's hotel. "It is a payoff. If they were that concerned about parking, they wouldn't have allowed themselves to be bought off."
Others have raised concerns that the homeowners gave up too much in the deal by agreeing, among other things, not to oppose the hotel's request to serve alcoholic beverages. In newsletters to fellow homeowners, Hahn and Diana Plotkin, the lead negotiators, wrote that "none of our future rights to enter into the process have been waived" and that their associations "retained the right to continue to monitor the hotel and address all concerns which will impact the community."
But the confidential agreement, a copy of which was obtained by The Times, clearly restricts the homeowners' ability to take on the hotel in the future. The agreement prohibits the homeowners from taking "any action at any time" to change the hotel's parking requirements, occupancy limits or license to serve alcohol unless the hotel itself requests a change. Moreover, the homeowners agreed not to oppose the hotel in any court-ordered environmental proceedings.
In an interview, Plotkin defended the deal: "We did the best job we could. We did a hell of a lot better than the people in West Hollywood. . . . I know there are always going to be critics. There are a lot of people who are jealous. There are a lot of people who are angry."
Gordon has also come under attack because of the hotel agreement, according to several developers and land-use attorneys who asked not to be identified. By paying the "ransom," as one of them characterized the payment, Gordon opened the door to more "hostage situations" for other developers.
Indeed, sources said, at least one other developer near the hotel has already been approached by homeowners about making a contribution--perhaps as high as $250,000--to the neighborhood fund. Other developers apparently have cash payments on their minds too. In Westwood, Brown said she was told up front by one builder, "I am not going to give you one red cent," even though she never asked for any money.
There is concern among some developers that groups in California, if encouraged by lucrative cash deals such as the Ma Maison Sofitel payment, may become as difficult to deal with as a highly controversial citizens group in Washington state. In the last year, an aggressive citizens environmental organization has shaken King County in the Seattle area by tying up proposed projects until developers agree to stiff environmental requirements and hefty cash settlements.
The founders of the Hestia Alliance, named for the Greek goddess of hearth and home, reportedly received $500,000 in a settlement with the developers of a proposed housing and apartment complex near their home.
"We make no bones about it," said Tom Evans, the group's attorney, who would not confirm the amount of the settlement. "We go into these battles with the intention of obtaining funds to pay for furthering the goals of the organization. . . . Developers are truly interested in better mitigation (of damage to the environment), but unless someone comes along and applies the pressure, none of this stuff is going to happen."
King County developers have complained bitterly about the group's tactics, accusing it of creating "an assembly line extortion machine," in the words of critic Peter L. Buck. At least one developer has refused to pay. Dick Van der Peyl, whose company wants to build several hundred apartments in King County, said he agreed to Hestia's environmental requests but turned down the group's demand for $15,000.
'Had Been Shaken Down'
"I felt like I had been shaken down," Van der Peyl said. "We are willing to give legitimate documented expenses . . . but they just flat out demanded 15 grand from us before even having done any environmental work on the project."
In California, few groups seems to be interested in cash alone. In many cases, the "extractions," as one attorney called developer concessions, come in "cash equivalents." Some community groups do not need or want money. Some, particularly in more affluent areas, have attorneys, engineers and other professionals among their members who volunteer their services, or leaders who work on neighborhood issues so often that they have become experts themselves.
In some neighborhoods, it is a matter of ethics.
Hoag Canyon homeowners in Bel-Air said they rejected a $150,000 offer from a developer who flattened a nearby mountain ridge without any notice to area homeowners. Instead, the Roscomare Valley Assn. held out for an agreement that requires the developer to rebuild part of the ridge and pay about $40,000 in lawyer and engineering fees.
"Our particular homeowner group was offended by the offer," Mark Slade said. "It is really up to the individual homeowner group how they feel about it. This is a way of doing business throughout the city. . . . We always felt the objective was to save Hoag Canyon as much as possible. Mitigation funds of any kind were not our objective. In fact, we found it distasteful."
Deal Falls Through
In the hills above Sherman Oaks, a homeowner group helped craft a proposed agreement with the developer of a housing tract that called for a $500,000 contribution to the Santa Monica Mountains Conservancy to purchase land in the area. Richard Close, who heads the Sherman Oaks homeowners group, said some residents had ethical problems with the deal, which ultimately fell through for other reasons.
"We did have some moral questions raised in our minds, but we never had to make the hard decision," Close said. "We made it clear up front that the money would not go to the homeowners association, that it had to go to a third party. Still, you have the moral question of whether it is right to agree to a project in which substantial dollars are being given to a group. Is that any different than a developer making a large contribution to council people?"
In planned communities, which are common in suburban settings such as Orange County, many homeowner and condominium associations are precluded by their bylaws from accepting or spending money outside their maintenance responsibilities. In such cases, members negotiate with developers for sound walls, palm trees, wider driveways or traffic signals.
Other community groups statewide work closely enough with developers--and get enough concessions--that they see no need to stow away cash.
In the Miracle Mile area of Los Angeles, cordial negotiations between residents and the developer of a six-story office building on Wilshire Boulevard netted the community a two-acre private park where the developer had proposed building condominiums.
The park cost developer Jerry Snyder $750,000 as well as annual maintenance expenses--more money, several residents said, than any homeowner group could have hoped to extract in cash. Snyder also agreed to give the Miracle Mile Residential Assn. a free office in the building for five years.
Lyn MacEwen Cohen, who negotiated the agreement for the homeowners, said she never asked for money.
"We really don't have much need for funds," she said. "What we have is a wonderful park."
The developer of a shopping center near Marina del Rey, confronted by nearby condominium owners opposed to alcohol sales at the center, agreed to provide an overnight private security patrol in the neighborhood for three years. The service will cost the developer between $30,000 and $50,000 a year, but he would have lost far more than that if his project had been denied its liquor licenses. Meanwhile, the neighborhood got a service it had wanted for many years but could not afford.
In San Francisco, a downtown developer has agreed to contribute $500,000 to a recreational center in Chinatown, while a developer in a rural Solano County consented to set aside open space to win support from residents for his project.
In the Los Angeles Harbor area, the developer of a condominium project has agreed to build a senior citizens center, and in Brentwood, the J. Paul Getty Trust will pay $300,000 to homeowners near its proposed arts center so they can erect gates to keep traffic out of their neighborhood.
The list goes on and on, particularly in the Los Angeles area, where "every acre is being fought over," according to San Francisco attorney Mark Weinberger, who represents community groups across the state.
And both developers and homeowners say they are bracing for more.
"The sophisticated developer of the 1990s is going to be the developer who understands how to communicate with homeowners just like the successful developer of the 1950s was the person who understood how to mass-produce in large volume cheaply," said Ring, the Century City attorney. "The developer who is the dinosaur is the guy who says, 'It is my property. I can do what I please with it, and the hell with them.' "
Hahn, the Los Angeles homeowner leader, made a similar prediction.
"If a developer is a bandit, you have to watch out for us," he said. "If you're a bastard, you get treated like one."