The Los Angeles City Council on Tuesday approved refinancing a $52-million loan for a downtown Bunker Hill apartment house in a deal that will save money for both the developer and the city.
The proposal generated a brief debate over whether it would eliminate low- and moderate-income units in the building in the face of the city’s housing shortage. The measure was amended to preserve the affordable apartments before it was sent to Mayor Tom Bradley on a 14-0 vote.
Noting that the refinancing, which would save the developer $1 million a year, would also save the city $600,000 in the first year, City Councilman Zev Yaroslavsky said that to turn it down would be “to cut off our nose to spite our face.”
At issue is the 573-unit Promenade Towers, at 1st and Figueroa streets in the city Community Redevelopment Agency’s Bunker Hill redevelopment area.
The apartment complex was completed in 1985 by the firm of Goldrich, Kest & Associates, a developer of many city-sponsored projects. In this case, financing of the building was provided by a $52-million city revenue bond issue, to be repaid through rents. The city helps with such projects so developers can afford to provide low-cost housing and still make a profit.
The developer wanted the city to float a second bond issue at a lower interest rate to save money.
Filled almost to capacity earlier in the year, the development’s occupancy has dropped recently as some tenants moved to a new apartment house completed nearby, according to Perla Efton, director of housing for the city Community Redevelopment Agency.
She said Goldrich, Kest reported it at 98% capacity last month. But the owners unofficially told the CRA that capacity was now in the low 80% area.
Council members Gloria Molina and Nate Holden expressed concern that the new loan arrangement would help the developer but threaten low-income housing in the building because it provided for conversion of the apartments to condominiums.
In the original agreement, Goldrich, Kest had agreed to set aside 86 units for low-income residents. Under the law, these are defined as families earning 80% of the median income in the area. In the case of Promenade Towers, a $30,400 annual income would qualify a family of four as low income.
Echoing longstanding concerns about the fate of affordable housing in high-rise downtown, Molina said, “The CRA talks about refinancing. . . . They are not getting the message . . . about affordability.”
The target of the questioning from Molina was a provision in the new loan agreement that would have allowed Goldrich, Kest to eliminate the low-income apartments if the building were converted to condominiums. A fee of 1% of the sales price of the condominiums would have been put into a fund to find relocation housing for displaced tenants.
The CRA agreed to rewrite the agreement to preserve the rental units for 20 years, even if the building is converted to condominiums. The CRA also said the city would receive 15% of the $1 million a year saved by the firm, which would be used for building more low-income housing.
The Goldrich firm is one of the biggest campaign contributors in city politics.
From 1982 through the first half of 1988, the firm and its affiliates contributed a total of $41,210 to various City Council members and to Mayor Bradley, according to a Times study of donations. Among present members of the council receiving contributions from the firm are Ernani Bernardi, Hal Bernson, Robert Farrell, Joy Picus, Richard Alatorre, Joan Milke Flores, Joel Wachs, Holden, Marvin Braude, Michael Woo and Gilbert Lindsay.