Compton to Provide Another $1.5 Million to Developer of Hotel-Convention Center

The City Council agreed this week to provide another $1.5 million to the developer of its hotel and convention center so that work on the project--stalled since November--can resume on Monday.

The 4-1 vote to give the money to Lazben Financial Co. and D & B Development, both controlled by developer Naftali Deutsch, came after lengthy negotiations between the city and Deutsch, who insisted that he needed $3 million to complete work on the $30-million project.

Deutsch agreed to raise $1.5 million of the $3 million if the city would give him the rest in the form of a loan and a change order.

Councilman Robert Adams said the city had to give Deutsch more money now or Compton residents would have to continue to go out of town to hold parties and other gatherings. Continued delays and debate by the council, Adams said, would make it seem as if “we’re trying to bog down this hotel in order to prevent our city from having a first-class facility.”

According to city staff members who conducted negotiations with Deutsch, the developer promised to resume work at the hotel site on Monday if the city provided the money.

Councilman Maxcy D. Filer, a critic of the project, cast the only vote Tuesday against the proposal to provide more money. “I think it’s a mistake for the simple reason that he (Deutsch) hasn’t acted in good faith all during the building of the project,” Filer said later. “Every time we face a problem, it’s give him, loan him. He takes everything and doesn’t give anything. He doesn’t bring anything to the table.”

When Deutsch got into financial trouble on the hotel project last spring and insisted he could not obtain loans from private lenders, the city loaned him $5.5 million, which is due to be repaid next year.

The hotel and convention center, which began taking shape in 1986, was to have opened in May, 1988, and was expected to have been generating from $400,000 to $1 million a year in tax revenues for the city by now. From the beginning, however, the project has been dogged by financial problems, labor disputes and work stoppages.

The opening date was pushed back to last December. The latest opening date is for this summer. In November, the state ordered a halt to work on the hotel project when workers complained that they were not being paid prevailing wages. The state agreed to lift the stop order, but Deutsch then insisted that he needed more money to complete the project.

State labor officials are still investigating the prevailing wage issue, as well as workers’ charges that they were not paid for their overtime and received cash payments from which no taxes were deducted.

The latest financial aid to Deutsch, who did not attend the council meeting, was allocated in two different forms. The council approved a loan of $1.25 million and a construction change order of $250,000 to pay for such things as an “enhanced” fire alarm, laundry equipment, television monitors and lighting changes.

“This is wrong,” Filer said before the vote. “This is just a subterfuge in order to pay more money to the developer.”

Filer insisted a change order should not be approved for work that already may have been completed, or for items that the developer was to have supplied under the terms of his original contract.

Filer also questioned the decision to provide more money for the fire-alarm system, pointing out that building contract specified that the hotel was to have been built to meet city codes, which require such an alarm system.

A letter from City Manager James Goins to Tucon Development Co., Deutsch’s construction firm, was attached to the council resolution on the change order. The letter, which lists $250,000 worth of “additional work” that the city wants Deutsch to do on the convention center, says the city wants a $128,000 fire alarm system.

Despite Filer’s questions, city staff members did not explain whether Deutsch had already supplied some of the items the city was demanding, such as television monitors, or if he had not installed them. They insisted that Deutsch had installed a fire alarm, but did not provide details of the proposed enhancements to the system.

The hotel and convention facilities, centerpiece of the city’s redevelopment plan, are being built under a complicated financial agreement that involves public and private funding. Under the terms of the agreement, Deutsch is acting only as the builder for the convention center and parking lot. On the hotel, however, Deutsch’s companies are the builders, owners and operators but the city owns the land on which the hotel sits.

The latest loan to Deutsch’s companies , which carries a 9% interest rate, was added to the $5.5 million that they already owe the city, bringing his indebtedness to $6.75 million. He is to repay the total sum all at once, plus interest, in May, 1990.

Filer quizzed city staff members about whether the city would be in the first position to collect if the developer defaults. Staff members and attorneys on the project told the council that the city is in first position and that the loan agreement carries provisions to protect the city in case of default.