Schulte Criticizes Proposal to Buy Office Building

The city of West Hollywood has offered to buy a vacant office building owned by a major developer, drawing criticism from a dissident city councilman who contends that the offer “smacked of favoritism.”

“I think it’s suspect at the very least, (and) the timing was wrong,” Councilman Steve Schulte said. The plan, approved by the City Council last week, calls for the city to buy the building at 7362 Santa Monica Blvd. from Raleigh Enterprises for $575,000.

As part of the proposal, city officials, who want to use the building to house offices for several social service programs, have offered to provide Raleigh with a letter that suggests the city is prepared to condemn the property, Schulte said.

But Schulte insisted that city officials have no intention of condemning the two-story building, saying the real purpose of the letter would be to enable Raleigh to defer capital gains taxes if the offer is accepted.

Not in City Plans

“This is a building that’s not in our capital improvement plan, that costs over half a million dollars at a time when we’re pinching pennies with the (city) budget, and is owned by a major developer who’s likely to be before the council with a new project in the not-too-distant future,” Schulte said.

Company President George Rosenthal is vice chairman of West Hollywood Marketing Corp., a private, nonprofit group that promotes West Hollywood business and industry. He has extensive real estate holdings in West Hollywood, including the Sunset Marquis Hotel and the building that houses Playboy Enterprises.

Rosenthal has expressed interest in developing a large commercial and residential project on one of the last remaining vacant sites along the Sunset Strip. The project, in the early stages of planning, would need City Council approval.

The council approved the purchase offer for the office building last week on a 4-1 vote, with Schulte dissenting. The terms of the arrangement were not disclosed. They were approved during an executive session of the council the previous week, City Manager Paul Brotzman said.

Schulte’s view was not shared by other council members.

“I understand what Steve’s concerns were, but I don’t think they had much merit,” Councilman Paul Koretz said.

Koretz said he voted to approve the offer “because it appears to make sense for the city to acquire its own building to house social service programs as opposed to spending money to pay for the agencies to rent space elsewhere.”

Of the offer to condemn the property, Koretz said: “That was something we would have done for anyone else. . . . I don’t see it as a controversial issue. If and when (Rosenthal) comes before the council seeking approval of a project, the project will be treated with the same scrutiny reserved for anyone else.”

Brotzman, who recommended that the city buy the building, requested that the matter be placed on the council agenda last week. It appeared among numerous items on the consent calendar, a part of the agenda reserved for items that may be approved en masse without discussion.

Schulte was upset that the item on the agenda related to the purchase contained neither the location of the property nor the proposed purchase price. At his insistance, the matter was removed from the consent calendar for further discussion.

Privileged Information

“I don’t want to sound unduly critical of my colleagues,” Schulte said. “Nine times out of 10 when the city manager comes to the council with a recommendation for purchasing property, the council is going to go along.”

Brotzman declined to comment on the terms of the offer, saying the information was privileged. He said that to discuss the matter might damage future negotiations for the property.

Gregor Momdjian, vice president of real estate for Raleigh Enterprises, referred questions about the matter to Rosenthal, who was unavailable for comment.

The city’s plans for the two-story building, across the street from Plummer Park on the city’s east side, call for using the first floor to house an adult health-care program for senior citizens and AIDS patients.

The council Monday approved spending $65,000 in “seed money” for the program, provided city officials can raise $50,000 to $100,000 from government and private sources to get the program off the ground. The council has yet to decide whether the program, if it becomes a reality, will be operated by the city or a private agency.

City officials want to use the upstairs of the building to house other social services agencies with which it contracts for services, Brotzman said.

Brotzman characterized the proposal to buy the property as “an attractive purchase price.”

Savings Cited

Officials say the city could save money by having the agencies occupy a building the city owns. Instead of reimbursing the agencies for renting space elsewhere, the city would essentially be reimbursing itself by having the agencies as tenants.

“We sent letters to social service agencies at the end of last week inquiring as to whether they would be interested in moving (into the building), and we’ve already received three encouraging replies,” said Jodi Curlee, the city’s director of social services.

However, critics of the plan remained skeptical.

“Does this mean the city is going to strong-arm the agencies by saying, ‘If you don’t move into our building, we don’t need what you have to offer?’ ” community activist Steve Martin said.

“No matter what you say about the merits of how the building is actually used, I’m disturbed by the way the secretive way the whole affair was handled,” he said.

Richard Settle, who chairs a subcommittee of the Public Facilities Board concerned with acquisition of public buildings, expressed a similar opinion.

“I can’t say whether it is a good deal or not, but what disturbs me is that the board was never informed,” he said. “I think that says something for the way things get done around here.”