Council Moves to Help Developer Obtain Loan to Clean Up Ceramics Factory Site

The Los Angeles City Council on Friday gave a boost to a developer’s bid to obtain a $19-million bank loan to finance the cleanup of toxic materials at the 45-acre site of a former ceramics factory in Atwater.

During a private executive session, the council directed its staff to enter into negotiations with the development group, the Franciscan Promenade partnership, about a move that could diminish the city’s ability to collect $9.5 million it previously loaned to the developer, City Hall sources said.

Council President John Ferraro, who represents Atwater, declined to discuss the council action except to say that lawmakers had authorized the city staff to negotiate with the developer on unspecified matters.

City Hall documents show that the developer, Franciscan Promenade, is seeking a $19-million loan from Crossland Savings Bank to finance toxic cleanup work at its Atwater property. But Crossland will make the loan only if the city agrees to subordinate its own loan to Crossland’s, the documents state.

In the event of borrower default, the subordinate lender runs a greater risk of not being repaid.

The city’s Community Development Department, which made the $9.5-million loan, has publicly recommended that the city accede to Crossland’s request. Crossland has already loaned the Franciscan Promenade about $20 million for the cleanup.

The developer wants to build a large shopping mall on the property, which is one of the biggest undeveloped parcels of land in the downtown area.

Attorney Malissa H. McKeith, representing the developer, said that if the city did not accept a subordinate loan position, the cleanup would have to be performed by state or federal agencies. “The site then becomes a public problem,” because the developer cannot afford to complete the cleanup, she said.

After learning of the council’s action, McKeith called it a good first step. She declined further comment.

The Atwater property was the home of the Franciscan Pottery Works for decades. Several years ago, the developer proposed building a 600,000-square-foot shopping complex on the site, and the city agreed to loan the group $9.5 million to acquire the property on the grounds that the project would alleviate blight in the low-income Atwater area.

It was initially estimated that cleaning up the toxic contamination problem at the site--caused in part by use of lead-based pottery glazes--would cost $6 million. More recently, however, the extra cost of cleaning up newly found asbestos contamination at the site was estimated at $19 million.

Actual cleanup of the site at 2901 Los Feliz Blvd. began Feb. 1, at the developer’s expense, and is scheduled to be finished later this year, McKeith said. State health officials are monitoring the cleanup.

The contaminated material is to be trucked to the Kettleman Hills toxic waste dump in the San Joaquin Valley.