City Buyout of Housing Units Tied to Probe Urged : Redevelopment: The project is the focus of a political corruption investigation involving a developer who is also a fund-raiser for the mayor.

Los Angeles redevelopment officials Monday proposed a multimillion-dollar city buyout of a controversial low-income housing development that is the focus of a political corruption investigation involving one of Mayor Tom Bradley’s campaign fund-raisers.

Under a proposal negotiated in recent days, the city’s Community Redevelopment Agency is seeking City Council approval of a $5-million buyout of the developer of two financially troubled, inner-city senior citizen apartment buildings, known together as Sheridan Manor.

The apartments and a city-subsidized contract to rehabilitate the buildings are the focus of a joint investigation by Los Angeles police and the county district attorney’s office. Former partners in the projects have alleged that political contributions or other payments were made to Bradley and other city officials to obtain assistance.

The Times reported Monday that Bradley has intervened repeatedly with city and federal agencies on Sheridan Manor and other projects involving Harold Washington, one of his campaign fund-raisers. Washington has variously served as a developer and consultant on Sheridan Manor, and sources said one focus of the probe is Washington’s ties to Bradley.

Bradley and Washington have denied doing anything improper, saying they were merely attempting to increase the city’s affordable housing stock.

CRA officials on Monday presented the latest in a series of rescue plans for Sheridan Manor to the council’s Community Development and Housing Committee. The recently completed project, which already has received $900,000 in CRA assistance, is years behind schedule and millions of dollars over budget, in part because of unanticipated earthquake safety requirements.

The project’s current developer and major investor, Jerome Steinbaum, said that costs on the project skyrocketed from an initial estimate of about $4 million to more than $7 million and that he has lost well over $2 million. Now, Steinbaum said, he is having difficulty renting the units.

Citing the financial and legal problems swirling around Sheridan Manor, Steinbaum said he is willing to take a loss to get out of the project. “I’m looking to sleep again,” he said. Earlier this month, Steinbaum pleaded no contest to state labor law violations on the project and agreed to cooperate with investigators in the ongoing corruption probe.

CRA Deputy Administrator John Maguire said the $5-million buyout would put the project on a sound financial footing and ensure that the 162 units involved would be available to needy, low-income residents. Maguire said that the CRA would buy the project and provide financial assistance to a nonprofit group that could receive special tax breaks to purchase and operate the buildings, located in Koreatown and the MacArthur Park area.

The goal is to “get these vacant units occupied by low-income residents,” Maguire told Councilman Zev Yaroslavsky, the only committee member present. He said auditors and outside accountants verified that Steinbaum had lost more than $2.3 million on the project.

Yaroslavsky instructed the city’s chief legislative analyst and city administrative office to independently verify Steinbaum’s investment before the matter goes to the full council later this week. Steinbaum said Washington would receive no funds from the buyout.