Questions on Proposed Mall at Dump Site

The City of Carson is negotiating with a group of developers who want to construct a factory outlet mall, Metro 2000, on a 157-acre dump site adjacent to the 405 Freeway (South Bay Edition, Around the South Bay, Dec. 12).

The site is seriously contaminated, and the state has not approved the site for any construction. The waste buried there is a threat to the underground water. The cost of cleanup will be staggering. That is why that land, in such a prime location, is not developed.

The city is rushing to commit to a deal before the end of 1993. Thereafter, I am told, the law will change about earmarking sales-tax revenues for the repayment of Mello-Roos bonds. I urge the city not to rush. There are many questions that must be answered.

Do we really need more malls and hotels when the existing ones are not doing well? Have there been feasibility and marketing studies? Is this the type of project that an institutional lender would finance? The city invested millions in the refurbishing of the Carson mall (South Bay Pavilion at Carson) and subsidies for IKEA. We should be careful not to destroy those earlier investments.

Is it not reckless to commit the City Redevelopment Agency and the city itself to millions of dollars of potential liabilities without having a clue to the cost of cleaning the land and making it usable? Can the agency and city really immunize themselves from liability from the contamination cleanup costs? We have no control over the federal agencies that may become involved. We cannot predict what courts may say about our future obligations to bondholders who get the contaminated land if the project fails. Litigation costs will be in the millions, even if we win the suits.

The council was asked in a public meeting to investigate via criminal justice records and financial records the reputations and credit-worthiness of the developers. Has this been done? If not, why would the council expose the Redevelopment Agency to such risks without making such inquiries? What development experience does this development team have?

This development will be complex beyond belief: uneven subsidence of two to 12 inches per year; water must be kept out of the soil; methane gas, hazardous waste threatening underground water; soil not adequate for street construction; access to an already jammed intersection of two major freeways with queuing at intersections; noise and dust pollution; 3,000 piles to drive into the ground, etc. Only the most experienced developer teams should be taken seriously as potential developers at this site.

The agency is asked to commit tax increment generated by the project up to $1 million per year. Is this to be a gift to the developers, or is it to retire bonds? I think that there have already been three commitments of tax increments. Will this be the fourth? If so, will this be subordinate to the other three? If subordinate, what will be the effect on the value of the bonds? Has there been a careful study of the likelihood of being able to sell such bonds?

If the annual sales tax income is to be split 75-25 with the 25 for the developer, what mechanism will assure that an adequate amount goes to paying for the Mello-Roos bonds? Do the tax increment and the sales tax moneys merely “flow through” the agency to pay the bonds, with the agency having the risks and the liabilities and the developers getting the enhanced value of the land and the subsidies? If the revenues are not sufficient, will the developers be responsible for the gap? What does the council know about the financial ability of the developers to raise money to fill such a gap?

What will be the security for the Mello-Roos bonds? Will the bond underwriters see the contaminated dirt as security for $62 million in bonds? In addition, is such a dirt pile a safe basis for taking $18 million from the Redevelopment Agency?

Some people like the project because they thought that the developers would pay half the cost of an extension and bridge for Del Amo Boulevard. I attended a meeting of the council committee and heard it said that the developer would only “front” the half cost and would be reimbursed when the state paid its half of the cost. Does this mean that the developers ultimately would pay nothing for the Del Amo project? Also, why should $300,000 come off the top for annual cost for sheriff’s services? We do not subsidize law enforcement at other commercial centers in the city.

The developers will use non-union Brown and Root as general contractors. Will this work in the real world, if the bulk of the private financing is to come from the Glazier Union Pension Fund?

Since three members of the City Council have received $2,500, $2,000 and $1,000, respectively, as campaign contributions from one of the developers, do not these council members have an obligation to appear to be dealing with these developers at arm’s length?

This is a serious question, since it was said at one meeting that the developers expected to be reimbursed for millions of dollars that they have already spent. Will not this involve the question of an unconstitutional gift of public funds?

Why should Carson be involved in putting up $80 million in dollars and agency bonds to clean up the dirt pile? The developers are probably purchasing it cheap because it needs cleaning. I read that the land is held by a trustee in bankruptcy. Why is the city negotiating so feverishly with people who do not even own the land? This may be a historic first: pledging some third party’s hazardous dump site as security for bonds! Does this sound like the formula for savings and loan scandals: Developer puts up very little of own resources, takes huge risks, and if project fails, taxpayers get stuck with the bill? The council must have firm evidence of the equity to be risked by the developers in the project.

I hope that the City Council will listen to voices of reason and refrain from rushing into a disastrous project to meet the Legislature’s Dec. 31 deadline. The Legislature prohibits this silliness after Dec. 31. Let us stop it now.

GARY COLBOTH