Plan for New School Draws Criticism

As the Los Angeles Unified School District nears completion of a deal to build a high school downtown, new questions are being raised about the price, financing and development team.

Nearly a year ago, the district began exclusive negotiations with Kajima International on the promise that the Japanese construction giant would offer a good price and provide financing for the 5,300-student school, as well as negotiate for commercial and residential projects planned for the site.

In the ensuing months, however, the estimated price tag for the Belmont Learning Center has risen--from $60 million to at least $81 million--and the district has rejected Kajima’s loans as more expensive than other financing. Now, with a key component of the development agreement headed for a school board vote today, a member of the oversight panel reviewing the project has sent the district a scathing letter alleging that the public is being “charged millions of dollars for development costs which are not justified.”

The letter by Thomas M. Wierdsma, area manager for Hensel Phelps Construction Co., a Colorado-based firm not involved in the project, complains that Kajima also would be able to pay itself millions of dollars in “buried” construction fees and that the oversight group has been crippled because Los Angeles Unified staff members have given them “reams of documents only days before our comments are requested.”

Although Wierdsma suggested he might be alone in his concerns, a recent confidential report from the district’s Internal Analysis Unit indicates that similar misgivings have been expressed by the rest of the oversight committee, led by Edward Blakely, USC planning dean. The memo singles out the developer fees of $5.4 million as “high compared to industry standards.”

The project, planned for a 35-acre lot near Temple Street and Beaudry Avenue, would be the district’s first new full-service high school in two decades, further enhanced by the simultaneous development of housing and stores.

The school district’s planning director, Dominic Shambra, defended the developer fees--which under an incentive plan could rise to $8.1 million or more if Kajima scales back construction costs--as reasonable because the deal also sets a lid on costs. Shambra said intense negotiations had pulled the cost of the school down from a high of $91 million in the spring.

A principal in the development team, Matthew Witte, said that the original $60-million figure was the district’s lowest estimate, not Kajima’s, and that most costs had decreased. Denying the developers were trying to “feather our nest,” he accused Wierdsma of being “a hypocrite” because his own firm competes for similar large projects across the nation.

A district official said halting negotiations with Kajima now and putting the project out for competitive bid, as Wierdsma suggested, would cause at least two years of delays on a project already behind schedule.

“You can second-guess any deal forever, but the question is do you have a better deal ready to go? Do you want to start over?” asked school board member Mark Slavkin, who was president of the board during most of the Kajima negotiations. “There’s no way I’m willing to do that.”

Despite the flurry of last-minute concerns, a majority of school board members appeared poised to approve the agreement with Kajima. But the two who have been most skeptical of the project--Julie Korenstein and David Tokofsky--were infuriated that the harshest criticisms reached the board just days before the vote.

“This information was not shared with us [by district staff] in a timely way and . . . I don’t think that’s happenstance,” Korenstein said. “Someone’s railroading this.”

Vicki Castro, in whose district the school would be built, said Friday that she would still champion the project today.

“I have to think of the children in my district,” Castro said. “I’m not willing to delay this project any further. If it means higher fees, so be it.”

Although a final development agreement would not be signed until January at the earliest, today’s vote would lock in a number of terms, some of which include a specific fee for the first time. Of the four areas cited by district staff a year ago as the chief reasons for choosing Kajima, three have since changed and one remains uncertain:

* Financing: The developer committed to providing financing for the project and has, in fact, outlined eight possible plans --only to have all rejected by the district’s finance staff as too expensive. The district now plans to issue certificates of participation, similar to local bonds.

* Price: District planning staff originally estimated that the school would cost between $60 million and $65 million, but the lowest estimate offered by Kajima in district documents is $78 million. The developer’s latest estimate ranges between $81 million and $85 million, a figure the district is still working to pare down.

* Housing: Years ago, about 300 homes were cleared off the Temple-Beaudry site to make way for a housing project that later failed. Under an agreement forged with the community after the district purchased the property--for $61 million--at least 200 low-cost housing units were to be built behind the school. That plan was part of the original Kajima proposal, but more recently the developer has determined that only 120 homes would qualify for an affordable housing subsidy from the city, Witte said.

* Retail: For a commercial strip envisioned along the First Street side of the school, the Kajima group offered to bring in a major grocery chain--such as Vons or Ralphs--along with other stores. Witte said the most likely anchor tenant now is a discount grocery store, because none of the major chains was willing to move into the poor neighborhood. “You can lead the horse to water, but you can’t make them drink,” he said.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Plans for New High School The Los Angeles Unified School District board will vote today on a development agreement in its quest to build a new downtown high school. The terms presented by members of the school’s planning division have changed significantly in the year since the district hired a development team.

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ITEM ORIGINAL PLAN CURRENT PLAN Construction costs $60 million $81-85 million Development team compensation $5.4 million $5.4-$8.1 million Early completion incentive fee No Yes Team provides financing Yes No Number of affordable housing units 200 120 Cash to district for housing land $4 million $2.7 million

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Sources: School district documents and statements from 1995 and 1996