Playa Vista Project Hits a Snag

The Los Angeles City Council handed investors in the Playa Vista development a setback Friday, refusing to help secure government-financed bonds to fund the massive project’s housing component.

Even City Councilwoman Ruth Galanter, the project’s chief champion on the council, withdrew her support of the $70-million state bond application after failing to persuade developers to include more low- and moderate-income housing in their plans.

Although Galanter said she believes loss of the housing bonds is significant, she nonetheless believes the project, which may one day contain the DreamWorks SKG studio, will be developed.

Recent changes in ownership--the project is now controlled by a consortium of investors and lenders--have led to unexpected delays and problems, she said.

“This is not a typical real estate deal,” Galanter said. “They have found themselves a little surprised at the complexity of community, as well as financial, issues they have to deal with.”

Playa Vista officials said they were disappointed by the council’s failure to support their housing bond application, which they said could result in additional delay for the project.

In a written statement, Playa Vista President Peter Denniston characterized the council’s rebuff as “puzzling.”

“We had committed to one of the highest percentages of subsidized housing of any comparable development in recent history,” he wrote. “Access to these bonds would have allowed us to provide subsidized housing faster than we are otherwise required to.”

The 1,087-acre project, on marshy land near Los Angeles International Airport, is expected to be developed for residential and commercial uses. It also is expected ultimately to restore the Ballona Wetlands.

Environmentalists and other opponents have filed lawsuits and appeared before the City Council to protest the development near Marina del Rey, which they say threatens nearby wetlands that provide habitat for endangered species.

The City Council two years ago approved a series of inducements--including tax incentives worth up to $85 million--aimed at luring DreamWorks, headed by director Steven Spielberg, veteran studio executive Jeffrey Katzenberg and producer and music executive David Geffen.

But Galanter, who said the incentives were designed to entice DreamWorks, also has expressed frustration that the studio hasn’t yet moved to the site.

“At this moment, [Playa Vista] still doesn’t have DreamWorks,” Galanter said Friday.

Andy Spahn, who oversees corporate affairs for DreamWorks, said the studio is in negotiations with the Playa Vista owners.

“We remain interested in the site, if we can make a deal that makes economic sense,” Spahn said.

When asked whether the studio was close to securing such a deal, he said: “Depends on what day you ask.”

Galanter too has been negotiating with the development’s owners for additional low- and moderate-income apartments. Galanter said the tax-exempt financing sought by the developers should only be available to them if the city and its residents benefit from it.

Without assurances that the developers will increase the number of affordable units from 15% to 20%, Galanter said she could not support the request. The council could act on the request later in the year if the developers agree to her requests, Galanter said.

“I was hopeful we were going to achieve an agreement that the developer would be willing to cough up some additional public benefits,” Galanter said. “Ultimately, we did not. . . . They felt they had been bled enough . . . and that they would just like the public financing anyway.”