L.A. Unified Criticized for Use of Posh Office Space

Of all the words that can be used to describe the Los Angeles Unified School District, “swanky” isn’t one of them.

So it was little wonder that Los Angeles businessman Steve Soboroff did a double-take when he drove up to the district’s Interim Business Services Center two years ago.

“I called my office and said, ‘C’mon, give me the right address. They can’t be in that building,’ ” recalled Soboroff, who as chairman of the Proposition BB Oversight Committee has toured the worst physical facilities the sprawling urban school system has to offer.

The reason for surprise: While it undertakes desperately needed repair of schools, the district has managed to park about a third of its administrative staff in one of the most glamorous office buildings downtown.

In all, about 1,000 district employees occupy more than 11 floors of the IBM Tower at 355 S. Grand Ave. on Bunker Hill. Performing grunt work more likely to be found in drab offices, they work in suites with floor-to-ceiling views that sweep from the San Gabriel Mountains to Long Beach.

And now, even as school officials stretch to buy necessities like textbooks, the price for those vistas is about to take a sharp jump. On Monday, the annual rent on most of the space will almost double, from $15.37 to $29.47 a square foot--a rate that brokers say tends toward the high end for Class A “trophy” buildings.

“The contradictions are just incredible,” said Assemblyman Scott Wildman (D-Los Angeles), chairman of the Joint Legislative Audit Committee and an outspoken district critic.

Wildman called L.A. Unified’s use of high-rent office space part of a “pattern of gross negligence and waste of taxpayer money,” akin to the controversial Belmont Learning Complex, which has been denounced by critics as a “Taj Mahal” for its burgeoning price tag.

But district officials say the problem with the lease is one of perception, not economics. They vigorously defend the bottom line of the deal, saying that over the course of the seven-year lease they received a bargain.

They concede, however, that it may not look good to have employees running the public’s business from such a posh corporate address.

“Frankly, I’m amazed there hasn’t been a bigger outcry,” said William L. Puget, a Cushman Realty Corp. executive who helped the district put together the deal. “I figured people . . . were going to look at the district sitting in this swanky office building and point a finger at them.”

David W. Koch, L.A. Unified’s chief administrative officer, said: “Obviously, there’s the image . . . of government waste. . . . This is not government waste.”

The district has leased nearly 300,000 square feet in the 45-story trapezoidal IBM Tower, one of twin high-rises joined by a multilevel atrium at the Wells Fargo Center. Amenities include a facade of brown imported Italian marble, underground parking and neighbors such as the exclusive City Club on Bunker Hill.

Seismic Safety Issues Prompted Move

L.A. Unified’s trek to Bunker Hill started with the 1994 Northridge earthquake, Koch said. Concerned about the safety of its work force, the district commissioned engineering studies that concluded that the old Business Services Center--the heart of non-curricular operations ranging from food service to accounting--was “extremely vulnerable” to a moderate temblor.

Rather than pay up to an estimated $29 million to fix the aging building in the 1400 block of South San Pedro Street, the staff asked the Board of Education to declare an emergency and began searching for space. Spurred by a soft real estate market, 22 brokers descended on the district touting 37 buildings, including one at Los Angeles International Airport.

From the start, the Wells Fargo deal looked the best on paper, Puget said. Yet school officials were too afraid of the “public relations hit” to take it seriously, he added.

But after talks on another site fell through, officials swallowed hard and in March 1995 inked a seven-year, $38.7-million lease because IBM, the namesake tenant desperate to move, offered big incentives for someone to take its space.

The computer giant threw in 200 desks, computer wiring, a telephone switch, the broker’s fee, half the moving cost, parking discounts, the first three months rent free, and a subsidy that produced a teaser rate of $8.56 a square foot--about half of market value, according to documents and interviews.

For added measure, landlord Maguire Partners agreed to lower the rate even more by passing along a property tax break it received for renting to a tax-exempt entity. And district officials figured they could further scrimp by using leftover U.S. Department of Education earthquake relief money to pay for the first year’s rent.

The deal dropped hundreds of government clerks, supervisors, auditors and accountants into a new universe. Used to dodging panhandlers and hearing occasional gunshots, they are now rubbing elbows with lawyers as they ride elevators to aerie offices featuring breathtaking views.

“You can see the Hollywood sign, the Glendale high-rises, the [Griffith] Observatory and Dodger Stadium when it’s clear,” said one L.A. Unified employee, whose desk faces the window on the 21st floor.

“The view on the other side is even better,” said the employee, who requested anonymity. “On a clear day, you can see the stacks of the Queen Mary.”

The new milieu, said Koch, cut absenteeism, boosted productivity and even inspired employees to dress better.

For most people, the image of school offices is that of Board of Education members’ and Supt. Ruben Zacarias’ headquarters a few blocks away at 450 N. Grand Ave., a bleak beige compound that includes a converted high school.

All of which makes for quite a surprise for first-time visitors to the Bunker Hill building.

Board member Valerie Fields said it was a “great shock” when she first saw the offices two years ago. “And it was a great shock that they validated my parking,” she added.

Wildman said he doubts that the move to the IBM Tower was necessary in the first place. He said research by the audit committee staff suggests that the school officials overstated the seismic risk to justify moving into the tony address. The audit staff based that suspicion on a 1994 district memo that stated there was no “imminent danger or imminent need” to move the employees out.

“They just don’t care about how much something costs, and frankly they don’t care about appearances, either,” said Wildman, adding that he plans to explore the Wells Fargo Center deal during a committee meeting next month.

Critics Say Planning Was Insufficient

A spokesman for Sen. Dianne Feinstein (D-Calif.) said her office is now looking into Wildman’s allegations that L.A. Unified mishandled federal earthquake funds, which the district used to pay the rent through mid-1998. School officials say the earthquake risk was real and they had permission from education officials to use relief money for the office space.

Those dollars are gone, forcing the district to dip into its general fund to pay the rent just as it escalates. With recent expansions and Monday’s increase, in essence a balloon payment, the annual rent increases to in excess of $8 million a year.

That puts the district on track to spend roughly $30 million by 2002, when the lease expires and officials expect to move employees out. The amount is partly offset by $11 million in savings from shuttering the service center, staffers say.

Within the last few weeks, the district hired a consultant to begin studying future office needs. Some fault administrators for not moving quickly enough.

Fields said the district should have aggressively subleased its IBM space and found cheaper offices before the rent hike kicked in.

“Why didn’t they move out and find some other digs?” she asked. “They knew this was going to happen.’

Soboroff, the Proposition BB Committee chairman, agreed, adding that he is afraid that the district may be so far behind in planning its eventual move that it won’t be able to leave when the lease runs out.

In the meantime, he said, it’s “absurd” that the district keeps paying rent at a highbrow office complex while it struggles to fix schools with no heat, bad lighting and toilet water coming up through the drinking fountains.

“There are very few children who wouldn’t trade their classrooms to move into the IBM tower,” he said.