Expansion Deal With Capitol Records OKd

A divided Los Angeles City Council approved a deal Wednesday to keep Capitol Records in Hollywood, but only after asking for an investigation of the city’s purchase of an adjacent parking lot for almost twice what a city appraisal said it was worth.

By the bare minimum vote of 8 to 4, the council agreed to invest $4 million in a deal that would help Capitol Records refurbish a nearby office building and add 80 employees to the company’s current Hollywood work force of 160.

Capitol Records officials had indicated that they were prepared to leave Hollywood because of lack of parking and the need to upgrade their building.

Private firms will put $29 million into renovating the Capitol Records building, constructing a parking garage and other nearby projects to allow the company to expand.

But even supporters of the arrangement voiced outrage over how the Community Redevelopment Agency handled one part of it.

In 1998, the agency paid $1.45 million to a firm headed by politically influential developer Steve Ullman, buying a small Argyle Avenue parking lot east of Capitol Records for development as a parking garage to serve the company.

The Times reported that an appraiser hired by the agency already had set the value of the lot at $795,000. An agency administrator, who has since resigned, went outside normal procedures to secure a second appraisal that justified the purchase price, but that appraisal was not completed until after the board voted to pay the $1.45 million.

The deal was criticized in an audit released Oct. 30 by the city controller, which found that the agency had not acted “in a prudent business manner” and had misled the council about the appraised value of the property.

The agency later decided not to build a garage on the Argyle lot. Capitol will buy the parcel from the agency for the full amount the city paid.

Still, council members said Wednesday that the earlier transaction warrants further investigation by the city attorney and city controller. At the urging of Councilwoman Cindy Miscikowski, the council asked for a report detailing how the Argyle lot was purchased, which officials were involved, and whether they were held accountable.

“It really does raise serious questions that need to be evaluated,” said Miscikowski, who argued that it should not hold up the separate development agreement, which she said is good for Hollywood.

Even with the promise of an investigation, council members Rita Walters, Joel Wachs, Mark Ridley-Thomas and Mike Feuer voted against the deal.

Wachs, a mayoral candidate, said he will ask the Los Angeles County Grand Jury to probe the purchase. He described the handling of the Argyle parcel purchase as “something that I think verges on corruption.”

“It’s not acceptable and it is tainting an otherwise very good project,” Wachs told his colleagues.

The concerns were heightened when the city’s director of auditing, Jim Armstrong, told the council Wednesday that another report due out in a few weeks will highlight other land deals in which the redevelopment agency purchased property at prices different from the appraised values. Armstrong declined to elaborate Wednesday.

“I’m astonished that this has occurred and that the agency could do this,” said Walters, who tried to delay a vote on the development agreement for two weeks so Armstrong’s new report could be considered.

Councilwoman Jackie Goldberg, whose district includes Hollywood, did not object to a review of the Argyle transaction, but asked her colleagues to avoid delaying the Capitol Records project.

“I was just as shocked and dismayed when I heard a second appraisal was done after the fact,” Goldberg said. “That is just unbelievable.”

But she said the first appraisal underestimated the value of the property. That view, she said, is vindicated by Capitol’s agreement to buy the parcel from the CRA for $1.45 million.

“They think it’s a good deal,” she said.