Capitol Records Deal OKd Despite Anger About Land Price

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 narrow margin of 8 to 4, the council agreed to invest $4 million in government funds in a development deal that includes helping Capitol Records refurbish a nearby office building, and adding 80 employees to the 160 already employed by the company in Hollywood.

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

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

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

The Times reported recently that at the time of the purchase, an agency-hired appraiser 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 $1.45 million.

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

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

The CRA, which uses taxpayer funds, also has projects underway in North Hollywood, Canoga Park and other areas of the San Fernando Valley.

City 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, what policies and which officials were involved, and whether those officials have been 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 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 an additional report due out in the next few weeks will highlight other land deals in which the CRA 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 unsuccessfully 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 and said that view 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, describing the new project as a plus for Hollywood.

Feuer raised an additional objection to the relocation of a company from Hollywood to Burbank to make way for Capitol to use a nearby building.

“We have a business team that is working to attract businesses to the city, and here we are paying public dollars to relocate a business to a city with which we are competing head-to-head for business,” Feuer said.