Showdown Close on Pact to Run the Greek Theatre

A controversy that has divided City Council members and tested long-standing friendships comes to a head Tuesday as the Los Angeles Recreation and Parks Commission votes on whether to award the Greek Theatre’s multimillion-dollar operating contract to House of Blues Concerts Inc., after more than 25 years of exclusive operation by the politically connected Nederlander family.

At stake are millions of dollars in concessions at the historic but threadbare theater, and some city heavyweights are trying hard to cut deals to steer the contract to the bidder they favor.

The council already acted once on the lucrative 10-year contract--voting 8-5 in 1999 to give the deal to the Nederlander family without a competitive bid. They took the action at the request of Council President John Ferraro, who is a longtime friend of the New York family and its powerful attorney, Neil Papiano.

But public outcry over that vote forced it back to the council, where under pressure from House of Blues and others, it agreed to rescind the agreement and solicit other bids.

Last month, the park commission’s special review panel recommended that the city award the contract to House of Blues, which outscored the Nederlanders in four of the five criteria used to evaluate which firm should get the deal.

Ellen Oppenheim, head of the Department of Recreation and Parks, told parks commissioners that House of Blues projected paying the city about $23.5 million in rent over the period of the contract, compared with $18.5 million offered by Nederlander.

House of Blues also proposed making about $11.1 million in improvements--including renovating the theater and putting in a special sound system that would buffer the surrounding neighborhood from noise.

By comparison, Nederlander proposed making $5.5 million in capital improvements to the theater. Oppenheim also noted that House of Blues outscored Nederlander in “experience and qualifications” and “proposed services and community outreach.”

Nederlander beat House of Blues in only one category: “financial capability and stability,” Oppenheim said.

Despite the strong recommendation from their staff, however, Recreation and Parks commissioners seemed reluctant to give the contract to House of Blues at their Dec. 14 meeting. They decided instead to put the matter off until Tuesday, saying they needed more information. If the commission acts on the issue this week, it will then go to the City Council for review.

Although Ferraro, who has been undergoing cancer treatment, has been away from City Hall, council insiders say he’s still pushing hard behind the scenes for the commission to grant the contract to Nederlander.

Behind the scenes, City Hall insiders say that deals are being cut over everything from personnel matters to commission appointments in an effort to keep the Greek contract with the Nederlanders.

Several sources said that Mayor Richard Riordan--who initially wanted an open bid process--has opted to stay out of the battle at Ferraro’s request.

Riordan’s reticence is surprising in some respects, but not others. He is a fierce advocate of negotiating hard for city benefits, but he also is a close friend of the ailing Ferraro.

As officials stake out their positions and barter for the best deal they can cut, some observers have been troubled by suggestions that relationships will decide the outcome of the debate.

“Watching inside politics is a lot like watching sausage being made,” said one city official who asked not to be named. “It’s one of those things you really don’t want to see.”

A spokesperson for Ferraro said all the talk about her boss amounts to nothing more than “gossip.”

“It’s true that John is best friends with Mr. Papiano,” said Gayle Johnson, Ferraro’s spokeswoman. “But behind-the-scenes deals never have been made or discussed.”

Johnson said Ferraro is simply interested in the outcome of the bid because the theater is in his district.

“We have to look at what is best for the city and the Greek Theatre,” Johnson said. “These proposals are complex, and comparing them is not easy.”

She added, however: “We think there are some good points on the Nederlander side that have not been brought out to date.”

Indeed, officials for Nederlander have accused House of Blues of exaggerating its rent estimates.

They also question the company’s financial stability, noting that House of Blues last year filed a notice with the Securities and Exchange Commission stating that it “has a history of losses and negative cash flows” and anticipates that losses will continue “for the foreseeable future.”

“They’ve admitted that they have negative cash flows,” said Adam Burke, an attorney who works with Papiano. “I hope the commission sees that they can’t live up to their promises.”

Officials for House of Blues, however, scoffed at Burke’s allegations.

“The city talked to our bank and reviewed our financial condition and concluded that the House of Blues has the ability to do this deal,” said Adam Friedman, senior vice president of House of Blues Concerts. “I remain optimistic that the better proposal will be the winner.”