Compton Insider Gets a Bargain

Compton has agreed to sell some of its best city-owned land to a well-connected politician for millions of dollars less than it is worth, city and county records and interviews show.

Under the terms of the deal, Paul Richards, who has no experience as a developer, would put up none of his own money. Instead, the city would lend him $1.6 million, which would cover the purchase price of the land and nearly half a million dollars in planning costs. He would have to repay only the loans--without interest--when he sold the 231 houses he plans to build.

Richards is a longtime councilman in Lynwood, which is next to Compton, and an important member of a network of allies who have held political posts and public-sector jobs in both cities.

Before and during his tenure as a Lynwood council member, Richards served for years as an assistant city manager in Compton and as a labor negotiator for the city as well as a paid advisor to the Compton Community College board. He is a political ally of former Compton Mayor Omar Bradley, who, in turn, has worked as an administrator for Lynwood’s schools.

Bradley lost his reelection effort last year, but his allies still control Compton’s City Council. Richards negotiated the deal during Bradley’s administration, and the council unanimously approved it in January 2001.

Charges of cronyism have for years been a feature of Compton, a working-class city of 93,000 residents, most of them black or Latino.

The land, which is vacant, is at the end of an industrial and commercial corridor along the Artesia Freeway. The parcel, about 20 acres, is bordered by the Alameda Corridor on the east, the Blue Line on the west, the Crystal Park hotel and casino on the south, and Greenleaf Boulevard on the north. In a recent interview, Bradley cited the property as the city’s most valuable.

Richards defended the deal, saying his ties to Bradley and his allies brought him no special treatment. It is not unusual for cities to discount land sold for redevelopment, he said.

Richards, a lawyer who was raised in Compton, said he has exceptional qualifications other than development experience including “a unique understanding of the desires and expectations of Compton residents” and “a blend of experience that surpasses what anybody brings to the table.”

Bradley’s successor as mayor, Eric Perrodin, has repeatedly denounced the arrangement, asking: “How come we’re giving him money to develop that property? How come we can’t get developers who will spend their own money?”

Perrodin, a Los Angeles County deputy district attorney, even told a council meeting that he believes that “somebody’s getting a kickback” on Richards’ “sweetheart deal.” He offered no evidence.

The district attorney’s office is investigating allegations of misuse of public funds in the city. There is no evidence that Richards’ project is part of that investigation.

Perrodin has not had the votes to kill the project, although it has been delayed by administrative moves.

When the council approved the $1.6-million price for the land, it did not publicly disclose that a 1997 appraisal conducted for the city had placed the property’s value at $3.6 million.

Richards’ purchase price reflected the approximate assessed value set by Los Angeles County for property tax purposes. That assessment was made in 1975, and has been increased only by the 1% annual hike allowed under Proposition 13.

The county assessor’s office said last week that sale prices of Compton real estate had soared by comparison, increasing more than fivefold since 1975.

If the market-price increase were applied to Richards’ land, it would now be worth about $8 million.

No Track Record

That matches what Jerry Evans, president of the commercial real estate firm Lee & Associates- South Bay Inc. said he thinks the parcel would be worth.

The market value would be four to six times what Compton, a city struggling with budget problems, was asking Richards to pay, Evans estimated.

Compton never tested the land’s market value by asking other developers how much they would pay for it.

A variety of people with expertise in redevelopment said such tests are desirable but not required by California law.

They added that although it is not unusual for cities to make land available to developers at reduced costs in redevelopment deals, it is unusual for a developer to get such a deal when he has no track record. It also is unusual for a city to assume a project’s early financial risks as in this case.

Although the Compton City Council has twice approved the loan to cover Richards’ predevelopment costs, the city attorney has held it up, saying he is worried that the city might not be repaid.

All other projects in the city have had substantial outside financial backing, City Atty. Legrand Clegg II told the council recently. Richards has not submitted proof that he can repay the loan if his project fails, Clegg said.

The city’s failure to issue Richards his predevelopment check prompted him to file a breach-of-contract lawsuit against Compton.

He said in an interview that he has moved ahead in planning the project without the city’s money and has by now incurred more than $1 million in costs.

He declined to say how he planned to pay them.

The Times reported two weeks ago that in Lynwood, Richards last year voted for the city to pay his sister up to $1 million for negotiating a billboard deal that correspondence showed he already had in the works.

Her payday was imperiled by last November’s election. Although Richards won reelection, he lost an ally who had given him a three-vote City Council majority. The new majority voted to cancel his sister’s no-bid contract; the matter is now in court.

In his lawsuit against Compton, Richards is demanding that the city release his loan funds and pay him $20 million in damages for causing an “inexcusable delay” in the project.

Richards has aspired to become a housing developer at the site at least since 1999. That year, he proposed in writing that Compton allow him to develop housing at four locations in the city, including this parcel, known locally as the Auto Plaza.

Richards made the proposal as part of an effort to settle another lawsuit he had filed against the city, alleging that he had been wrongfully discharged from his job as a part-time labor negotiator, earning $68,500 per year.

Richards had served as Compton’s assistant city manager for several years but had quit to run for Congress in 1995, a bid that was unsuccessful. He then got a two-year contract as a labor negotiator. Compton officials declined to renew the contract in 1997 amid union complaints that Richards was often unavailable. That move sparked his lawsuit.

After Bradley came to dominate the City Council, the suit was settled for $350,000, officials said.

At one point, Bradley and his allies had suggested paying Richards nearly $1.4 million to settle the case, according to the city’s outside trial counsel, Nelson Atkins.

That plan was abandoned after Atkins wrote a confidential letter to the City Council saying that if it approved a settlement that large, it might be held liable for making an improper “gift of public funds.”

As part of the settlement, Richards’ proposal to become a housing developer was dropped. But about the same time, Compton’s city manager began talking up the idea of bringing upscale housing to the city, Lawrence Adams, a city administrator, later told the City Council. Compton is one of the poorest cities in Los Angeles County.

The city then began negotiating exclusively with Richards to develop such housing, priced from $170,000 to $240,000, Adams said.

The median sale price for a house in Compton in July was $142,500, according to DataQuick Information Systems Inc. of La Jolla, which tracks completed sales.

Richards and Bradley have touted the housing plan as a way to boost the city’s ability to attract more upscale residents, who would in turn act as a magnet for fancier stores and restaurants.

Richards said he has had this idea for 20 years. “Cities like Compton die because of the lack of repatriation of human capital,” he said, referring to upwardly mobile young people who have left for lack of high-grade housing.

“Financial capital will follow human capital,” Richards said.

Compton’s written redevelopment guidelines call for a potential developer to put up earnest money when exclusive negotiations begin, but officials did not require this of Richards.

He and city staff negotiated a deal calling for the city to advance him the full purchase price of the land in the form of two loans--one for $1.15 million and the other, the predevelopment loan, for $485,000.

In addition to repaying the loans, the deal also calls for Richards to split with the city certain net profits from the sale of houses.

Richards has presented the terms as a benefit to Compton. “Generally, citizens are asked to pay, but never see the rewards of the development,” Richards told the City Council in seeking approval of the deal.

This time, he said, he and the city will be 50-50 partners.

He did not explain that the 99-page agreement with the city ensures that he will receive nearly $6 million in management and “preferred profit return” fees before he begins splitting any remaining profits with the city.

Some council members who voted to approve the agreement seemed unfamiliar with it.

But even if they had read it, they might have been confused.

Clarifying Boundaries

The officially recorded version mentions two different amounts for the predevelopment loan and provides two different schedules for its repayment.

Earlier this year, city administrators asked the City Council to eliminate these contradictions.

At the same time, they asked and the council agreed to clarify the physical boundaries of the project.

The agreement Richards negotiated with the city called for him to receive 25 acres of city-owned land.

However, before the council approved that deal, city administrator Adams told members that the city might have to hold back five acres for a project of its own.

He asked that the council leave exact boundaries up to administrators, who then recorded a document that omitted the five acres.

Earlier this year, administrators got the council to restore the acreage to Richards’ project at no additional charge.