Making Builders Do More

The light industrial park that Randall Roth plans for a weed-strewn corner of the San Fernando Valley will yield more than sturdy new buildings and freshly paved parking spaces.

Roth also will pay for a youth center and drainage improvements. Tenants will hire locally, and Roth has promised that 70% of jobs at the site will pay the city’s living wage--a substantial premium over minimum wage.

The extras are among a long list secured by a coalition of residents and labor and community activists. It is the third Los Angeles neighborhood benefits deal negotiated in the last year, placing the city at the front of a burgeoning national movement to demand more in return for the billions of dollars in annual economic development subsidies.

For decades, government economic development strategies were aimed largely at promoting business expansion, with the assumption that jobs and other benefits would follow. Now, those receiving public dollars increasingly are being called on to deliver improved wages, health benefits, subsidized housing, child-care centers and parks.

Not surprisingly, the new demands are causing some grumbling among developers. Saddling their projects with more fixes for civic problems drives up the cost and frequently sends them looking for even more public subsidies.

“There is a cost that could be too high,” said Larry Kosmont, a consultant whose Los Angeles-based Kosmont Cos. is working a dozen development deals across California, each with a proposed public subsidy of $5 million to $15 million.

But community groups, increasingly supported by politicians, say it’s payback time.

Cities hungry for jobs and higher sales taxes long have offered free land, tax breaks, sidewalks, street lights and power hookups to entice new development. Billions more has been spent on sweeteners to prevent companies from border-hopping to neighboring cities or states.

States paid more than $26 billion in grants, tax abatements, low-interest loans and other incentives in 1996, said political scientist Kenneth P. Thomas, a fellow at the Center for International Studies, University of Missouri-St. Louis.

More recent nationwide data are not available, but Thomas said the figure has ballooned. Last year, California alone devoted nearly $8 billion to state economic development incentives, according to the nonprofit California Budget Project, an advocacy group for low- and middle-income residents. And local governments across the country probably spend billions more, Thomas said.

Many of the deals have come with few strings attached, but that’s beginning to change.

At least nine states (California is not among them) have passed laws demanding a detailed accounting of subsidies meted out to private industry, in some cases requiring disclosure of the number and quality of jobs created. Also on the rise are “clawbacks,” which require companies to return the money if they don’t hold up their end of the deals, said Greg LeRoy, executive director of Good Jobs First, a Washington-based advocacy group.

Government also is increasingly imposing wage requirements when public dollars are used. About 60 counties and cities across the country--including the city of Los Angeles--have living wage ordinances that apply to public contracts.

And a California law that went into effect in January significantly broadens requirements that union wages be paid for construction jobs that receive even modest public assistance.

Communities Have More Leverage

Even where direct subsidies are not involved, government controls other resources that can spell profit for developers. And that has cracked the door open to some hardball negotiations.

For Roth’s development in Sun Valley, the city will sell the dormant Branford landfill and a neighboring lot to Roth for $2.25 million and spend a little more than half a million in taxpayer dollars on cleanup and other costs, city documents show.

The land sale was not a giveaway. But combined with the needed public stamp of approval, it gave Los Angeles City Councilman Alex Padilla and community groups leverage to insist on something more than a new office park.

“There wasn’t a lot of leverage on the part of the city but . . . there was enough,” said Lizette Bravo, an organizer with the nonprofit Los Angeles Alliance for a New Economy, or LAANE, which devised the community negotiating strategy and has brokered three such deals here.

Padilla, who represents the northeast Valley, recruited LAANE to head the community negotiating effort.

In the two other recent Los Angeles deals--the Staples Center expansion and a North Hollywood retail and residential complex--tens of millions of dollars in anticipated public subsidies gave community groups the leverage to push their wish lists.

LAANE is working with organizations in San Diego, Oakland and San Jose to launch similar campaigns in those cities and hopes ultimately to push for statewide public investment guidelines.

The group also is pushing Los Angeles to require that community needs be addressed wherever subsidies flow. The goal, said LAANE Executive Director Madeline Janis-Aparicio, is to “take our limited public resources and use them to deal with huge problems,” such as poverty, child care and housing.

LAANE first rolled out the tactic in Los Angeles in 1998 with TrizecHahn’s retail, hotel and entertainment complex at Hollywood Boulevard and Highland Avenue.

Street-Level Organizing Efforts Find Success

The project’s $90-million subsidy through the city’s Community Redevelopment Agency gave LAANE its entree to negotiate. The developer agreed to some local hiring and training, and about 1,000 workers--roughly half--earn the premium hourly living wages of $7.99 with benefits or $9.24 without, LAANE said.

But the neighborhood played no role in the process. And wage provisions did not apply to retail tenants.

Next came a street-level organizing effort and an even bigger target: the L.A. Arena Land Co., developers of Staples Center and a planned downtown hotel and entertainment district.

Together with more than two dozen community groups, five labor unions and 500 immigrant residents of the neighborhood’s worn-down apartment buildings, LAANE helped secure a deal that includes affordable housing, local hiring and a park. At least 70% of the estimated 5,500 permanent jobs will pay living wages.

And the agreement--negotiated with the assumption that the hotel could require as much as $75 million in public help--is binding even if the properties change hands.

LAANE’s San Fernando Valley operation--the Valley Jobs Coalition--also influenced development of a 17-acre North Hollywood project.

The $218-million project--a housing, office and retail complex east of Lankershim Boulevard and adjacent to the North Hollywood Red Line station--received final council approval in December. The public price tag: nearly $44 million.

But for those dollars, the neighborhood also will get subsidized housing units, a child-care center, local hiring and training and a promise that 75% of the estimated 1,800 jobs at the site will pay the living wage.

Developer J.H. Snyder Co. also agreed to allow union organizing and donated $10,000 to a local day laborers program for training.

“We’re not building an island,” said Snyder partner Clifford P. Goldstein. “To be successful, everyone in the area has to benefit.”

Padilla had tracked LAANE’s efforts with interest, and last summer he turned his eye to Roth’s proposed SunQuest Business Park. Roth needed land from the city, and Padilla let him know he wanted community perks in exchange.

Each neighborhood’s needs are different, and when LAANE organizers knocked on 400 doors in neighboring Pacoima and Arleta to call a meeting last summer, a wish list started taking shape.

Residents near the 33-acre property wanted protection from diesel truck fumes. They wanted trees and better drainage and a say in the project design. They wanted decent-paying jobs. And they wanted a teen center.

“If you ask for a little, you don’t get anything,” said Maria Trinidad Navarro, a Guadalajara-born mother of three who lives near the site and negotiated with the help of a translator. “We felt the power that we had with unity.”

That call is being echoed across the country.

One New York organization is tracking the more than $2 billion in city and state funds that have been channeled to big corporations since 1994 to keep them from leaving Manhattan.

In Chicago, the Neighborhood Capital Budget Group is pushing to channel redevelopment dollars into housing and job training for low-income residents, instead of cycling them all back to private developers.

“There has been a galvanizing of public opinion that ‘Hey, the rich are getting richer and . . . a lot of it is because the general coffers of society are subsidizing private developers,’ ” said Jacqueline Leavy, the group’s executive director. “People are beginning to say, ‘What’s in it for us?’ ”

Some Say Benefits Will Strain Public Purse

California cities are catching on too. Since its timber industry was decimated a decade ago, Redding has lured manufacturers with special perks. Now, it is considering tying those deals explicitly to job quality.

Companies that pay above Shasta County’s average wage would be eligible for subsidies in direct proportion to their own generosity. Those that pay less wouldn’t get a cent.

“We have a little phrase up here that successful economic development should not be hinged on the number of W-2s we help create but on the numbers on the W-2s we help create,” said Redding’s economic development director, Michael Mitchell.

Still, some developers complain that they are being pressed to foot the bill for problems beyond their control.

“It doesn’t work. You could get a half-million in public benefits that end up costing you $6 million,” said Tom Gilmore, who has developed downtown loft housing with the help of state funds. “When you say, ‘As long as government dollars are involved, why don’t we also feed starving children in Afghanistan?’ you take your eye off the ball, which is to do housing and redevelopment.”

Of particular concern is a controversial California law that took effect this year. The measure, sponsored by state Sen. Richard Alarcon (D-Sylmar) and backed by construction unions, requires that “prevailing” wages--which parallel union wages--be paid on all construction jobs that receive even the slightest public help.

Developers and advocates of affordable housing say it will make it even harder to finance projects that benefit low-income neighborhoods. And that will prompt a call for even fatter public handouts.

Even the head of the city’s redevelopment agency--which strongly backed the North Hollywood community concessions--said the benefits wrested from developers ultimately strain the public purse.

The needed public subsidy for Snyder’s project grew during the last year from $32 million to $44 million, said agency Administrator Jerry Scharlin, partly because of the burgeoning list of community benefits.

“In this case, the stars lined up. We had the money,” Scharlin said. “In other places, by adding these burdens, you ultimately drive away development. I worry about the ultimate success of this.”