Audit Finds Underreporting on L.A. Project

The city controller charged Wednesday that Los Angeles redevelopment officials underreported the subsidy provided to the developer of the Metropolitan Lofts project by $2.5 million and gave inaccurate information about the amount to the City Council.

City Controller Laura Chick also gave the civil grand jury documents collected from two audits on Community Redevelopment Agency loans and subsidies that were risky or in default. Documents turned over include critical evaluations of the city’s recent decision to give $38 million to the Marlton Square project in South Los Angeles.

The problem with the Metropolitan Lofts project was discovered as part of a third audit released Wednesday that found the agency had failed to keep accurate track of its property and its real estate transactions.

The controller singled out the Metropolitan Lofts project, in which the CRA board and the City Council agreed to provide land for 264 new apartments at the northeast corner of Flower and 11th streets in downtown Los Angeles.

The board and council agreed to lease the land to developer Forest City Properties Corp. for $10,000 per year for 97 years -- a total of $970,000 -- after being told the CRA bought the 73,350-square-foot property for $5.9 million.

Chick’s audit, however, found the agency actually spent $8.4 million to acquire the land.

Chick said there was no evidence that agency officials intentionally misled the council about the cost, but she questioned whether the council would have approved the lease if it had known the land had cost $2.5 million more.

“This vital information could have influenced the board’s decision to approve the project as presented,” Chick said.

Indeed, City Council members were troubled by the audit finding and said it might have changed their votes.

“It would have certainly raised the per-unit cost to somewhere above our average, so it would have given us greater pause had we known that,” said Councilman Eric Garcetti, who heads the council committee overseeing redevelopment.

CRA administrator Robert Ovrom confirmed that the agency staff made a mistake but said it was unintentional.

The original price, which the council approved, was for an initial site. The agency later added more land that cost $2.5 million more but did not go back to the council to reflect the change.

“The staff erred in not reflecting the change in the money,” Ovrom said.

Said Garcetti, “If we can’t trust the numbers that are coming through, we can’t do our jobs.”

Forest City and its executives have contributed $44,000 to city candidates in the last five years, including $11,000 to Mayor James K. Hahn, records show.

Later, Chick acknowledged that she had sent the civil grand jury documents involving other redevelopment projects.

“In the course of reviewing CRA files, several issues were brought to my attention, which I have referred to the Los Angeles County civil grand jury,” she said, declining to offer specifics.

An index for the documents sent to the grand jury shows the information involves risky loans and subsidies for projects, including the Marlton Square development, a major commercial and residential project in South Los Angeles that received $38 million in subsidies.

Chick complained to the mayor recently that city money was provided to the project without sufficient background checks, which would have found that developer Christopher Hammond and his company, Capital Vision Equities, had credit problems, including county, state and federal tax liens, that made the project risky.