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Redevelopment agency to vote on the Grand Avenue project

Times Staff Writers

The plan to transform a stretch of downtown’s Grand Avenue into a Frank Gehry-designed cultural and retail hub is expected to clear another major hurdle today, although key questions about public financial support for the development remain unresolved.

The city hasn’t decided yet whether to grant Grand Avenue the estimated $40 million in parking and hotel tax breaks that developers say are crucial to building the project near the Walt Disney Concert Hall.

Ultimately, it will be up to the Los Angeles City Council to decide whether to approve the tax breaks, a vote expected to come later this month. In the meantime, the Community Redevelopment Agency is to vote on the deal today -- the latest in a series of government approvals the project needs.

The revitalization of Grand Avenue is the vision of philanthropist Eli Broad, who two years ago vowed that it would be accomplished “without using one dollar of general fund money from the city or the county.”

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The $2-billion high-rise project of cultural, retail, residential and business use is a privately financed venture rising on public land -- meaning that it inevitably joined public and private interests.

A Times analysis shows that the Grand Avenue Committee, a nonprofit set up by a group of civic leaders to shepherd the project, has spent $4.2 million in public money, from the city and Los Angeles County, to help get the project off the ground.

The money -- paid over the last six years -- was used to begin the early planning for Grand Avenue. The work was managed by a committee made up of Broad and representatives of the public and private sectors. The committee selected a developer, setting the stage for public approval.

The money paid for the committee’s lawyers, consultants and staff members, including Martha Welborne, the project’s managing director.

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The city and county sent their share of the seed money through the California Community Foundation, a nonprofit group that served as the administrator for the planning effort.

From the beginning, the Grand Avenue project has been marked by a nontraditional public-private marriage. Besides the proposed tax breaks, government agencies are providing the land, investing in street improvements and subsidizing affordable housing in the project.

The developer, Related Cos., and its fiscal partners, meanwhile, are taking much of the financial risk -- particularly tenuous in a downtown real estate market that has shown signs of softening. They are also subject to a number of requirements, including the condition that all construction and permanent jobs in the development meet either “prevailing” or “living” wage requirements for the city.

Though each side bears a portion of the project’s financial risk, each side also stands to profit if the development is a success. The city and county could reap substantial tax revenue from the project, far more than they receive now from the properties, which are either vacant or used as parking lots.

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The Community Redevelopment Agency’s board is to consider a package deal to approve the project. Included is $24.4 million in public assistance for street improvements and payments to the developer to subsidize affordable housing in the complex. The agency also must approve long-term leases on public land.

But before the project can break ground, it must also get approval from the City Council and the county Board of Supervisors.

Construction of the first phase -- two high-rise residential towers, one with a five-star hotel, and 285,000 square feet of retail space -- is expected to start in October and be completed in June 2011.

The entire development would be built on nearly three square blocks on Bunker Hill, amounting to 10 acres. There would also be a 16-acre park stretching from the Los Angeles Music Center to the edge of City Hall.

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Bill Witte, president of Related California, said that without a 20-year rebate of the city’s hotel tax, which is just above 14%, it would be hard to include a hotel in the project. “It’s obviously crucial,” Witte said.

Related announced last week that it had signed a deal with the Mandarin Oriental hotel group to manage the project’s proposed 275-room hotel.

The developer and the city have been negotiating privately over the hotel tax and parking tax breaks. Neither Witte nor Jerry Miller, the city’s chief legislative analyst, would disclose the amount of tax relief involved, but previous estimates put the figure at $40 million.

Councilwoman Jan Perry said Wednesday she expected that the tax breaks would be in line with what Related had requested. She said that the development in her district was “a very exciting model for other projects that may follow this.”

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Granting tax breaks for high-profile hotel projects is an increasingly common occurrence used by city councils nationwide. In 2005, the city granted another downtown mega-project -- L.A. Live, which is not on public land -- up to $290 million in subsidies and tax breaks.

To spur construction of a high-rise Convention Center hotel near Staples Center, the council agreed to about $246 million in hotel tax rebates over a 25-year period.

Perry defended the outlay of public money for Grand Avenue. “We’re pooling our assets to have the greatest impact, instead of doing this piecemeal, which we have done in the past,” she said.

Defenders of the public financing said that without the Grand Avenue Committee, the responsibility for getting the project off the ground would have fallen to already overworked city and county staff members, or to a project management company, which could have cost the government agencies 2% of the full construction costs, or around $40 million.

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A handful of civic foundations -- including the Broad Foundation, the James Thomas Foundation and the California Community Foundation -- kicked in $176,579 in cash and $661,875 in in-kind donations.

Antonia Hernandez, vice chairman of the Grand Avenue Committee and president of the California Community Foundation, said it was important for her organization to support the effort.

“This project is very important for the civic life of Los Angeles,” she said. “It’s not just cultural. It’s a park. It’s economic development. It’s creating a center for the city where people can come and gather together.”

In addition, the committee received $358,000 in developers’ fees, mostly from Related.

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An MIT-trained architect and urban planner, Welborne, whose last civic project was promoting a rapid bus system for Los Angeles, has spent nearly six years shepherding the Grand Avenue project. She currently receives an annual salary of $246,800.

Welborne is a passionate advocate for the project’s role in changing the face of downtown Los Angeles. “If we don’t have a good heart of the city, what kind of city do we have?” she said.

Once construction starts, the nation’s largest public pension fund is poised to play a key role in financing construction of the development’s $775-million first phase.

The California Public Employees Retirement System, which invests the pension dollars of hundreds of thousands of state and local government workers, is a partner in the project along with Related and MacFarlane Partners.

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Witte said CalPERS has invested in a number of other Related projects: two projects in Little Tokyo, a planned luxury condo tower in Century City and the Time Warner Center in New York City.

jeff.rabin@latimes.com

cara.dimassa@latimes.com


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