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JUST SAYIN' - Imagine discovering a lamp on the beach and upon inspection, a genie appears and presents you with an offer: a 52-story building available at a bargain price of $200 million. However, a significant additional and yet unknown investment of public money is required to make the property habitable.
What do you do? Well, you toss the lamp and the genie into the ocean.
But the County did not and purchased the Gas Company Tower on West 5th Street last year, paying $200 million.
The idea was to move county headquarters from the current Kenneth Hahn Hall of Administration in the Civic Center into the Tower six blocks south. The aging Hall is badly in need of seismic retrofitting according to county officials. The original estimate for the seismic retrofit was $1billion, later a number of $700 million was given, unsubstantiated numbers thrown around after the fact by the irresponsible county officials to justify a boneheaded decision.
All this confusion about funds comes as the county deals with federal funding cuts over $1.5 billion in five years, ongoing liabilities from child abuse cases in juvenile facilities and foster care, and $2 billion in fire-related costs.
To make matters more intricate, the Tower`s retrofit cost projections have escalated with each appraisal, approximating a smoke and mirrors deception, at first $230 million, then $297 million, and now $397 million, causing the supervisors to balk. And it is not over. The costs are sure to climb. Based on my own experience, the phrase “unforeseen conditions” will kick in when actual work is done in an existing building, and the costs will balloon.
The county board last week directed the county chief executive officer to provide a written report in 60 days that includes the financial sources for any retrofit and an occupancy plan for the Tower. The supervisors voted to immediately suspend all proposals for seismic work on the Tower amid concerns about the cost of upgrades.
“I want a more surgical look at how we are spending our money,” Supervisor Hilda Solis said at the meeting. Solis and Supervisor Lindsey Horvath wrote in their motion that the building was acquired so that the county could consolidate its operations and save money.
“However, there has been little to no transparency into what progress, if any, the County has made in occupying spaces in the Gas Company Tower after eight months of ownership,” the motion states. “Meanwhile, it continues to lease higher priced office space elsewhere to meet the needs of county departments.”
County CEO Fesia Davenport said there were no plans to move forward with spending the money on retrofitting the Tower without board approval. She said the Department of Public Works had not yet asked for proposals to analyze what exactly the building needs. She also added that she has not yet recommended the county retrofit the building.
Last November the supervisors approved the county’s purchase of the Tower with a 4-1 vote, over passionate objections from Supervisor Janice Hahn, who warned that the purchase would sound the death knell for downtown’s civic heart and shunt the county’s workforce to a “soulless” office Tower on Bunker Hill.
“None of you here are going to convince me that this is a good idea,” Hahn said. She voted with a “Hell, no!” The Hall of Administration carries her father’s name, a longtime revered county supervisor.
Hahn said the transaction was akin to “robbing Peter to pay Paul.” She claimed the money being used to pay for this purchase “is being stolen from the funds that were meant to keep this building alive".
Davenport, whose office spearheaded the sale, promised the purchase “will save the county hundreds of millions of dollars” compared with the cost of upgrading the Hall of Administration and other county buildings.
As the bewilderment swells, Supervisor Solis said, “I think we need to be better planners.” She noted that, “we are in financial straits, so I want to make sure we are taking more of a surgical look on how we are spending our money. It has been eight months now and there has been little to no visibility of any progress.”
Determining what must be done, and how much must be spent, is a complicated circumstance. The Gas Company Tower would withstand an 8.0 earthquake, but glass would be shattered and fall to the ground, most likely injuring passers-by, said Mark Pestrella, Public Works director.
On the other hand, the much older Hall of Administration is at “high risk,” saying a major earthquake equal to or larger than the 6.7 magnitude 1994 Northridge Earthquake would do “significant damage.”
But Hahn was adamant in her own evaluation. “I would rather be in this building where the most you have to get down is four floors to reach an exit. That other building is a 52-floor Tower with two stairwells. I’d rather be here.”
“This is turning out to be a bigger boondoggle than was originally sold to the public,” said Hahn, who said she had not been told about the upgrade costs. “I am only more convinced that we are better off retrofitting the historic Hall of Administration and keeping the heart of county government in our Civic Center.
At the same time, an uneasy question keeps sneaking in my mind. Did LA County bail out an office speculator? I faced a similar issue when the Southern California Rapid Transit District/Metro planned its new headquarters. Forceful pressure, especially from a top broker, was applied to lease or buy a downtown office tower during the collapsed rental market in the early 1990s. Staunchly, I maintained that public agencies should not rescue struggling office speculators.
Janice Hahn may very well be right. “I think this cost is just the tip of the iceberg,” she said. “I think there’s been a lot hidden from us.”
I agree with Supervisor Hahn. There are too many shady corners in this deal and questions unanswered.;
What incentives were offered or extended that could prompt the several offices within the County to satisfy required notices, due diligence, reallocation of public funds, obtain multi-agency reviews and clearances, and then enter into negotiations and then close the acquisition within two months' time when the most aggressive of commercial real estate transactions takes 3 months at best? Bottom line is: Did the process begin and funds expended prior to October 2024 without Board authorization?
If the Hall of Administration is living on borrowed time and the Board needs to spare County employees from the danger of an earthquake, why would a 54 -story, Class A office building that is certified LEED Gold and capable of withstanding an 8.0 earthquake be in need of additional funding to further retrofit? In November 2024 the Board was told " The Tower is effectively in move-in condition and would not need upgrades, including seismic ones". Considering 'proactive seismic" retrofit has now been suggested, County counsel should opine whether taxpayers are liable for damages during an earthquake because the retrofit has not been done.
If the Tower was foreclosed on because of the Seller`s inability to meet its mortgage obligations and was not able to pay its property taxes, how does the County plan to cover cash flow deficits given how slow it is to lease all of the vacant space in a market that continues to see increasing vacancy rates?
When does the County plan to make public all of the due diligence documents and economic analyses that it said would need to remain confidential until which time the acquisition had been completed?
How does the County expect to enhance, let alone maintain, property and business tax revenues as it moves government business away from the current government buildings it occupies (Let`s not forget the ripple effect to surrounding businesses and property owners) with a move to the Tower which was immediately removed from the property tax rolls and the prior property taxes forfeited?
Who were the vendors, and how much was paid to each, for all the work performed prior to the acquisition of the Tower that had to be "reimbursed "afterwards because they weren't disclosed as part of the purchase cost?
Indeed, there are too many red flags here. Lack of accountability and poor policy execution flourished. Public trust is diminished, and public engagement is non-existent. And it all may very well be just "the tip of the iceberg" to quote Supervisor Janice Hahn.
(Nick Patsaouras is an electrical engineer and civic leader whose engineering firm has shaped projects across commercial, medical, housing and entertainment sectors. A longtime public advocate, he ran for Mayor in 1993 with a focus on rebuilding L.A. through transportation. He has served on major public boards, including the Department of Water and Power, Metro, and the Board of Zoning Appeals, helping guide infrastructure and planning policy in Los Angeles. Nick Patsaouras is also the author of "The Making of Modern Los Angeles".)
