A GRAND DELUSION? QUESTIONS UNANSWERED IN DOWNTOWN REMAKE.

Byline: Troy Anderson Staff Writer

For the rich and powerful lined up last week to show off plans for the $1.8 billion Grand Avenue project, it was the grandest of their dreams coming true: A spectacular complex of parks, commerce and people that would culminate three decades of building a true downtown in Los Angeles.

But behind the boosterism remained a long series of unknowns: What is the real value of the public property and the cost of the public support involved? Will it prove to be as good a deal for the public as a whole as for the developers, investors and public officials who are advocating it? Will it deliver on its promise to make downtown L.A. a vibrant center of the city's life 24 hours a day, seven days a week?

``I think it's important to have a vital economy,'' said Stephen Cauley, director of research at the Richard S. Ziman Center for Real Estate at the University of California, Los Angeles, Anderson School of Management.

``But I don't see why historically it's necessary to have a vital economy downtown. Downtown has deteriorated. In some sense, Century City and West Los Angeles have taken over as downtown.''

Driven by the vision of billionaire Eli Broad, the Grand Avenue Authority last week unanimously approved the redevelopment plan to turn the area around the Walt Disney Concert Hall into the ``civic heart'' of the city. In the coming months, the Community Redevelopment Agency, City Council and county Board of Supervisors will be asked to approve the plans - something that seems certain to occur with little contentious debate.

The $1.8 billion project - already $600 million higher than first estimated - calls for the construction of five high-rise towers, 400,000 square feet of retail stores, a 275-room boutique hotel, up to 2,600 condominiums and apartments, a bookstore and cinema.

``I think it's an excellent deal,'' county Chief Administrative Office David Janssen said, an authority member. ``Downtown has tried many, many, many times to get this area completed, developed and built out.

``That's a real possibility now at no real risk to taxpayers and the exciting possibility that we will have an economic engine downtown that everyone has talked about for years.''

Under the plan approved last week, developers would pay the CRA and the county more than $110 million in ground lease and incentive rent payments over the three phases of construction. If the project is approved, construction on the first phase would start at the end of 2006. Construction on the third phase would start by 2011.

Of that money, the developers would pay $50 million up front for the construction of a 16-acre civic park between the Department of Water and Power building and City Hall. The park and more Grand Avenue improvements are expected to cost $55-$60 million.

``What I believe is unimaginable, but is actually happening, is that (government officials) have said, 'We have no prospect of being able to finance the development of public space ourselves and therefore we're asking these developers to be responsible for designing and financing the civic park,' '' said Robert Harris, a professor of architecture at the University of Southern California School of Architecture.

The ground lease and rent incentive payments are also expected to pay for $10 million to $12 million in public space improvements throughout the project and to provide developers with incentives to help pay for affordable housing in 20 percent of the units.

The developer, The Related Companies, has asked government officials to pay for the parking facilities, which would be repaid by tax increment financing - bonds sold by redevelopment agencies, which are repaid with the increased property tax revenues generated by the redevelopment project themselves.

And unlike the CRA's Hollywood & Highland project where the parking garage has not raised enough revenues to repay the bond, Related has offered a payment guarantee on the parking bonds.

``So much of it depends on how successful the projects are,'' said Larry Kosmont, chief executive officer and owner of Kosmont Companies, a Los Angeles-based development consultant firm.

``It's a little too early to tell if it's a good deal or not. The bones of the deal seem OK. But whether or not the cost for parking is justified by the economic activity, that's a big question mark.''

Skeptics also point out that no appraisal of the four parcels of land owned by the CRA and county has been conducted to determine if the proposed ground lease and incentive rent payments are appropriate compensation.

According to the real estate adviser firm that helped broker the deal, the more than $110 million in proposed ground lease and rent incentive payments is in the range of what the four parcels, totaling 10 acres, could be sold for at current market rates.

Proponents say the real advantage of the project is not the value of the land, but that it will serve as an economic engine for downtown and create a gathering place for people throughout the region for community celebrations. It's also expected to generate 5,300 jobs at build-out plus $28 million in annual tax revenues for the city, county and state.

``And more than this, these are four parcels that are underutilized or nearly fallow and the revenue and property taxes generated from this potential development will be transformative,'' said City Councilwoman Jan Perry, an authority member. ``We've structured this deal so we don't have a problem down the road.''

Last year, some authority members had expressed concerns about how the government would obtain an estimated $300 million to develop the park, underground parking structures and to make street improvements. But under the deal now proposed, officials don't expect taxpayers to be stuck with the tab or any unforeseen bills.

However, the plan indirectly could cost taxpayers because it has reignited interest in replacing the earthquake-damaged county Hall of Administration building, a project expected to cost about $200 million, and an undetermined amount for a new courthouse.

Under the Grand Avenue proposed plan, the county could relocate its present staff at the hall to one of the towers at 1st and Hill streets sometime around 2011.

``We're going to be revisiting the issue during our budget hearings about what to do with this building,'' Janssen said. ``We are going to have to do something.''

As the city learned with the $300 million renovation of City Hall - far more than anticipated - Janssen said it may cost the county less to occupy the tower, rather than trying to renovate the existing hall.

Harris said the question isn't whether the project is worth pursuing, but that it's done correctly.

``My general perspective is optimistic,'' Harris said. ``There is a chance that good things could happen, but this is the moment we ought not be critical in the sense of opposing what is going on, but encouraging that what is about to be built be really worthy of the city. It's time for us to do something really good.''

Troy Anderson, [phone]

troy.anderson(at)dailynews.com