CHILDREN'S MUSEUM GETS CITY BAILOUT $1.7 MILLION LOAN OK'D IF FUNDS ARE MATCHED.

Byline: KERRY CAVANAUGH

Staff Writer

In a rare and controversial decision, the City Council voted Friday to dip into the city's savings account and loan up to $1.75 million to the financially struggling Children's Museum of Los Angeles to keep construction going.

Contractors had threatened to stop work Monday on the $58 million attraction in Lake View Terrace if they didn't get some of the $3.3 million owed them.

Though money won't actually change hands by then, the city's pledge to loan up to half the money is enough to keep workers on the job.

Working with Mayor Antonio Villaraigosa, Councilman Richard Alarcon offered the bailout as part of an effort to spur the museum into accelerating private fundraising. The museum will get the loan only if it can collect $1.75 million in private pledges within the next 30 days.

"We have invested so much that 80 percent into construction is not the time to pull the plug on the project," Alarcon said Friday.

"It is very important to me that we increase the private-sector participation. Currently the project has raised $38 million, with $27.5 million from the public sector. That formula is not a formula for success in my mind."

The move comes a day after City Controller Laura Chick announced she will audit the financial activities of the nonprofit museum.

And while the council voted 11-0 to approve the loan, some members said they were hesitant to dip into the city's reserve fund -- the equivalent of a rainy-day account -- to support a nonprofit with financial problems.

Some also expressed frustration with Alarcon, who recently rescinded nearly $1 million that his predecessor, former Councilman Alex Padilla, had pledged for the museum.

"I'm uncomfortable when we are going to bear the burden, the risk on our side, when there is some question as to whether they will be able to raise the private funds, given the history of being shortchanged," Councilman Jose Huizar said.

But City Legislative Analyst Gerry Miller said the city has already sunk millions of taxpayer dollars into the museum -- money that could be lost if the venue doesn't open.

"We're clearly between a rock and a hard place. This is a stop-gap measure and a loan to make sure the contractors don't walk off the site," he said.

The motion calls for a city loan to match private donations, up to $1.75 million. If the museum receives pledges of $1.75 million, the city will match that dollar for dollar with a loan.

The museum will have until June 30, 2008, to repay the no-interest loan.

The City Council is expected to work out details and a contract in the next two weeks.

Bruce Corwin, co-chairman of the museum Board of Directors, said the "challenge gift" has already helped kick-start fundraising.

The motion "has re-energized the board, to the point that we have already raised close to $1 million for the new museum," he said.

The bailout comes after a week of tension over the Children's Museum, which closed its downtown location in 2000 and is now 80 percent through construction of a modern facility in Lake View Terrace in the northeast San Fernando Valley.

Fundraising has been slow, and at least one state grant has been canceled because of delays.

Earlier in the week, some museum board members blamed Alarcon for the financial shortfall.

Shortly after taking office, Alarcon stopped a pledge by Padilla to dedicate $982,000 to the museum, money generated from methane gas sales at the former Lopez Canyon Landfill.

The Cambria Energy Fund, Alarcon argued, had been created to benefit the community around the landfill, and that community -- including the Foothill Trails Neighborhood Council -- wanted the money spent on local amenities, not a museum near Hansen Dam.

Some council members chastised Alarcon for yanking the money promised by Padilla, and they pushed him Friday to back up the council loan with his community trust fund.

"That money, while it was not allocated according to what you believe was the right way to do it, was a pledge made by the former councilman of the district to complete the project," said Councilman Greig Smith.

"At the last minute that money is not there now, and we're forced to make this decision we have to make today."

But Alarcon refused, saying local residents shouldn't bear the burden of slow fundraising efforts.

"This community has ponied up plenty. This is a citywide museum. The whole city is responsible for this -- not just one community," he said.

kerry.cavanaugh(at)dailynews.com

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