WILL KIDS PAY FOR GRAND PROJECT? SUIT ALLEGES SCHOOLS BEING SHORTCHANGED.

Byline: TROY ANDERSON

Staff Writer

Grand Avenue project officials structured the deal in a way that will cost Los Angeles public schools and community colleges $25 million over eight years, according to a lawsuit challenging public subsidies for the massive development.

The lawyer representing the Bonaventure Hotel, which sued to block the $2 billion project, has urged the Los Angeles Unified School District and local colleges to join the hotel's March 2 lawsuit to protect a key source of revenue.

Attorney Christopher Sutton claims that city, county and redevelopment officials used outdated documents to structure the project's financing, allowing them to avoid paying education a higher share of property tax and other revenue from redevelopment projects.

"This is a serious transfer of money away from children and schools to the well-connected downtown insiders," said school board member David Tokofsky, who has asked his LAUSD colleagues to consider joining the lawsuit.

"This is enough money to build a new elementary school every eight years," he said.

Supporters say the $2.05 billion Grand Avenue project will revitalize downtown Los Angeles with 3.6 million square feet of development and green space larger than New York's Central Park.

The proposal includes more than 2,000 condominium units, a luxury hotel, entertainment venues, restaurants, and commercial and retail space.

Los Angeles city and county and the Community Redevelopment Agency created a special entity -- the Grand Avenue Authority -- to administer the project at the top of the city's landmark Bunker Hill.

While officials promised that the project would require little taxpayer funds, Supervisor Michael D. Antonovich has estimated that $176 million in tax breaks and subsidies will be needed.

Officials eye revenue

Still, the Grand Avenue project has received near-unanimous support from local officials and civic leaders, who tout the potential for a massive infusion of tax revenue -- some $109 million a year -- for various government agencies.

But Sutton's suit claims that, under the agreement brokered by the Grand Avenue Authority, most of the tax revenue that should be funneled to education will instead remain with the CRA.

The complex issue has its roots in the Bunker Hill Urban Renewal Project -- which was approved in 1959 and amended in 1970 -- and resulted in the development of a prestigious residential and retail area that generates $26 million annually in property tax revenue.

The Grand Avenue Authority maintains that its project is simply an extension of the long-ago Bunker Hill development, allowing it to use revenue-distribution rules in place at the time.

But Sutton says the density of the condominium projects proposed for Grand Avenue violate guidelines of the 1970 amendment.

And he argues that the plan should be amended again -- a process that would trigger a reassessment of the area and, ultimately, a more equitable disbursement of tax revenue and more money for education.

That formula could potentially redirect as much as $52 million to other entities over 10 years and $307 million after 40 years, said Sutton.

Under that formula, Sutton estimates about $25 million would go to education during the first eight years.

"It's a question of whether a major amendment is required of the Bunker Hill plan, which would trigger reallocation of the $26 million a year (the area generates in revenue), which goes up every year by at least 2 percent," Sutton said.

CRA officials declined to be interviewed but issued the following statement:

"As a result of a past Bunker Plan amendment, the Agency is already making mandated payments to LAUSD, the Community College District and all other taxing entities. A Bunker Hill plan amendment would not increase these payments.

"The Agency believes that no plan amendment is required. All taxing entities would benefit from the increased tax base from the Grand Avenue Project."

Lease criticized

Sutton also criticized the lease agreement that the city and county signed with The Related Cos., which is developing the project.

He says a $50 million lease payment the county received to jump-start development of the 16-acre downtown park was really designed to quell any objections to the redevelopment plan.

"It's basically a payment so the county will not assert the objection that a plan amendment is required," Sutton said. "And the money being left on the table through that little sweetheart deal is the money that would go to the schools and colleges and other local districts."

Officials with The Related Cos. did not return phone calls.

No county comment

Helen Parker, principal deputy county counsel, said the county is reviewing Sutton's lawsuit and coordinating a defense.

"We don't have any comment on pending litigation," Parker said.

During recent public hearings on the project, Sutton warned the city and county that the Bonaventure would fight an estimated waiver of $60.5 million in hotel bed taxes and $5.5 million in parking taxes for the Mandarin Oriental Hotel that is part of the project.

Sutton said the waivers are unfair to existing hotels and violate existing redevelopment plans for the area. And he said his estimates of the money the deal would divert are conservative.

"The number grows in later years," Sutton said. "This is a very conservative estimate. By structuring the project as a lease, it allows the city and county to approve the project without taking into consideration the impact on other agencies," he said. "In essence, it's a payoff to the city and county to sell out other tax entities."

Tokofsky said the city and county should have better disclosed how the project was being financed.

"We shouldn't be putting all of our efforts into one place, and certainly not without disclosing the finances of such a redistribution of wealth from kids to people like The Related Cos."

troy.anderson(at)dailynews.com

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