May 4, 2004 - From the October, 2003 issue

L.A. City Controller's Audit Finds City Mismanaging Its Extensive Real Estate Holdings

The current state of California's budget crisis coupled with the structural hindrances that restrain local governments from being the architects of their own futures have compelled cities statewide to tighten their belts and to optimize their spending. MIR is pleased to present this interview with L.A. City Controller Laura Chick, in which she discusses her recent audit of the city's real estate holdings and the procedural manner in which the office of the controller has changed since charter reform passed.

Laura Chick

When we last spoke you had just taken office as controller. In that interview you stated that under the new charter, the controller's office was under increased public scrutiny and you believed transparacy was an advantageous outcome of the charter reform process. Elaborate on what's changed with adoption of a new charter and with your assuming leadership of the office?

First and foremost, the office has become more visible and involved in more aspects of city government through a function of management audits, or performance audits, as well as through reports or white papers.

You served on the City Council before the charter was passed, and now serve as controller after passage of the charter. What, if anything, changed in city governance as a result of revising the city charter?

Unfortunately, I don't think that some of the changes in the new charter have really been fully implemented yet. One that I can very much point to as a success is the Department of Neighborhood Empowerment and the growth of neighborhood councils. I just went to vote in my own Silverlake Neighborhood Council election, and it was phenomenal, both in terms of how many people were there to vote and also that there were over 45 candidates running for positions on the board. We still need to work on the communication part to make sure neighborhood councils are getting expedient, accurate, easy to understand information so they can weigh in on issues. But, I remember the term "accountability" being a very major word that former Mayor Riordan used as part of his campaign to get support for the charter-that the public wanted more accountability from government. I don't think we're there yet. My audits are a step in the right direction, but there's a ways to go to deliver a truly accountable government that is open, so that the public easily understands how their dollars are allocated.

In your recently released audit of the city's real estate holdings, you stated "the real estate holdings of the city of LA are vast, valuable and diversified. But, instead of a clear vision and mandate in overseeing these assets, the city is flying by the seat of its pants." Could you elaborate on what your audit found and its conclusions?

The city owns a lot of very valuable real estate all over Los Angeles. Some is property with occupied buildings, others are surplus properties-property that isn't improved and doesn't have a specific use. What we found was that while we own very valuable property, we do not have d real understanding of the value of that property. We don't have any kind of comprehensive or comprehensible inventory of that property. We enter into leases with no over-arching plan that predicts the city's workforce space needs. We go out to the public with bond measures to build libraries and police stations and yet we have no accurate analysis of all of the existing space and how it's being currently used. We have good people working in the General Services Department on this, but our whole approach is antiquated-we don't have the right software, and we're approaching this in an extremely unproductive, amateurish manner.

What are the costs to taxpayers of business as usual regrading the management of the city's real estate assets?

It's difficult, even for me, to estimate the costs of continuing to do it this way. We have over 2,000 designated surplus properties that we are not putting to better use or selling and using the revenue from those real estate sales to, for instance, help hire more police officers in accordance with mayor Hahn's agenda. We're holding on to land for which we could have money in the bank. Sometimes, that land is costing us money to maintain. So it's costing us money and it doesn't make sense. It's really hard to assess the dollars that we could be saving. I just know that it's significant.

The audit singled out the Los Angeles Mall, adjacent to City Hall, as an area with tremendous unrealized potential. Last week, the Grand Avenue committee unveiled a plan to revitalize the area around the Los Angeles Mall under a joint powers authority involving the city, the county and CRA. Address the nexus between your audit and realization of this civic vision for Grand Avenue. How might the city both realize value through better planning from it's public's assets?

I'm certainly supportive of the current movement of joining all the government entities to produce a great plan for Grand Avenue and downtown. Both the vision and the cooperation and teamwork have been missing for a long time. The mall is a perfect example of an under used, under developed piece of prime property. There aren't very many places to go shopping or to go for affordable meals in the heart of the civic center. We have thousands of public and private employees in this area. Part of the problem is that people don't even know we have a mall. We don't advertise it, we don't maintain it, and we don't do a good search for the right mix of tenants. We've got people who want places to go, we've got a destination, and somehow we're not matching the two. I will be getting a briefing from General Services on how they are planning market and improve the mall and I'm very curious to hear it. As far as I know, there is no plan.


Your office's report on the economic impact of Staples Center, which was released earlier this summer, indicates that Staples Center has been, "a win for the economy, a win for the taxpayer, and a win for the people of Los Angeles." What has the city learned from the financing of Staples Center that might benefit future public benefit development projects?

We did that report because everywhere I look in the city of Los Angeles, I see chopped up transactions that intend to do positive things for economic development and economic vitality, but do not fit anywhere into an economic development strategic plan for the city, or serve as role models for future endeavors. Add on to that the fact that the city rarely, if ever, goes back to take a look at an economic development project into which we put public funds to evaluate its progress and to determine what are the lessons learned.

The whole reason I did the Staples report was to ask the question, how did the city do in participating in this project? The answer was, we did very well. The second question is, what can be replicated to improve our track record in being successful in economic development projects? Some of the things that Staples has to teach us is that there are ways to give public resources and not put taxpayer dollars at risk. The first lesson is to leverage but protect taxpayer dollars and to look for and a secure dedicated funding source. Key to this was the process, which was very public and transparent. It also wasn't an isolated project, but part of a bigger development plan, which has yet to be fully realized. In addition, the project has not only benefited the city and private developers, but it also improved the quality of life in the surrounding community.

That last time you spoke with MIR was shortly after the September 11th attacks. In that interview you stated that, "my worry is that as we focus on these very serious and pressing issues on a national and international scale, we will lose the political will and focus that is needed to solve the concrete problems facing us at the local level-housing, transportation, public safety, education etc." It's now two years later. How accurate and perceptive was your 2001 assessment?

I'm sorry to say that my fears have proven to be quite real. The perfect example is, with this formation of the Federal Department of Homeland Security, how few dollars have trickled down to the city of Los Angeles for such issues as port security and reimbursements for the city's ongoing investment in public safety.

The city of LA does a very good job with its money-balancing the budget, not going into too much debt, delivering services, and never going near the brink of bankruptcy. But, about every decade, because the state doesn't manage its money well, the people of Los Angeles get punished for doing a good job with their local tax dollars. Something is very wrong with the picture in California. We're doing well in Los Angeles, but we're bearing the burden of a lot of additional costs without the help we should be getting from Washington.

In the final gubernatorial debate in the recall election, former Assemblywoman Helen Thomson, now a Supervisor in Yolo County, asked all five of the candidates about what services are needed at the local level and how would they be funded. All of the candidates spoke to the dysfunction currently in state and local finance. Could you comment on their answers and your prescription for what needs to be done in the Capitol to better protect local government revenues?

Cruz Bustamante was talking about the swap between sales tax and property tax. I'm not sure that anyone has convinced me that such a swap totally protects the state from raiding local revenue. But, I do happen to think that it would be a better way of reallocating dollars. The swap would put the emphasis on property tax at the local level and sales tax more at the state level. I've watched, within the city as well as between the city of LA and other cities, the struggle for sales tax dollars that big box retailers can create. You see cities more interested in those kinds of land use projects than in very needed affordable housing. In terms of our land use policies and economic development programs, a creative swap makes sense. But, I still want to see where and how we can get guarantees that there are certain dollars that are just sacred and that cannot be taken by the state.


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