Two New Faces Downtown: James Hunter and Carlyle Hall on Growth

Historically, the Central City Association and the Community Redevelopment Agency have had a very close working relationship regarding downtown. What are the legitimate expectations from the CCA regarding its partnership with the CRA in the evolutionary development of downtown?

Hunter: The Association has been very close over the years. I think that in the past two years, there had been friction over the issue of the transfer of air rights and from the lack of clarity in agency policy. In 1990, there has been an effort to breach the gap on both sides. We meet frequently with agency staff and Commissioners to understand each other’s point of view on downtown issues. I believe there is a fair degree of concord with regard to Agency policies on downtown development, housing, transportation policy, and the strategic plan.

We both want to see a major increase in the residential population of downtown. We think that is critical to creating a community out of the 275,000 jobs that currently exist downtown. Bringing residents closer to their jobs is a correct strategy. When the downtown strategic plan calls for 100,000 new residences in its vision statement, it is very consistent with CCA’s long-held position.

Carlyle, what is your perception of the CRA Board’s relationship with the CCA?

I think we are now in the process of establishing CCA’s relationship with the Agency since they are a very important player in town; they represent property owners and downtown businesses. In the past, it has been charged that the Agency and the CCA were too close.

For example, I think the Vice-Chairman of the Agency was the Executive Director of the CCA. That was not an appropriate arms-length relationship. Now Larry Kirk is on the Agency Board and a member of the Board of Central City, and that is a more balanced relationship.

We will be working not only with the Central City Association but any other interested groups who are involved in the build out and maintenance of the Central City. This includes a whole set of non-profit groups, the resident population located primarily in South Park, the L.A. Conservancy, the unions and other groups who are impacted by downtown development.

If it is clear that the CCA has a natural reason to have a board member on the CRA board, what natural constituency do you serve?

Hall: I think I am viewed as a representative of the natural constituency of non­profits who were originally concerned with the Agency’s involvement when the Mayor recommended that the cap on the Central Business District (CB D) redevelopment plan be raised to $5 billion. Half of those funds will be spent on affordable housing and services for the homeless. Many of the groups who are interested in that portion of the Agency’s activities had raised problems with the Agency’s activities in the past.

They want to ensure that a new approach be taken and that they have a better relationship with the agency. I’m there in part to acknowledge this concern and to specifically look at the affordable housing and homeless services as part of the Agency’s citywide program. Those programs will be the jurisdiction of a new housing committee that was recently set up.

What are the constellation of issues currently defined on the agenda that overlap between the CRA and CCA?

Hunter: First and foremost is housing. We need both affordable housing and market rate housing to meet the needs of the workforce that exist downtown—both professional, clerical and industrial. We need to look at housing for people whose income is higher than the 80% of median that would define the target group which Carlyle represents.

Second is the nexus of transportation issues including mass transit, demand management, improvement in the roadway and street network. Third is the quality of life on our streets, expressed by the construction fences on Seventh Street, crime on the street, the problems of the simple maintenance of public facilities downtown and public infrastructure, and the social problems created by homelessness which negatively affect the perspective of outsiders, employees and employers.

Hall: Not only do Jim and I share the view of the top three priorities, but a number of people I talk to have indicated the same sense of priority. I think this consensus is dictated historically by the fact that much of the commercial redevelopment has been completed. You can look around at all the tall buildings, and we have a healthy downtown office market.

With the convention center, much of the money has been spent, people have been moved, and it’s just a matter of building the structures. The Central Library project, which is a massive commitment of time, energy and resources, is over; the decisions have been made. Those factors have allowed these priorities to go higher on our list. At the same time, the federal government has withdrawn almost completely from the fields of affordable housing and transportation.

You have left some issues off the list: the CBD cap, City Council oversite of the CRA …

Hall: This is our list of priorities. You are talking about how to get there, which is a different issue. We need to raise the cap, or we will not have the money to address the three items on the common list. The City Council is critical as well because if you don’t have political support, the CRA will not be able to do it on its own, and certainly the CCA cannot do it on its own. So you need a general political consensus. It’s important on the part of the Agency to work with the Council and the Community Redevelopment and Housing Committee; once that relationship is addressed and there is a relationship of trust and confidence, then the cap issue can fall into place.

The issue of housing you each mentioned is not only of how many units but where it is to be located. The CRA hopes that South Park becomes a residential community.

Hall: Actually, since I have been on the Board, the main place we have been building housing is on Skid Row. We approved a number of rehabs of the old single room occupancy hotels—probably a dozen that are now decent, safe and sanitary housing when they were formerly decrepit.

In addition, a number of apartment buildings are now long-term occupancy. We also approved the first new single room occupancy hotel that will be built by Skid Row Housing Trust. This is a very exciting project.

In South Park, we have two projects which have a certain level of controversy associated with them. The developers of the Del Prado Apartments are asking the Agency to subsidize units that are partly market rate and partly affordable. It is a much higher level of subsidy given the area and the project, and this will raise issues of how we are spending money in South Park.

The other question is the RCI project at Ninth and Figueroa It will be a large office building with some residential component, and it is being done in part with a density transfer. It raises the issue, at what point do we need to encourage a greater level of housing?

I think it’s fair to say that the housing on that project is a rather small part of the relative size of the project, and yet it’s in an area zoned for residential density. Our sale of the density is assisting that developer to tilt it to the commercial side. That kind of choice will happen in many levels in the South Park area. We have to look at how we approach the issue. I suspect CCA shares my concern about how to get the private market to produce more housing. Public subsidy is limited and the demands on public subsidy on the part of the affordable sector and the homeless are in general more compelling than the demand to subsidize a market rate unit. But it is imperative to get the market to produce the market rate unit without the subsidy.

Hunter: Can that happen? Right now I don’t think it can happen on those sites. The problem is land value. Because of AB 283, additional downzoning and the creation of the QR5 zone through much of South Park, a golden opportunity was missed. Creating the residential hegemony in the area was a great idea, but unfortunately the barn door that was left open for commercial development was so large that the whole concept began to fall apart.

Most of the land in that area has been held for a long time. The primary use in South Park is surface parking lot, and it will remain that way until we grapple with the land price problem. One possibility, which I think Carlyle is reluctant to embrace, is to subsidize to some degree the value of the land to the point where it is affordable for market rale residential development.

Hall: I have difficulty saying that a high priority for precious public dollars is meeting a property owners expectation on the pro forma since he wished he could have had the commercial use in the rezon­ing.

Hunter: I’m not sure which alternatives are most feasible, but these are certainly means that have been discussed. The second means is to create a pool of residential air rights. This can be done by stripping the residential component from the FAR count so that developers could build residential units and still have the commercial viability to move the air rights within certain transferable zone boundaries. The third idea is to use the law to enforce a residential component; simply go back, change the zoning, take off the Q, and make it a residential zone. I think there would be a great deal of division within the community, especially within the CCA membership. It’s a very draconian way of dealing with the economics of commercial expectation.

South Park is a very real problem. The reason we have seen only 700 units built out of the 10,000 originally planned is that the land price of $200-$400/square foot presents a difficult problem.

Hall: The land prices have been encouraged to be so high by the City’s long term divorce between planning and zoning which AB 283 was designed to end. When the 283 program dealt with South Park, it was one of the first times that the property owners’ expectations were shown to be misplaced if they were looking at the zoning side, because the planning side was saying it was residential land even though it was zoned commercial. The marriage between planning and zoning should have done a better job of indicating to the property owner how the area is to be built out in the City’s eye.

Central City West is within CCA boundaries though not within the CRA project areas. What is its significance for each of you?

Hunter: We have three concerns. The first is the placement of housing in the immediate ring around a downtown core the extent to which the West Bank needs to provide for a substantial number of units. Their plan calls for 12,000 units including the replacement units. That probably provides housing for 20,000-28,000 people. The second issue is parking. It’s partly an issue of equity between the east and the west. Their parking requirements allow for 1.9 parking spaces per 1,000 square feet of development compared to a .6 effective ratio on the eastside.

The third issue is, who is going to pay for the infrastructure improvements? Their program is massive, in the hundreds of millions of dollars, and there is a common agreement that there is a $90 million gap in payments. If this plan is to be approved and moved forward, we need to know where the $90 million is coming from. The second part of this infrastructure issue centers on their plan for development to go in lockstep with improvements. But what is the schedule for the developments to generate the fees to pay for the improvements?

The recent wave of commercial development has increased vacancy rates in Class B and C buildings.

Hall: What do you mean by Class B? Are you talking about Arco Towers which has an increased vacancy rate as everybody goes over to the new Library Square Tower?

Hunter: That becomes an interesting conundrum. What defines Class B is very rapidly changing in this town.

Much of the leased space in new office buildings consists of relocations. Are you both comfortable with the balance in the Central City West Specific Plan between 25 million square feet of allowable commercial development and 12,000 residential units?

Hunter: This development is not jumping out of the ground in five or ten years. Office buildings will develop apace with the absorption ability of the overall down­town market. And they will be in competition with new buildings on the eastside of the freeway. I’m not sure that we have not chased a false issue, concentrating on this competitive demand. The development pressure seems to be running well ahead of the absorption ability of the marketplace, whose estimate is anywhere from ¾ of a million square feet to 2 million. But we’re developing more than 2 million square feet each year.

Every year, we’re falling a little further behind, and we haven’t even looked at Central City West in terms of real projects. We have to look at where vacancy rates are going. They are currently in the low teens, and they should probably be in the high single digits. But people have learned to live with the low teens and make money. Can they make money at 20%, because that’s where they may go if we keep putting in projects ahead of the marketplace.

Members of the CCA have in recent years been frustrated with the CRA. Carlyle, you were appointed to the Board based on frustration with the Agency. What changes need to take place at the CRA to allow for a higher level of confidence?

Hunter: The traditional frustration from the real estate and business communities was the difficulty in moving projects expeditiously through the Agency. There was always a changing cast of characters at meetings, and an insensitivity to the economics of a project I get the very clear impression starting last year with the Council’s oversight that there is a lot of pressure on the Agency to change. Much of the frustration has been resolved, and I have seen some very effective handling of problems. There are talented people at the CRA who have been given more of a reign. The appointments of Carlyle and Larry Kirk were meant to send a very clear signal to the Agency to reform itself before some extraordinary steps of oversight would be taken.

Hall: I think the Agency is on the way to redressing some of the problems that were raised about it. It’s important that in our restructuring, we demonstrate that there will be a difference in how we approach problems. The most important thing for us to do is to get our Board to lay out our policies so that we are not involved in the particulars of every deal. We should have a highly competent staff to work with developers to do any given deal. But the Board should set the policy. One of the problems people have with the Agency is that so much of the policy is buried within the inner workings of any given deal that it’s hard to see the policy.