It seems that last week’s debacle concerning a misleading staff report to City Council wasn’t an isolated incident.
Last Monday, I wrote about Housing and Economic Development Department Director Andy Agle’s request for City Council approval to negotiate exclusively with AMC Theaters to build and operate a new movie complex on Fourth Street. His report misrepresented AMC’s ability to close the Loews/AMC Broadway to meet City Council’s stipulation that a new, 2,100-seat movie complex wouldn’t add a large number of additional movie seats to Downtown.
The staff report said AMC proposed to shutter the Loews/AMC Broadway and remove its 1,049 movie seats. There was one big problem: AMC doesn’t own the fourplex and as a lessee, can’t close it and eliminate its seats. Only AMC’s landlord can close the theaters when AMC’s lease expires in 2014. Then, the landlord could find another operator to take over (if AMC doesn’t renew) or remodel for non-cinema use.
A second bid received from a partnership that included ArcLight Cinemas was summarily ignored because ArcLight has no theaters in Santa Monica and no opportunity to reduce Downtown’s overall seating capacity.
In June, 2008, a similar slip-up occurred in obtaining approval of the development agreement for The Village at the Civic Center from the city’s Redevelopment Agency (made up of members of the City Council.) The Village is the large, mixed-use redevelopment project facing Ocean Avenue consisting of three parcels: Parcels A and B for 165 market rate condos and Parcel C for 160 affordable housing apartments.
The lead developer of The Village is Related Companies of California. When it came to guarantees, Agle’s report stated that Related Companies of New York (the $5 billion parent company of which the California company is a subsidiary) would guarantee the obligations for all three parcels of the project when the guarantee actually excluded the affordable housing component, Parcel C.
Without the guarantee, City Hall could be responsible for paying out claims on Parcel C against the developer and City Hall by third parties such as workers, vendors or other persons injured on or near the site. Even worse, if claims by City Hall against Related for non-performance on Parcel C aren’t covered or the California subsidiary “goes out of business” and breaches its contract to develop The Village, City Hall would be left holding the bag.
When commercial real estate attorney Stanley Epstein found out Agle’s report said all three parcels were “guaranteed” when they weren’t, he notified Agle, some agency/council members and the outside law firm for the agency/council of the error. A red-faced Agle verbally admitted to the agency/council at their June 10, 2008 meeting that his report was in error and only two parcels — A and B — were covered by the parent company’s guarantee.
Even though Related volunteered to add Parcel C, the council/agency inexplicably turned down the “free” guarantee saying it didn’t need it. Unbelievable! City Hall could have eliminated all its exposure if the guarantee also covered all three parcels.
In the meantime, neither Agle nor his superiors would offer a reason or explanation for stating in the report that Parcel C was included. Fearing the possibility of misconduct, Epstein requested an investigation of the matter and was stonewalled.
Daily Press Editor-in-Chief Kevin Herrera and I met with Epstein who told us he didn’t think it was conceivable that the person (Agle) who negotiated the more substantial terms in the agreement wouldn’t know the exact terms of the guarantee or how such an error could be made especially when the guarantee document could be easily understood by a 14 year old. While we thought it was interesting, neither Herrera nor I saw sufficient proof of wrongdoing or an overriding public interest in the subject, therefore the “story” didn’t receive news coverage or a mention in my column.
Agle’s serious misrepresentation of AMC’s ability to meet significant bid criteria on top of misstatements concerning The Village guarantee raises even more questions about how and why such dumb mistakes are made. With the AMC fiasco, there’s now a disturbing pattern of mistakes.
Within 16 months, two major errors on big money projects under HED’s jurisdiction have been uncovered. It also appears that Agle may have swung his second strike — not counting how many other serious errors may be in reports submitted to City Council and the Redevelopment Agency.
It’s city policy that staff reports be reviewed for accuracy by the city attorney, city manager and finance offices before being agendized and made public. None of these departments questioned Agle’s claim about the Loews/AMC Broadway closing or looked into the omissions involving The Village guarantee which makes the reason for the errors even more of a concern to residents.
With projects costing the tens of millions of dollars, is anyone minding the store?
Bill Bauer can be reached at email@example.com