Is the Public Paying for Playa Vista's Affordable Housing?

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Is the Public Paying for Playa Vista's Affordable Housing?

June 2001/Ballona Wetlands Land Trust

Affordable Housing "White Paper"
Public Subsidies and Playa Vista’s "Affordable Housing":
How Much Bang for the Buck?

I. Summary

As one of the key justifications for building their Playa Vista megaproject in the Ballona Wetlands ecosystem, the project developers, Playa Capital, claim that they are performing a public service by building "affordable housing." They say that much of that housing would be for very-low and low-income residents. In return for this public service, the City of Los Angeles and State of California are proposing direct and indirect public subsidies conservatively estimated to be more than $455 million.

The following document concerns these subsidies, what they are, where they come from, and how the figure of $455 million was arrived at. It will also show that the "affordable housing" component of Playa Vista actually designed to serve poor families with children is remarkably smaller than the public has been led to believe, amounting to fewer than 120 rental units with more than one bedroom out of more than 3000 dwellings planned for Playa Vista’s Phase One. Finally, the document will address the question of whether the public is really receiving a fair and just return on its investment.

II. A Historical Perspective: New York 1850, Los Angeles 2000

One hundred fifty years ago, a debate eerily similar to the current debate over the Ballona Wetlands took place in another major city—a debate about a piece of prime real estate and how it should be used. In 1850 the rapidly expanding metropolis of New York City did not have a large public park to match the great urban open spaces of Europe (London’s Hyde Park and Paris’s Bois du Boulogne, for example). Many New Yorkers felt the need to create a large public space that would give city dwellers a vision of nature and a place to escape from the noise and stress of the burgeoning city, but within the city.

The conflicting economic, political, and social interests in New York City during almost ten years of debate on the park made a local solution impossible; even among the elites who controlled the city’s political process (not to mention the essentially powerless majority, the poor) there were simply too many centers of power and too many competing interests. The solution eventually came at the state level, with the New York legislature passing a bill allowing for eminent domain to be used to acquire the land. The process wasn’t easy, but in the end it worked. After almost ten years of discussions and arguments, accusations of profiteering and land speculation, political intrigues and legislative battles, a mostly undeveloped 779-acre parcel in the middle of Manhattan was chosen (later expanded to 843 acres). After a design competition, construction began on what would become New York’s world-renowned Central Park.

Public Subsidies and Playa Vista’s "Affordable Housing," by the Ballona Wetlands Land Trust

Actually creating the park was not an easy matter, even after the competing factions reached agreement on the where and the how. The land was swampy and considered ugly. It was partially "degraded" by unplanned human use. The original budget ($1.5 million, close to $100 million in today’s dollars) soon proved completely unrealistic; just buying the land from the 560 scattered landowners cost $5 million, more than New York City’s annual budget at the time. There were endless arguments over who would pay for the park, and how much; over wages and working conditions; over rising cost overruns; over design changes and over which materials should be used for the roads and bridges.

The amount of work done was enormous; the finished park, although designed to look completely natural, was in fact a created space, constructed foot by foot over more than six years by thousands of workers at the expense of huge budget overruns.

A book on the history of the park says, Central Park thus emerged out of a complex mix of motivations—to make money, to display the city’s cultivation, to lift up the poor, to refine the rich, to advance commercial interests, to retard commercial development, to improve public health, to curry political favor, to provide jobs. No single individual either conceived or carried through the massive public project that, in the end, cost more than $10 million (three times the city’s total budget in 1850) and took more than eight hundred acres out of the most expensive and intensely competitive real estate market in the United States.1

But for all the work and expense, for all the battles over what kind of park it should be and who should enjoy it, Central Park was, and remains, a triumph—of imagination, of aesthetics, of engineering, of public policy and the notion of the "greater good." Who today could, or would want to, imagine New York City without Central Park? Today Los Angeles faces a situation in many ways comparable to the situation New Yorkers faced in 1850. In a prime section of sprawling Los Angeles lies a piece of unimproved land that is even larger than the body of land that became Central Park (1,087 acres rather than 843). Like the Central Park land this land in Los Angeles, the Ballona ecosystem, is prime real estate owing to its location, and arguably among the most valuable land parcels in all of Southern California. (It is also LA’s last coastal wetlands ecosystem.) Like the Central Park land before the park was built, the Ballona Wetlands is mostly privately owned, and most of the land is zoned and slated for private development. If built out according to Playa Capital’s master plan, the land would be turned into the largest development in the history of Los Angeles. Even if the project is scaled back (the so-called "East of Lincoln" or "Phase One" solution), its immensity would sorely test the environment, transportation infrastructure, and quality of life for residents and businesses on the Westside. Recognizing this, the developers have proposed various mitigation plans—to be paid for by the public, not the developers—that purport to undo some of Playa Vista’s ill effects: traffic gridlock, toxic run-off, possible methane explosions, destruction of plants and animals. Destruction for private profit followed by 1 Roy Rosenzweig and Elizabeth Blackmar, The Park and the People: A History of Central Park, Ithaca, NY, Cornell University Press, 1992, p. 18. Public Subsidies and Playa Vista’s "Affordable Housing," by the Ballona Wetlands Land Trust 3 publicly funded mitigation is the development model here. To accomplish such supposed "highest and best use," the developers have asked for vast amounts of public subsidies.

III. Public Subsidies

Proposed or granted direct and indirect public subsidies to Playa Vista are as follows:
1) $42,000,000 direct subsidies from CalTrans through the State Transportation

Improvement Program (STIP) Source: Harris Realty Appraisal Report, City of Los Angeles, Community FacilitiesDistrict No. 4, Playa Vista—Phase One, January 2000, page 319: "This funding agreement (STIP) was approved in 1996, and totaled over $42,000,000. These funds were for improvements throughout the entire Playa Vista planned community. The funding was reaffirmed in October of 1999."2

2) $12,230,000 direct subsidies from Department of Water and Power Source: DWP Transmittal from William T. Fujioka to the Mayor and Council, March 24, 2000, page 2. The figure is derived by subtracting $5,700,000 in reimbursable (by Playa Vista) costs from DWP’s total "financial obligations" of $17,930,000. According to the transmittal, these financial obligations "include DWP’s normal 50% share ($9.7 million) of power system design and construction costs and $2.3 million in Public Benefit Funds for electric buses and infrastructure and…energy efficiency design incentives and Sustainable Urban Design Center."

3) Estimated $330,000,000 indirect subsidies resulting from $428,000,000 of Mello-Roos bonds to be used in three "community facility districts." The $330,000,000 figure, representing taxes not paid by bondholders, is based on a 30-year variable rate bond with an average interest rate of 6.50% per year.

Source for term and interest rate: Harris Realty Appraisal Report, op. cit., p. 281, and addendum to the report, "Scenario: S&Y Debt Service."

Explanation: Mello-Roos bonds, which are used to construct "community facilities"—infrastructure, public utilities, schools, parks, etc.—are exempt from federal and state tax. The taxes not paid by bondholders are in effect a transfer of money from the public treasury to private hands in the interests of the project being built with the bond proceeds—i.e., they are an indirect subsidy to the developer. To arrive at the total amount of this subsidy we calculate as follows: $428,000,000 × 6.50% = $27,820,000 × 30 years = $834,600,000 total interest over the life of the 2 Note: The Harris appraisal was labeled a Final Draft but was never finalized, according to James Harris (phone conversation, October 9, 2000), owing to changing conditions for the project. It is possible that the report will be updated, but it is unlikely that the section referring to STIP will change. Public Subsidies and Playa Vista’s "Affordable Housing," by the Ballona Wetlands Land Trust 4 bonds. To figure the actual tax loss to the public from this amount, we multiply the total interest by the federal and state tax rates that the high-income individuals who buy tax-exempt bonds would be likely to pay if the bonds were not tax-exempt. The three highest federal tax rates are 31%, 36%, and 39.6%. The three highest state tax rates are 6%, 8%, and 9.3%. If we combined the highest federal and state rates (39.6 + 9.3) we would get 48.9%. This percentage multiplied by $834,600,000 would equal approximately $408,000,000 in taxes not paid. In the interests of not overstating, however, we will choose a lower combined federal and state rate, 40%. The amount of the tax exemption then is $834,600,000 × 40% = $333,840,000. Again, in the interests of being conservative, we round this amount down to $330,000,000.

4) Estimated $53,000,000 indirect subsidies resulting from $73,600,000 of tax-exempt City of Los Angeles Variable Rate Demand Multifamily Housing Revenue Bonds (Fountain Park phases I and II) issued by California Debt Limit Allocation Committee (CDLAC) in two separate issues of $40,000,000 and $33,615,000, the former due in 2033, the latter due in 2034.3 Source: The bond official statements. Explanation: The estimated subsidy, again representing taxes not paid by bondholders, is derived by a methodology similar to the one used in (3) for the Mello-Roos bonds. This time, however, we will use an even more conservative interest rate, 5.50%, over the 33-year term of the bonds. The calculation then is as follows: $73,600,000 × 5.50% = $4,048,000 × 33 years = $133,584,000 × 40% combined federal and state tax rate = $53,433,600, rounded down to $53,000,000.4

5) Estimated $21,000,000 direct subsidy in the form of the waiving of option payments not paid by Playa Capital (and its predecessor, Maguire-Thomas Partners) on a 70- acre portion of the proposed Playa Vista project owned by the state of California known as Area C. Source: Harris Realty Appraisal Report, op. cit., p. 10: "The original [Area C option] agreement was for a purchase price of $115,000,000 to be exercised by February, 1996 with option payments of $5,000,000 in February, 1991 and $3,000,000 each subsequent year. The extension of the agreement to December, 2000 waives past due fees of $6,000,000 and requires no annual option payments." (Emphasis added Explanation: According to the California state controller’s office, the $6,000,000 waived past-due option payments mentioned by Harris in the preceding paragraph were for 1994 and 1995.5 For 1996–2000, five more years, the yearly payments of 3 Note: The first bond series, $40,000,000, has already been issued and the money disbursed to Playa Capital. The money from the second series, $33,615,000, is in escrow pending resolution of a City of Los Angeles methane study and mitigation plan. 4 Tax-exempt bonds of this type are a subsidy to the borrower (in this case the developer) in another way as well: Because they have lower interest rates than taxable bonds, they lower the borrower’s borrowing costs. 5 The waiving of annual payments was made at the end of 1994, at the same time the option was extended through December 31, 2000. Public Subsidies and Playa Vista’s "Affordable Housing," by the Ballona Wetlands Land Trust 5 $3,000,000 were also waived (per the italicized wording in the preceding paragraph), for a total of seven years, or $3,000,000 × 7 = $21,000,000. Playa Capital did not exercise its option to purchase Area C by the December 31, 2000, deadline. Therefore, the forgiveness of the seven years of option payments constitutes a direct subsidy to the developer.

Grand Total
Adding together (1) through (5) produces the following total proposed or granted public subsidies to assist Playa Capital in building Playa Vista: $458,230,000, rounded down to $455,000,000

IV. The Affordable Housing Component:

How Much Bang for the Buck?

The Playa Vista master plan consists of two phases, including approximately 12,800 housing units ranging from million-dollar-plus luxury detached town homes to low income studio apartments. Phase One is currently planned for 3051 units.6 About 60% of these would be for-sale condos, townhouses, etc.; about 40% would be rental units. By agreement between Playa Capital and the City of Los Angeles, 15% of the total of 3051, or 458, would be "affordable" rental units, equally divided (5% each) among very low income, low income, and moderate income. In particular, the Fountain Park apartment complex being funded by the $73,600,000 of CDLAC housing bonds is planned to include 705 rental units of different sizes, 375 of which fall under the "affordable" definition. Of those, 142 would be very low income and 83 low income, for a total of 225.7 Note that Fountain Park’s 375 affordable units make up the vast majority of the total affordable rental units (458) in Playa Vista Phase One. (The remaining 83 are proposed to be included in two other apartment complexes to be built after Fountain

6 Phase Two calls for about 9800 residential units, both for-sale and rental, but current plans are so uncertain (according to the developer itself) that there is no known "affordable" component, although the developer has an oral agreement with the city to make 15% of its residential units affordable.

7 The above terms are defined as follows: "Very low" = 50% of area median income; "low" = 80% of area median income; and "moderate" = 120% of area median income. In 1999 the City of Los Angeles median income was $38,532, according to the Harris appraisal report (p. 41). Using the standard government figure of 30% as the average proportion of household income paid for rent, this figure translates to a monthly average rent of about $482 for very-low-income families in Los Angeles, $771 for low-income families, and $1157 for moderate-income families. (For example, to calculate 1999 very-low-income monthly rent:
$38,532 × 50% [percentage of median] = $19,266 [annual income] × 30% [percent of income paid as rent] = $5780 [annual rent] ÷ 12 [months] = $482.) The proposed Playa Vista Phase One affordable rents roughly correspond to these figures, although the averages are somewhat higher. For example, according to the Harris appraisal (p. 83), very-low-income rentals (studios to three bedrooms) would range from $448–$641 (average $513), low-income rentals would range from $718–$1026 (average $871), and moderate income would range from $1077–$1539 (average $1369). Note: Another 10% of the total Phase One dwellings would be "affordable" for-sale units, with prices starting at approximately $225,000, according to Playa Vista’s own most recent estimate. Since such units are not really geared toward the needs of lower income people, however, we will use only rental units in our calculations.

Public Subsidies and Playa Vista’s "Affordable Housing," by the Ballona Wetlands Land Trust 6 Park.) The reason for this is that Playa Capital is "front-loading" its affordable housing construction in order to qualify for the tax-exempt CDLAC bonds.8 The table below provides a breakdown on the sizes and rents of the Fountain Park units, and the number of affordable units of each type.

FOUNTAIN PARK APTS. PHASES I AND II (705 units) Unit Characteristics Number of "Affordable" Units number of units
Unit type
BR/BA
Unit size
(sq. ft.)
Market
rent (#)
Very-low income
Low income
Moderate
income
36 Jr. 1/1 488 0 36 0 0
248 1/1 685 94 60 44 50
20 1+/1 752 20 0 0 0
178 2/1 886 61 35 30 52
152 2/2 987 152 0 0 0
71 3/2 1112 3 10 10 48
705 330 141 84 150
Bold italic = Total number of multi-bedroom units for poor families with children
Sources: Harris Report, p. 86, CDLAC Bond documents for Phases I and I, pp. 23 and 21, respectively

This table illustrates how few of the Fountain Park "affordable" units are actually being built for poor families with children. Of the 225 (141 + 84) very-low and low-income Fountain Park rentals, 140, or almost two-thirds, are proposed to be "juniors" or one-bedrooms—that is, designed for single persons or childless couples. A grand total of 65 units would have two bedrooms, and only 20 would have three bedrooms. From a purely economic standpoint the tilt toward especially one-bedroom apartments makes sense, since such units bring higher average rents per square foot than multi-bedroom units. But they don’t help the section of the public who are most underserved by the current (profit driven) housing industry. It is also worth noting here that the Fountain Park "affordables" would be the vast majority of all Phase One affordables. So far, the developer has not specified the size breakdown of the remaining 83 (12 very-low, 69 low, and 2 moderate) affordable units slated for the other two Phase One complexes. But if we "guestimate" by applying the same bedroom/bathroom (BR/BA) ratios as the developer has planned for Fountain Park, we arrive at about 22 additional two-bedroom and 8 additional three-bedroom units which, when added to Fountain Park, brings the total to approximately 87 two-bedroom and 28 three-bedroom apartments—apartments appropriate for low-income families with children—in all of Playa Vista Phase One. That’s it, and it bears repeating. In the entire first phase—the only permitted phase so far—of a project that has been touted as the great provider of affordable housing for Westside Los Angeles families, there is proposed a total of fewer than 120 apartments 8 Among other things, the bond agreement between the City of Los Angeles (the bond issuer) and Playa Capital (the borrower) requires that 20% of the units financed by the CDLAC bonds be very-low-income (142 very-low-income units = approximately 20% of the 705 total Fountain Park units). Source: CDLAC offering statements for the two series, pp. 23 and 21, respectively.

Public Subsidies and Playa Vista’s "Affordable Housing," by the Ballona Wetlands Land Trust 7 for poor families. One hundred and twenty out of more than 3000 (otherwise mostly upscale) dwellings. All at a cost to the public of over $455 million. The next section analyzes how the $455 million in public subsidies translates into perunit subsidies for the affordable units.

(A) Per-Unit CDLAC Taxpayer Subsidy of $141,000–$235,000 for Fountain Park "Affordable" Rentals If we divide the estimated $53,000,000 taxpayer subsidy calculated in III(4) above by 375 (all "affordable" Fountain Park rental units), we arrive at a per-unit subsidy of approximately $141,000. If we divide the $53,000,000 figure by 225, which is just the number of low income (specifically, 83 "low" and 142 "very low") rental units created for truly needy families otherwise priced out of the Westside housing market, we arrive at a per-unit subsidy of approximately $235,000.

(B) Per-Unit CDLAC Taxpayer Subsidy of $115,000–$173,000 for All Phase One "Affordable" Rentals9 Now, by way of giving the developers the benefit of the doubt, let us spread the Fountain Park tax-exempt bond subsidy over all the Phase One affordable rental units—that is, 458 instead of 375. The per-unit amount we arrive at ($53,000,000 + 458) is still more than $115,000. If we include only low and very-low income units for all of Phase One (306 units), the per-unit subsidy ($53,000,000 + 306) is more than $173,000. Note that these still-significant amounts represent the absolute minimum subsidies that the public is granting the developers. The true amounts, as we will now show, are far higher.

(C) Adding Mello-Roos Taxpayer Subsidies to the CDLAC Subsidies Results in a Per-Unit Subsidy of $327,000–$489,000. The true disproportion between what the public is giving up in lost taxes and what it is getting in "affordable" housing comes into focus if we figure in the cost to the public of the Mello-Roos bonds and add those subsidies to the CDLAC subsidies. But before running the numbers we need to explain our justification for doing this. What right do we have to attribute the Mello-Roos subsidies to the affordable housing component at all, since the Mello-Roos proceeds, which pay for infrastructure and other "community facilities," are not being directly used to build the project’s affordable units?

Probably the main selling point, and definitely one of the top two selling points, that Playa Capital has used to get public money—and not just public housing money—is that Playa Vista would provide much-needed affordable housing and therefore produce a 9 We refer here to the units in Fountain Park as well as the two other rental complexes that would include affordable units. Owing to the relatively small number of affordable units in the latter two developments, they do not appear eligible for additional tax-exempt financing. Public Subsidies and Playa Vista’s "Affordable Housing," by the Ballona Wetlands Land Trust 8 public benefit worthy of public support.10 For instance, according to an August 10, 1999 City of Los Angeles report from the City Administrative Officer, in 1996 the Los Angeles City Council "approved various economic incentives relating directly to the Mello-Roos financing for Playa Vista." These incentives (which related to the terms of the bonds and the uses to which the bond proceeds could be put) were made "in order to secure a commitment from DreamWorks SKG" to locate its new campus on the eastern part of the Playa Vista project.

However, DreamWorks pulled out of the project in the summer of 1999. Despite this, the City of Los Angeles refused to revoke the economic incentives, even though the initial reason for granting them no longer existed. Instead, the Los Angeles Chief Administrative Officer recommended that the incentives remain in place "[g]iven the extraordinary public benefits of the project, including the affordable housing…"11 (Emphasis added)

Particularly since DreamWorks abandoned Playa Vista, the developers and their supporters have increasingly dwelt on Playa Vista’s supposedly key role ("extraordinary public benefit") in relieving Los Angeles’s shortage of affordable housing—failing to mention the small (both relatively and absolutely) proportion of real affordable housing in the project’s total housing mix. Thus, given the all-important public relations role affordable housing has played in Playa Capital’s ability to gain Mello-Roos funding in general and the special incentives in particular, it is fair to include the Mello-Roos subsidies in our per-unit calculations of what Playa Vista’s "affordable" housing would cost the public.

We saw in III(3) above that Playa Vista as a whole (Phase One and Phase Two) would use $428,000,000 raised from Mello-Roos bonds. Of this amount, $124,000,000 is slated to be used in Phase One. Calculating the public subsidy portion for Phase One in the same way we did in III(3) for the entire $428,000,000, we arrive at almost $97,000,000 ($124,000,000 × 6.50% interest = $8,060,000 × 30 years = $241,800,000 × 40% combined federal and state tax = $96,720,000). If we divide this amount by the total of affordable rental units in all of Phase One, or 458,12 we get a subsidy from the Mello-Roos bonds of about $211,000 per unit. If we again focus on housing for truly lowincome people and divide the $96,720,000 by just the very-low-income and low-income apartments (306 units), we get a Mello-Roos subsidy of $317,000 per unit.

Now let us combine the per-unit Mello-Roos Phase One subsidies ($96,720,000) with the CDLAC bond subsidies for the Fountain Park units ($53,000,000), a total of $149,720,000. If we divide this amount by the total affordable rental units (458) slated for Playa Vista Phase One, we get a public subsidy of a little less than $327,000 per unit. 10 Playa Capital’s other main selling point is that the developers are going to restore the remaining wetlands and perform other environmentally friendly restoration and mitigation, at a cost of over $40 million.

Source: Playa Vista "Fact Sheet," fall 2000. A third selling point is that Playa Vista’s construction would provide jobs to "at-risk" youth. 11 Source: CAO file no. 0670-00024-0000, Council file no. 99-0385 12 458 = 375 Fountain Park Units + 83 units in subsequent Phase One apartment buildings. Public Subsidies and Playa Vista’s "Affordable Housing," by the Ballona Wetlands Land Trust 9 If we leave out the moderate-income units and focus only on the 306 very-low-income and low-income units, the per-unit subsidy becomes about $489,000 ($149,720,000 + 306 = $489,281). And please note: The figures we derived above do not include any of the other, nonbondpublic subsidies being offered to the Playa Vista developers. If we included at least part of the CalTrans and DWP direct incentives—$42,000,000 and $12,230,000, respectively, per III(1) and (2) above—the per-unit figures would rise accordingly.

What Does It All Mean?
To avoid getting lost in a maze of numbers, a few basics should be kept in mind: Phase One of Playa Vista would be directly and indirectly subsidized by more than $150 million in public money to produce about 300 apartments for very-low and low-income people almost $500,000 per apartment. (And remember, as few as a third of these apartments would be large enough for families with children.) If Playa Vista goes to full buildout according to its master plan and constructs about 12,800 dwellings, and if 10% of these dwellings are very-low and low-income rental units, the public subsidy using the methods applied above would be close to $300,000 for each such unit even if the developers get no further subsidies than they have been granted already (approximately $455,000,000).13

The Los Angeles Housing Market
According to Jack Kyser, chief economist of the Los Angeles County Economic Development Corporation, the average construction cost of multifamily units in Los Angeles County (not including land and other costs) is $90,000.14 Compared with this figure, all of the per-unit amounts mentioned above, even the amounts (starting at $115,00015) that spread the public subsidies over the moderate as well as low-income units, are substantially higher.

Even if we limit our analysis to the Westside, where housing prices tend to be higher than elsewhere in LA County, the gap between the public’s cost of building "affordable units" at Playa Vista and the cost of building a multi-family unit elsewhere is dramatic. For example, in Santa Monica, where a number of apartment buildings are under development that are generally comparable in quality to Playa Vista’s Fountain Park, 13 This per-unit figure is derived as follows: Given that 10% of 12,800 = 1280; and given that Phase One and Two CDLAC and Mello-Roos subsidies = $330,000,000 + $53,000,000 = $383,000,000; then, $383,000,000 ÷ 1280 = $299,219. 14Kyser is cited in a Los Angeles Times article that talks about how even "affordable" rents—such as those projected to be charged at Playa Vista—are too high for many local families: "Los Angeles County grew by 169,000 people last year, but only 6,525 new multifamily units were built. The average construction cost of such a unit is $90,000, excluding land and other costs, and are [sic] therefore aimed at middle- to upper income households, according to Jack Kyser, chief economist for the Los Angeles County Economic Development Corp." (Emphasis added) ("Affordable Housing a Luxury for Some," by Diane Wedner and Daryl Strickland, Los Angeles Times, September 21, 2000, C1 and C10.) 15 See IV(B).

Public Subsidies and Playa Vista’s "Affordable Housing," by the Ballona Wetlands Land Trust10 construction costs currently run from about $89,000 to $100,000 per unit, according to an analyst in the city’s housing department.16 The upshot is that each affordable unit built at Playa Vista would cost the public somewhere between $237,000 and $399,000 in taxes lost through the use, or misuse, of tax-exempt CDLAC and Mello-Roos bonds.

So How Much Bang, Really?
In the interests of building a relatively small amount of "affordable" housing, and an even smaller amount of housing that would actually be available to low-income people (and an even smaller amount that would be available to low-income families with children!), Playa Vista is wasting public funds. Given the growing shortage of affordable housing in Southern California, a shortage that has reached crisis proportions during the current boom—with low-wage workers forced to live in motels for $600+ per month, according to a recent Los Angeles Times article—does the area really need a megaproject that would consist mostly of luxury housing for the rich and a token amount for the less well-off, all at a public subsidy in the hundreds of millions of dollars? As mentioned, multifamily housing costs about $90,000 per unit to build. Even if we adjust upward for inflation—say, to $100,000—this means that the $450 million in public subsidies being sought by Playa Vista could instead be used to build well over four thousand affordable apartments for poor and working families, not the couple of hundred planned now. Wouldn’t it be a better use of public money to subsidize small construction firms that really need financial assistance, allowing them to develop thousands of units of truly affordable housing in areas of Los Angeles with existing infrastructure and without the threat of methane explosion and destruction of increasingly rare green space? Part of that money could be used even more efficiently, to buy and rehab existing affordable housing units—like the Lincoln Place complex in Venice—that are now being rendered unaffordable through purchase by developers, who are fixing them up as high-end condos or upscale rentals or else tearing them down entirely and building luxury housing in their place.

V. 2001—An Urban Space Odyssey When the builders of Central Park created their new kind of urban public space, they also created a new way of thinking about public power. "The gentlemen who saw the project 16 The following comparables were used to derive these figures. As with the Playa Vista and Jack Kyser citation figures, all dollar figures refer to construction costs and do not include land, architecture costs, other fees, etc.: (A) 620 Broadway, Santa Monica: 46 units (35 two-bedroom, 11 one-bedroom), comprising 41,895 square feet. Cost: $4,080,000, or $88,696 per unit (approx. $97 per square foot). (B) 425 Broadway, Santa Monica: 101 units comprising approximately 110,000 square feet. Cost: $9,400,000, or $93,069 per unit (approx. $85 per square foot). (C) 1445 and 1535 Sixth Street, Santa Monica, two 48-unit buildings (each with 38 two-bedrooms and 10 one-bedrooms) by the same developer, with underground parking. 1445 Sixth: Cost: $4,000,000 (as of August 1999), or $83,333 per unit (approximately $78 per square foot). 1535 Sixth: Cost: $4,790,000 (as of February 2000), or $99,792 per unit (approximately $103 per square foot). The difference in per-unit cost between the two buildings may reflect the increase in costs from August 1999 to February 2000. (Source: Phone conversation with Santa Monica housing analyst, December 19, 2000)

Public Subsidies and Playa Vista’s "Affordable Housing," by the Ballona Wetlands Land Trust 11 through to law challenged the laissez-faire…conviction" that "the state existed only to protect private property"; in its place they "offered an expanded vision of positive public action." The state (in the United States and elsewhere) has always involved itself in acquiring land for infrastructure, government buildings, and military facilities. New York’s Central Park embodied a new idea: the idea of using state resources to build a park. Such use "marked a gradual redefinition of the relationship between the state and the private economy."17

In many ways the situation Los Angeles faces with the Ballona Wetlands ecosystem in 2001 is much simpler than the situation New York faced in 1850. At Ballona there is only one private landowner, not 560. Further, modern land-use doctrine and the notion of "positive public action" have evolved to the point where even real estate developers must pay lip service, at least, to public policy goals.18 The economic arguments in favor of Playa Vista—the "affordable housing" argument, for example—are, we have shown, really pretty weak. The amount of public subsidies the developers claim to require undermines the argument that public acquisition of the land, by comparison, would be too expensive. Money from various sources for such acquisition is available. Overwhelming public support for a restored ecosystem exists. The environmental and aesthetic arguments in favor of restoration versus development are, in a city that now has the official distinction of having both the worst air and the worst traffic in the country, overwhelming.

In short, the City of Los Angeles would benefit from preserving the entire 1087-acre Ballona Wetlands ecosystem as a park and wildlife refuge and simultaneously redirecting public money to entities that would use it efficiently. Indeed, the public deserves a much better return on its investment than would be realized at Playa Vista.

Acknowledgments

We would like to offer special thanks to the following individuals for providing information and other help in the preparation of the above report: Dave Doerr, Chief Tax Consultant, Cal-Tax; Lisa Martin, Policy Analyst, Cal-Tax; Robert Benson, Professor, Loyola Law School; Wendy Wendlandt, Political Director, CalPIRG; Rex Frankel; Kathy Knight; and Don May. Any errors of mathematics or analysis, however, are solely the responsibility of the Ballona Wetlands Land Trust. 17 Rosenzweig and Blackmar, op. cit., pp. 58–59. 18 An example is the real estate appraisal term "highest and best use," whose standard definition (The Appraisal of Real Estate, 10th ed., Chicago, the Appraisal Institute, p. 275) is, "The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value." Highest value: That sounds pretty laissez-faire. But in the above-mentioned Harris report (p. 102) the appraiser, after giving the above definition, adds, "It is implied in these definitions that determination of highest and best use takes into account the contribution of a specific use to the community and community development goals as well as the benefits of that use to individual property owners. Hence, in certain situations, the highest and best use of land may be for parks, greenbelts, preservation, conservation, wildlife habitats, and the like. A use which does not meet the needs of the public will not meet the highest and best use criteria." (Emphasis added)