L.A. City Council OKs $19.3-million loan for Midtown Crossing mall
Real estate developer CIM will get the money to finish the stalled project, which will be getting a total of $34 million in city loans and subsidies.
May 29, 2010 | By David Zahniser, Los Angeles Times
On a 9-2 vote, the council agreed to provide real estate developer CIM Group with a new $19.3-million loan to finish the center, which would include a Lowe’s home improvement store.
Under the terms of the deal, the loan would operate more like a grant. CIM would be able to pay the money back using sales, business and utility tax revenue generated by the project — money that normally goes into the city’s budget.
The vote occurred nine months after the council approved a $30-million loan to help CIM lure Cirque du Soleil to a theater at its Hollywood & Highland shopping center. And it came two hours after two top policy analysts released a report stating that the city’s various contributions for Midtown Crossing, when spread over a 30-year period, could exceed $90 million.
CIM said in a statement that the vote would allow construction to begin immediately, spurring a “revitalization” of the neighborhood.
Councilmen Dennis Zine and Paul Krekorian, both of whom represent the San Fernando Valley, voted against the plan.
“CIM Group has not met my expectations sufficiently to justify increasing the city’s investment,” said Krekorian, who sent mailers during last year’s election campaign criticizing the city’s Cirque du Soleil loan.
Councilman Herb Wesson praised the project, saying it would spark other development activity in his district.
Mid-City resident Lynn Kuwahara had a similar view, saying Midtown Crossing would become a new town center for her neighborhood. “We’ve been looking at a hole in the ground for almost two decades now,” she said.
Even after the vote, there was confusion over the total cost to the city.
Under the proposal, CIM would receive two loans totaling $28 million, both from the federal Housing and Urban Development Department. One report, prepared by the city’s top policy analysts, said CIM would be allowed to pay off the principal and interest by tapping up to $56.6 million in sales, business, utility and property taxes generated by the project over the coming decades.
The official in the Community Development Department who prepared the loan agreement put that figure at $37.5 million. Ninoos Benjamin, who heads the department’s economic development division, said the city’s total financial commitment over 30 years would reach $71 million, not the $90 million cited in another report.
Midtown Crossing’s first phase opened in 2007, bringing Foot Locker and other shops to a property bounded by Pico, San Vicente and Venice boulevards. When the recession hit, CIM lost the private financing needed for the second phase.
City officials said that once it was up and running, Midtown Crossing would create 802 permanent jobs and generate $2.3 million in annual sales tax revenue.
But Julia Joseph, a businesswoman who testified against the project Friday, said the council should not commit future tax money in tough economic times.
“If the numbers don’t make sense,” she said, “don’t throw more public money at it.”