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August 2000 issue of Save All of Ballona
--Editor's View: Phony Housing Shortage Used to Justify Paving Our Last Open Spaces --Explosive Gases plague developer; Woman's work Halts Playa Vista in Its (bulldozer) Tracks No matter how many times local politicians bend over backwards to help keep Playa Vista financially afloat, the project is floundering. After 20 years of trying, still the only permanent building they've started, an apartment complex, has been with $40 million of government funding. They are in trouble. The project's financial statements from their accountants Ernst and Young reveal that the project lost $11.3 million in 1999 and $4.3 million in 1998. They owe another $81 million to their lenders. The landowners' problems started 5 years ago when Maguire-Thomas Partners made a choice of paying off their mortgage owed to Chase Manhattan Bank, or paying their lawyers to fight the environmental group Save Ballona Wetlands over the development plans. (Save Ballona Wetlands recently merged into the Ballona Ecosystem Education Project) Five years ago Maguire stopped making payments of $3 million a year to the State of California on an option they have to buy the baseball fields and wetlands north of Ballona Creek and east of Lincoln Blvd., which they'd like to develop. Two years later, after long battles with local environmentalists took their financial toll, Maguire lost control of the land to the bank, which then sold it to New York investment banks Morgan Stanley and Goldman Sachs. However, with new owners the old problems didn't go away. It's not just the methane issue that caused the City Council to halt the latest giveaway, the city infrastructure bonds totaling $135 million. This is the first installment in infrastructure bonds they seek, out of a total of $428 million, for roads and sewers in the first 140-acre phase of the development. The bonds are L.A. City tax-exempt bonds which would be sold to outside investors to pay for roads, sewers and other infrastructure in the project. No, the problem is that the project is so financially shaky that the City's financial experts are afraid the project will go bankrupt and destroy the City's credit rating. The City's bond issuance guidelines specify that the land where the infrastructure bonds will be spent must be worth 4 times as much as the $135 million in bond proceeds, or $540 million, for the project to be safe for the City to be involved in. The problem is that the developers claim the property is only worth $138 million, or only 1/4th as much as the City requires to make these bonds safe. Even worse, we have discovered that PLAYA VISTA AND THE CITY'S OWN APPRAISAL IS GROSSLY INFLATED! In fact, the land which benefits from these infrastructure bonds is not worth $137.8 million, as they claim, but is actually by itself worth $28 million. According to page vii of the appraisal commissioned for the City by Harris Realty Appraisal, dated January 2000, the $137.8 million appraisal includes: $94 million received from the expected issuance of the Mello-Roos bonds, plus $15.5 million offered to the project as "incentives" at the request of former Governor Pete Wilson and Councilwoman Ruth Galanter and funded by the State Highway Department and the City's Department of Water and Power. This means the land is only worth 1/16th the amount to make these bonds financially safe! To make the bonds seem safer, Playa Vista could have found an appraiser who would say the land is worth more, but that would lead to a catch-22 situation. They are having trouble paying their property taxes. A document dated February 11, 2000 from Playa Vista to Harris Realty Appraisal in the City's files shows that the County Tax Assessor originally decided this 140 acres is worth $465 million. That hit Playa Vista with an annual tax bill of $5 million on just one small part of their holdings. They filed an appeal and got the assessment reduced to $155 million, and still want it reduced further to $130 million. So if the land is safe for the issuance of the infrastructure bonds, then the property taxes will be too high for Playa Vista to pay. And finally, despite the promises from the developer, if the City ultimately issues these bonds, city documents reveal that TAXPAYERS OF THE CITY OF LOS ANGELES ARE DIRECTLY ON THE HOOK if this project fails. "Though unlikely, such an event could cause bondholders or the insurer to encourage the City to accept or acknowledge a 'moral obligation' to pay the debt service on the bonds." (From page 20, "Preliminary Financing Feasiblity Study for proposed Community Facilities District No. 4--Playa Vista, dated April 30, 2000, prepared for the L.A. City Director of Public Finance).
Editor's View: Phony Housing Shortage Used to Justify Paving Our Last Open Spaces It's hard to believe the desperate statements of the local developer community that if they can't build every mega-development and pave everything and expand the Airport as far as possible, then the economy is going to fall apart and everyone is going to be out of work. I just don't buy the argument that the economy will die without mega-growth. The fact is that our economy is booming despite all the environmental regulations which we voters have created to protect our neighborhoods, to clean up L.A.'s smog and to keep our streets from becoming all-day traffic jams. During the 1980's decade, Because growth in L.A. has slowed down so dramatically, it's time to take a breather and stop trying to accommodate more growth, but to make life better for everyone here now. Now's the time to take advantage of the big surpluses in our government's treasury and buy up all the open space left in the urban sprawl. The State budget includes $25 million to buy land at Ballona and almost $40 million for the Baldwin Hills. We desperately need urban parkland much more than any new development. In fact, if there was a need for more building as development boosters claim, why aren't we seeing investors rushing to build huge apartment complexes in low density apartment neighborhoods all over town, as happened in the 1980's? The zoning laws would allow it. And if investors are so interested in pouring money into Playa Vista, why do they need the $80 million in city housing bonds, and $400 million in city road & sewer bonds. Why don't they spend their own money? The government and taxpayers HAVE to help out, say these developers-on-welfare, because we have a housing shortage, right? So says the "honorary" mayor of Westchester, David Herbst, who is also the vice president and chief propagandist for Playa Vista. No one voted for him. He was appointed by the head of the local chamber of commerce, Gwen Vuchsas, who's also an employee of Playa Vista. Actually, we have a shortage of affordable housing. But Herbst's company is building very little of that, and what he is building with his government handout is on top of the methane leak and the newly discovered Lincoln Blvd. earthquake fault. We also have a shortage of office and industrial buildings, right? Well, that's according to Jack Kyser, chief economist for the official sounding L.A. County Economic Development Corporation. Kyser gets quoted repeatedly in the L.A. Times sounding like an unbiased "expert", when in fact his employer is not a government agency, but a booster group run by the big industrial and commercial landowners in the county. With all the gifts our local politicians hand out to developers, in giveaways, tax breaks, rezonings of open space, why aren't our leaders willing to spend a cent to buy and preserve this open space? I say we should say no to any more development of our City's remaining unpaved areas. Then investment and growth, if it's needed, can be sensitively channeled to revitalize depressed shopping and industrial districts. Instead, developers have this ravenous appetite for raw land, even if the local laws ban any development there. In the Marina area, on the former train tracks along the Marina Freeway, developer Jeff Lee wants to fill in wetlands and flatten wildflowers so he can build more condos. The fact that the California Coastal Act bans destruction of wetlands for residential development matters not to L.A City politicians. The fact that the City's Community Plan for the area says the property should be "open space" doesn't matter--gosh, we've got a "housing shortage", especially of expensive condos. Balloney! And look at the Catellus Corporation, which wants to destroy the Ballona Westbluffs. Our City Councilwoman Ruth Galanter bent over backwords, agreeing to give them a city-owned canyon and to let them chop their access road right through the bluff face which is protected from any development by the California Coastal Act as an "Environmentally Sensitive Habitat Area". No roads or development of any kind are allowed in this bluff face. Does Galanter care? NO! We've got a shortage of million dollar homes in this area and she can't bear to see super-rich campaign contributors living in cardboard boxes.
This "housing shortage" claim is about as phony as a smog shortage, as a traffic jam shortage. We have no shortage of development on the westside. We have almost no open space left. Enough is enough!
Woman Halts Playa Vista in Its (bulldozer)Tracks By Rex Frankel Seven years ago, Patricia McPherson put aside a promising acting career to devote thousands of hours to lobby politicians and health authorities to look at the risks of building at the Ballona Wetlands. For years, L.A. City officials and the developer laughed off these concerns. They're not laughing anymore. Last year, when shown a videotape of explosive methane gas bubbling out of Ballona Creek by McPherson, the city's building and safety department hired Exploration Technologies Inc. (ETI) based in Texas as an unbiased "peer reviewer" to investigate the strange smells local residents have complained about from this project. While drilling test wells into a portion of land planned for high density residential development this spring, ETI's drillers experienced "blowouts" where the drill rig was blown out of the ground and a 40 foot tall methane and mud geyser spewed into the air for a 24 hour period. ETI's study found methane in the soil at concentrations as high as 90% in many locations that they sampled. Methane gas is considered potentially explosive when it is only 5% of the air in a sample. Most worrisome to city officials was a videotape of methane gas bubbling out of the construction site which McPherson shot this Spring while construction equipment worked there. McPherson, also the president of the Grassroots Coalition showed the footage in June to the regular monthly meeting of the Airport-Marina Sierra Club, prompting gasps from the crowd packing the Chace Park meeting hall in Marina Del Rey. A few days after ETI released their findings this spring, McPherson and three local environmental groups, Grassroots Coalition, Earthways Foundation and Spirit of the Sage Council, filed a lawsuit seeking to halt all work at the project until the City prepares a new environmental impact report for the project, which was originally approved by the City Council in 1993. The folks at Playa Vista soon took out full-page ads in the newspapers to announce that there was no risk to their development plans. But on June 7th of this year, ETI's president, Victor Jones, told City Councilmembers that no development should occur until the entire Playa Vista/Ballona Wetlands property is tested for the presence of these toxic and explosive gases. The City's building and safety department agreed, stating "Regarding the methane gas and potential subsidence issue at PV, the department of Building and Safety requires that these issues be addressed before any future permits can be issued," in a May 19, 2000 letter. So, for the next four months, no new development will occur at the Ballona Wetlands development in Los Angeles while the City's many departments study the risks of locating a multi-billion dollar project on land contaminated with explosive methane gas, poisonous hydrogen sulfide and a newly discovered earthquake fault. By an 11 to 1 vote, the City Council agreed with the Airport-Marina Sierra Club, Grassroots Coalition, Spirit of the Sage Council and Ballona Ecosystem Education Project, and decided that to allow this project consisting of 13,000 homes and many office buildings without considering this shocking new information could lead to a disaster for future residents and taxpayers of the City. Also postponed was the first $135 million in road and sewer bonds that Playa Vista was seeking. The City Council did not, however, postpone Playa Vista's request for $33 million in affordable housing bonds, but decided to put the money in an escrow fund pending the outcome of the methane investigation.
YEARS OF DENIALS BY THE CITYThe Playa Vista project has survived several challenges in court that have also demanded preparation of a new environmental impact report (EIR). The legal standard that requires a new EIR is that this substantial new information about the safety of building homes for 30,000 people was not known or even covered-up when the project was originally approved in 1993. Local residents originally warned the City Planning department in 1993 of their belief that there might be a methane problem similar to the Fairfax area, where the Ross department store blew up in 1985. The City responded "The major geologic difference between the Fairfax area and the Playa Vista site is that, unlike the Fairfax area, the project site has no shallow zones and pockets of oil and shallow pockets of methane that can seep to the surface. " (From page W-24-4 of the Final EIR dated May 26, 1993). In fact, the recent study of the site by Exploration Technologies Inc. shows that shallow deposits of methane are all over the Playa Vista site. Despite the developer's claim that the project is safe, the ETI report recommends that nothing be built on land which has huge methane seeps, especially not residences for 30,000 people. The ETI report says in part: "The best approach would be to leave these seepage areas open. If they have to be used for construction, then one should build non-residential buildings within such areas. . . In the event of a major earthquake in this area, there will be little to no warning of the onset of significant gas seepage from depth. In addition, the volume of a natural seep cannot be calculated, nor turned off in the event of an earthquake, as with natural gas lines." HOW DOES THIS AFFECT THE BALLONA WETLANDS WILDLIFE PRESERVE? Playa Vista's 1000 acres are home to over 1100 species of plants and animals on coastal wetlands and uplands. The wetlands are mostly west of Lincoln Blvd. On the uplands to the east of Lincoln is where most of the development is planned, and this land has high levels of methane and other toxic gases bubbling out of the soil. While the open land is safe for the wildlife, any building could fill up with dangerous gases, putting people at severe risk. This risk has shut down construction of the $170 million Belmont High School and the Fairfax/Wilshire Blvd. Subway project where similar problems were found. Sited in the flood plain of Ballona Creek and the former channel of the L.A. River, the project sits on thousands of feet of soil deposited from the San Gabriel and Santa Monica Mountains. Since the 1920's, millions of barrels of oil have been pumped from an oil field underneath the west end of the wetlands. Starting in World War II, the government began storing natural gas in the depleted oil field as a strategic reserve. Since then, the Southern California Gas Company has operated the storage field. At the east end of the property are spills of industrial pollutants from a former Hughes Aircraft factory which contaminate aquifers that are the source of local drinking water. Together, these problems make leaving this land for wildlife the wisest choice. WHO OWNS THE LEAKING METHANE GAS?A central point in the methane lawsuit is that the gas is owned by the Southern California Gas Company. Clearly, neither they nor Playa Vista wants to admit there is any problem, for that would cost them millions of dollars. If the Gas Company's field leaks, then either Playa Vista can't be built, or the Gas reservoir must be shut down. Even if there is no connection between the field and Playa Vista's gas problem, then Playa Vista still HAS A BIG GAS PROBLEM! The ETI report states the "Lincoln Boulevard Fault provides a permeable vertical pathway for the natural gases at depth to migrate to the near-surface." That is the explanation for gases already appearing: The report noted "two main areas of methane gas seepage." All of this deeply alarms Dr. Bernard Endres, a critic of the development project and a gas migration expert who first called attention to the existence of a fault under the Belmont school site. And the problem, he told L.A. times columnist Robert Scheer, is more serious at the Playa Vista site: "It's a lot worse than Belmont. It's a very similar situation because we have a fault plane coming up right underneath the project site. But at Playa Vista, the fault plane connects directly with the Southern California Gas [Co.] underground gas storage facility. Exploration Technologies Inc. identified the existence of this very large fault plane, which is called the Lincoln Boulevard Fault, that comes up directly underneath the ... project site." Endres continues: "The earthquake fault intersects the underground gas storage facility at a depth of 6,000 feet, where the gas is stored by the gas company under very high pressures. The peer review has identified a very serious risk of gas migration rushing to the surface as a result of an earthquake." According to Endres: "This leak would be directly under the so-called low-cost housing project that is currently going in at the intersection of Lincoln and Jefferson boulevards. Furthermore, the Lincoln Boulevard Fault and the massive amounts of gas that would be migrating up to the surface along the fault directly underlies the exact location of where the proposed visitor center is being currently constructed, at the location of the Fountain Park apartment complex at Lincoln and Jefferson boulevards. "This gas, however, is very widespread under the area and it is a direct threat and danger to the regional U.S. post office center on Jefferson Boulevard and existing commercial and residential structures in the area." THE DENIALS FALL APARTFor a month after the April release of the ETI report, Playa Vista's spokesman David Herbst was adamant in his claim that "The report states that in the current project area, there is no evidence that the source of gas is from the [Southern California Gas Co.] storage facility." At a hearing by the City Council's budget and finance committee on June 7th, Playa Vista brought 5 petroleum industry apologists ( sorry...experts), who said that there is no risk, probably no new fault. The Gas Company sent out an employee to argue that the gas isn't leaking from their gas storage reservoir a mile under the wetlands. This was contradicted by Victor Jones, director of the ETI study that showed the huge volumes of explosive gas in the soil at Ballona. Unlike both the Gas Company's and Playa Vista's claim that the study found no evidence that the gas came from the Gas Company, Jones said "We did ask for information from the Gas Company, and it was denied." He said the Gas Company would not cooperate with the City's experts. His study did not reach the conclusion that Playa Vista wanted to hear. More study is needed. "We have no evidence that it's true, we have no evidence that it's false", Jones said. In response to this, Councilman Mike Feuer directed the Gas Company to comply with the City's investigation this time. Critics say it's clear there has been a long cover-up of this problem by Playa Vista and the Gas Company. They point to the fact that both the Gas Co. and Playa Vista have the same lawyers, Latham and Watkins. Playa Vista spokesman David Herbst says his project is no less safe than the rest of Los Angeles, which he says is full of methane and oil fields with homes built on top. McPherson replies that the Ballona site is even more dangerous than other former oil fields targeted by developers because it's a wetland with an extremely high ground-water table and a natural gas storage reservoir operated by the Gas Co. This site is unlike any in Los Angeles, and merits special concern.
For the next 4 months the City will have independent experts fully investigate this problem. Already, Playa Vista has found their own experts to say there is nothing to worry about. One of those experts is a former Playa Vista executive who now runs a company that designs methane mitigation systems. Joel Stensby's company, KPRS, has come up with an estimate of only $3000 per apartment unit to solve the methane leaks. Critics say that cost should really be at least triple that amount, if solving it is possible. When making this estimate to the City, however, Stensby didn't reveal that he formerly worked for Playa Vista. David Herbst also revealed to the City's budget committee that if methane solutions don't work, his company won't be responsible to fix it. It will be the problem of the homeowner's associations and the people who buy homes at Playa Vista. A BIG THANK YOU TO: The Sierra Club and the Spirit of the Sage Council for contributing several thousand dollars this year to the legal bills rung up by the local environmental groups who are taking the lead in stopping this development. We couldn't have done it without you!
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