Financial weaknesses obscures deeper missing vision weakness
By Paul Rosenberg, Senior Editor
The long-awaited financial feasibility study for redeveloping Ports O’ Call, released in early November, concluded that “the Developer’s Initial Concept is not financially feasible.”
But that a scaled-down project, anchored by a smaller themed attraction, would be feasible. Councilman Joe Buscaino, who dismissed it as merely “an opinion,” at a special meeting of the council’s Trade, Commerce and Tourism Committee, held on Nov. 12, 2014 at Port of Los Angeles headquarters in San Pedro, quickly panned it.
“I’m not looking for a scaled-down project,” said Buscaino, in his opening remarks. “My vision is for Ports O’ Call redevelopment project to be an opportunity to pursue an important first step in transformation of our LA Waterfront.”
He went on to draw comparisons to “key initiatives that have taken place in the last several months,” starting with “$1 billion that has been earmarked to green the Los Angeles River.”
At Buscaino’s invitation, early waterfront promenade promoter John Papadakis went much further in criticizing the study, blasting it as “anemic” and “intentionally misguided.” But the developers themselves, who Papadakis also blasted, were far more measured, treating the study as a worthwhile, but inherently limited document.
“It’s very worthy effort,” said Wayne Ratkovitch, who heads up one half of the development team known as the LA Waterfront Alliance, but there are limits, he explained. “Feasibility studies, however, cannot take into account a number of things. They can’t take into account good fortune. They can’t take into account creativity, entrepreneurship, opportunities that can’t be seen or expected. So our job is to exceed what the model says.”
Erik Johnson, representing the other half, took a similarly balanced approach.
“I think it was an important step that needed to be taken by the port,” Johnson said. “By the very nature of these types of things, they tend to undershoot the actual mark. I think in many ways it presents a conservative picture. But if you just take it at face value, the original phase of development is almost identical to what we had proposed. That may be all the market can bear today, but we don’t think so.”
“Our job is to bring in something better than the standard,” Ratkovitch elaborated. “The standard is simply to look at other projects and compare this one to other projects. We want to do more than that. We have done more than that. I keep thinking about some of our past projects. The Oviatt Building [a 1928-built Art Deco treasure], in downtown Los Angeles, we had not one, but two, feasibility studies [that] told us to do food-service and building, but keep it very low. We didn’t do that. We we brought in the Rex restaurant, which was the finest restaurant in Los Angeles for 17 years.”
And then, there was the Wiltern Theatre, which “was about to be torn down, it had no future. We had to recover equipment to put the theater back together. Now, 30 some years later, it’s still functioning as a live theater and doing very well.”
All developers may believe they’re exceptional and can defy expectations, but Ratkovitch has the record to prove it—not just a record of financial success, but also of preserving and enhancing heritage. This is why his involvement was so widely welcomed. Johnson, on the other hand, dove into some of the details in order to make a related point, that the big-picture opportunities were being significantly underestimated.
“If you just take at what’s modeled at face value, just the RD & E [retail, dining and entertainment] enhancements, will add $28 million in incremental revenue on that site,” Johnson said. “That doesn’t include the themed attraction component, which is $22 million, add them together that’s $53 million of economic activity that can be made on the base case… which is less than what the developer thinks is achievable.”
But there was more that was being overlooked, Johnson argued.
“It doesn’t include the quantification of the incremental tax revenue, property tax, sales tax, business tax. It talks about 500 jobs, but it doesn’t include the multiplier effects, the add-on jobs and the overall economic employment—property value, which is trickier to estimate. But, if you look at this as a project not just with the port, but for the City of Los Angeles, as a whole, the economic benefits are manifoldly increased from those modeled.”
Another side that’s apparently not getting the attention it deserves is that of the ongoing concerns that have kept Ports O’ Call alive all these years—alive and growing, according to Mike Galvin, POLA’s director of special projects, who presented the study to the committee.
“The existing site has been experiencing very good revenue growth in the last three years,” Galvin said. “It’s up about 28 percent since 2010.”
That is, with estimated visitors up from 800,000 to around 1.5 to 2 million annually.
In short, it’s already a significant economic force—but an endangered one—two points driven home by Michael Ungaro, whose family owns The San Pedro Fish Market. Also, more broadly, it was supported by Stephanie Mardesich, who spoke up on behalf of “preserving the history of our community,” noting that she had been vocal “on behalf of saving Ports O’ Call” and routinely got expressions of support whenever she spoke out.
“That does not mean I’m against the project or what Alan and his team are doing,” she said.
But it did reflect a strong concern that historical continuity was being forgotten—one of several themes that long-time waterfront activists June Smith, who also commented briefly, touched upon in later comments to Random Lengths.
Ungaro, however, gave these general concerns a razor-sharp focus:
“We currently hold four Guinness World Records and attracted over 1 million visitors from all other Southern California in the last 12 months,” he said. “We are also a current tenant the Port of Los Angeles on the LA Waterfront. After more than five decades, our lease will be coming to an end in seven weeks.”
That is an extremely precarious position for such an economic powerhouse to be in.
“According to the study our company provides the waterfront with over 50 percent of its financial results, 70 percent of its paid visitors, and nearly 80 percent of its year-over-year growth,” Ungaro explained. “We note that all those accomplishments and those of like businesses are lumped anonymously together, while assuming that our company and our peers can provide twice as much financial result. Even after having our net space is cut by 30 percent, our rent is raised by 138 percent,” to match rental rates in the Wilshire district.
According to the report, Ungaro said, “We are the only paid tourist attraction in California that attracts over 1 million people annually and has no long-term guarantee of location, lease or lease amount.”
But the precarious position of Ports O’ Call’s current tenants is only one facet of a larger neglect of community well-being, as summarized by Smith, a leading community activist on waterfront development issues for more than a decade with the Port Community Advisory Committee. Smith spoke briefly during the one-minute public comment period at the meeting, but gave Random Lengths a more extended reflection on the gap that’s opened up between the port and the community over time.
When the Waterfront Alliance development team was chosen, “The port and the developers made it very clear that they were no longer asking for ‘input’ but only for public reaction to their plans,” Smith said. “The port sold this approach by its ‘urgency’ in finally seeing a new development. By this time, both the PCAC and the CRA had been disbanded, and the groups that had been formed and had overseen the numerous plans and attempts at developmental designs for 12 or more years. There was no mechanism, in effect, to properly oversee the proposed development. Essentially, the community was back to doing business with the port in the same way as the good old days before PCAC.”
One result, Smith noted, was that “Absent a cohesive knowledgeable community group having the ‘ear’ of the port. The port has quietly been ‘cleaning out’ businesses at POC. The negotiations for new leases drags on and is a critical aspect of what the newly chosen developers can do at the site. Some, like the Art Association, have simply been cut off because the port no longer thinks it worth subsidizing…. [T]heir plan all along has not been to necessarily keep the current businesses as the new development moves forward. Not keeping successful businesses runs counter to everything professional waterfront developers have told all of us, consistently,”
Smith specifically mentioned studies done by the Urban Land Institute, which the port has repeatedly given lip-service to and then ignored.
Another window onto the port’s failure of vision can be gleaned from the feasibility study itself. Part of that study involves an inventory of existing nearby attractions and the potential inter-actions of customer bases. But the only considerations envisioned are pairwise overlap.
Concerning CRAFTED, for example, the study notes, “Annual visitation is approximately 90,000 visitors. Current visitation is generally from the South Bay but due to target market and separation from the Project, there is not believed to be much overlap of visitors.”
Concerning the Maritime Museum, it says, “The museum visitation is approximately 80,000 annual visitors. While a redeveloped POC may benefit the Museum, the limited attendance volume and typical visitor profile (youth/school groups) moderates retail spend potential.”
Comments are similarly narrow regarding the USS Iowa, the Cabrillo Marine Aquarium, the World Cruise Center, and others. There is no hint of thinking about holistic synergies between all the different elements, which was a key animating concept in the early stages of waterfront development planning, and which the port alone is in a position to nurture and guide.
Smith provided a broad overview of what this would entail.
“A well conceived coordinated plan should include: a) a completely integrated transportation and parking plan; b) the retention of currently successful businesses; c) addition of businesses that are unique to the Harbor history and culture, including: the fishing industry; the armed services; the labor movement; the Japanese community and all the immigrant cultures who formed the Harbor Area and their colorful contributions in the arts, foods and music.”
Going even deeper than Mardesich, Smith continued.
“I, frankly, am deeply dismayed that the historical elements that were possible only a few years ago have almost been totally obliterated,” Smith said. “Only the Japanese community seems to have continued to raise funds to assure the awareness of their successful but painful history in the Harbor. We have watched many of the old successful immigrant based businesses fold, restaurants like Ante’s and Canetti’s, bakeries such as Ramona’s and the Norwegian Bakery, businesses such as Williams’.”
The preservation of such businesses in a rich historical and cultural mix was one of the primary lessons that waterfront activists learned from attending international waterfront conferences in the early 2000s. And, while the obvious common sense of such preservation remains clear to individuals in the community, it seems to have no institutional representation or power to shape the future.
“This is of the highest priority to the Harbor Department in non-cargo-related areas,” said POLA Executive Director Gene Seroka in kicking off the discussion of Ports O’ Call redevelopment.
But if it’s to succeed, POLA also needs to prioritize rebuilding a framework in which the community can fully participate in shaping its future, with enduring ties to its past.