L.A. Watchdog –In June, the Board of Commissioners of our Dept. of Water and Power postponed its consideration of a 10-year, $63 million lease of six floors of office space at Figueroa Plaza, a city- owned office complex, because it did not pass the smell test.*
Now, the department is considering another 10-year lease, but only for four floors at a cost of $41 million. Once again, this deal is not ready for prime time as it is not in the best interests of the department and the ratepayers.
The department’s management makes the valid argument that it needs this additional space to house 700 employees who are needed to oversee the repair and maintenance of its water and power infrastructure, to modernize its IT and financial management systems, and to facilitate succession planning and the transfer of institutional knowledge as one-third of its work force is eligible to retire over the next five years.
But a 10-year, $41 million lease is out of the question since DWP has not developed a long-term plan to determine its real estate needs. This space plan would include the reconfiguration of the John Ferraro Building, DWP’s 50-year- old, 1.6 million square foot headquarters across from the Music Center in downtown Los Angeles.
Interestingly, this idea was nixed during the city’s budget crisis by Mayor Villaraigosa and the Eric Garcetti-led City Council.
The “restacking” of JFB is estimated to be an expensive two- or three-year project if it were properly planned and managed by an experienced, independent contractor who would develop a floor-by-floor plan that would limit the disruption to the department’s operations.
There is also the concept of locating some of the department’s non-core functions in less expensive real estate in parts of our city that would benefit from economic development.
Here Is the Strategy
A well-thought-out and properly executed space plan would indicate that the Figueroa Plaza lease not exceed four or five years and that the department would need only three floors of “creative” office space. This would imply that a five-year lease (including parking) would be in the range of $12 million, not including tenant improvements of around $9 million that the city wants DWP to pay. The total lease would be approximately $21 million, a significant discount to the new $41 million proposal.
However, the city should consider cutting DWP and its ratepayers a break given that we are forking over $291 million to fund the illegal 8 percent Transfer Tax on Power System revenues.
We are also being slammed with a five- year $1 billion rate increase. As such, the city should consider waiving the annual rent of about $2 million a year, leaving DWP to pay for the tenant improvements and parking. DWP would be responsible for the $9 million tenant improvements that would stay with the building after the lease is over.
The city will argue that it cannot afford the loss of revenue. But given the vacancy factor of this out-of-the-way location, its lack of amenities, its government dominated rent roll, the lack of interest by private sector renters, and the complex’s deferred maintenance, the likelihood of attracting tenants for these three floors is questionable.
Maybe it is time for the city to give a little something back to the ratepayers.
Previous CityWatch articles on the DWP lease of Figueroa Plaza:
—The Fig Plaza Stick Up: Ripping Off DWP Ratepayers for $40 Million – June 27, 2016
—Exposed! City Overcharging DWP Millions on Downtown Fig Plaza Rent – June 20, 2016
Mr. Humphreville writes L.A. Watchdog for www.CityWatchla.com. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council. Mr. Humphreville is the publisher of the Recycler Classifieds – www.recycler.com. He may be contacted at lajack@gmail.com.)
