Saturday, August 09, 2008

SCHOOL DISTRICT SETTLES LAUSD DISPUTE FOR $50 MILLION: Agreement With Meruelo Maddux Comes Four Years After LAUSD Tried to Buy Taylor Yard Site for $27 Million

by Ryan Vaillancourt

LA DOWNTOWN NEWS  page 1, 8/11/2008

Construction crews ready the future site of Central Region High School No. 13. Three years ago developer Meruelo Maddux Properties paid $31.8 million for the land at Taylor Yard. Photo by Gary Leonard.

The Los Angeles Unified School District has agreed to pay $50 million to settle an eminent domain dispute with Meruelo Maddux Properties over a 23-acre Cypress Park site, Los Angeles Downtown News has learned.

The agreement involving the property known as Taylor Yard comes about four years after the district sought to buy the land for $27 million, only to be eclipsed by a higher offer from Meruelo Maddux.

The previously unreported agreement was approved in a closed session meeting of the board of education by a 6 to 1 vote on June 17. That came more than two years after the district initiated eminent domain proceedings to acquire the property. A judge ruled in November 2007 that the district could take the land by eminent domain, but attorneys have since been debating what constitutes fair market value.

The district had long sought to buy the site and build a 2,200-seat facility to relieve overcrowding at nearby schools. The school board authorized the district to pay up to $29.4 million for the property at 2050 San Fernando Road, and in 2004 LAUSD negotiators offered $27 million, said Shannon Haber, a spokeswoman for the district's Facilities Services Decision. In March 2005, Meruelo Maddux bought the site for $31.8 million.

The $50 million settlement does not sit well with some, including Tamar Galatzan, the only member of the board of education to vote against the agreement.

"This is a lot of money for a property that the district could have purchased years ago and the run-up in price is based on the developer speculating that if the district didn't buy it, he could put a huge development on it and make double his investment," she said.

District officials in 2005 accused Meruelo Maddux (which was then a private company; it went public in January 2007) of swooping in at the last minute and snatching the property when the district was nearing its own deal.

Richard Meruelo, the company's chief executive officer - and a prominent Downtown landowner with close ties to Mayor Antonio Villaraigosa - has long countered that the district wavered for too long and he stepped in when the seller got anxious.

"LAUSD staff walked away from the property only to become interested again after a frustrated seller put it back on the market and re-approached the entities that had provided purchase offers nearly a year prior," the company said in a statement to Downtown News last week.

Competing Visions

After acquiring the site, Meruelo Maddux proposed a joint-use project that would have placed a school with housing and retail components on the land and surrounding company-owned parcels. The development was pitched as an opportunity to enliven and give public access to a major plot adjacent to the Los Angeles River.

The company and a team of consultants envisioned the school on an approximately eight-acre parcel on the south side of the property owned by Meruelo Maddux - where a FedEx distribution center still operates - abutting the 40-acre Rio de Los Angeles State Park. The plan imagined the school and city sharing the park's athletic facilities.

The school board insisted that planning such a project would have delayed construction for too long at a time when Franklin, Marshall and Eagle Rock high schools were all in urgent need of relief from overcrowding.

Board Vice President Yolie Flores Aguilar, whose district includes the Taylor Yard site, said the LAUSD was also hesitant to embrace the mixed-use plan because there was a lack of trust in the developer (Aguilar was elected to the board last year).

Instead, the board initiated eminent domain proceedings in April 2006 to acquire the 23-acre parcel.

A Reluctant Vote

The district is now in the preliminary construction stage for Central Region High School No. 13 on the site, but only after paying about 85% more than it was initially looking to spend.

The settlement pushes the district about 5% over budget on the approximately $161 million school, said Haber. That price is what sparked Galatzan's opposition.

"I voted against what I thought was a sweetheart deal for the developer," Galatzan said. "And I remember several of my colleagues saying they were going to hold their nose and vote for it. I couldn't do that."

Aguilar said that the board members who voted for the settlement did so reluctantly.

"I can tell you, none of us were happy," she said.

Michelle Meroughni, associate general counsel for the district, said the ultimate losers in the dispute are Los Angeles taxpayers.

"I think it's unfortunate that Mr. Meruelo dragged the district through this process for as long as he did for the reasons that he did and these are taxpayer dollars that had to pay for this," Meroughni said. "Of course it's unfortunate, because it was a game to him."

Meruelo Maddux argues that the board's decision to settle is ample evidence that the company is in the right.

"On its own, the LAUSD decided to accept a settlement agreement rather than continue discussions or litigating the matter, a clear indication that it believed both history and their arguments were not on solid ground," the company statement said.

Aguilar said the board considered pushing litigation further and possibly taking the case to trial - a strategy that Galatzan favored - but most members feared that could have proved even more costly.

"This is where lawyers make their money, so we weighed that, we really did, and at the end of the day we could keep fighting it and fighting and use those $50 million and still be back at square one," Aguilar said. "For me, the most important thing was to build the school."

In preparation for construction, crews are in the process of leveling the soil and installing trailers on the site, Haber said. The project is slated for completion in 2011.

Contact Ryan Vaillancourt at

No comments: