CALIFORNIA COMMENTARY - L.A. Couldn’t Get Its Act Together - Ambassador: Failure of Trump Wilshire and the school district to agree about the hotel property has a lot to with how local, state governments work.

The headlines make it easy to choose a villain in the tug-of-war over how to use the Ambassador Hotel site: “East Coast developer” Donald Trump vs. the “children-first” Los Angeles Unified School District. But when negotiations between the two sides recently concluded, the absence of an agreement had little to do with good guys and bad guys.

Six months ago, I was hopeful an agreement could be reached; another district-developer conflict, involving a junior high school, had just been tentatively settled. The Ambassador challenge proved much more daunting, however.

The school district, exercising its powers of eminent domain, first became interested in the Ambassador property as a site for a new mid-Wilshire high school. After study, the district designated it as the best site and was proceeding with its application for state funding when Wilshire Center Associates, pre-Trump, paid $64 million for the property. There were two other complications: the district’s requirement that a high-school campus be 17 acres and its policy that no housing shall be condemned if vacant land is available nearby. There is, of course, no 17-acre parcel without housing in the mid-Wilshire corridor; there were even 22 apartment units on the Ambassador site.

During the negotiations, a team working for the new owners, joined by Trump, as managing partner identified several alternative sites for the school district’s high school. The district rejected every proposal, citing traffic congestion, noise, lack of replacement housing, property owners unwilling to sell and so on. Yet the true reasons that the district-developer discussions collapsed involved issues beyond the negotiators’ control:

--The City of Los Angeles’ piecemeal planning and entitlement process. When development projects such as that proposed by Trump move through the city planning bureaucracy, everyone tries to take a bite of the apple. Wider, more beautiful streets, traffic abatement, a child-care center, a park--these are examples of bites demanded by government and community. More ominously, a City Council member, in response to community concerns, may demand that the project be downsized.

Developers, to be sure, take these added costs into account. But after awhile, a project, reduced in size and burdened with add-ons, ceases to be economical. Furthermore, the central Wilshire corridor is not exactly booming. In fact, it has been decaying for years and there is no certainty that Trump Wilshire Associates’ proposal, or any other, would reverse the slide.

Thus, if the school district takes too many bites of the apple now, before the first sketch has been drawn or the first city permit applied for, the project becomes less and less economically viable even before the serious nibblers step up to the table--the city officials who will determine just how big the project will be.

--Limitations imposed on the school district by the state process of funding school construction. Since Proposition 13 makes it difficult, if not impossible, for school districts to raise school-construction money through local bond elections, districts have had to look to the state for their money. Unmet school-construction requests at present total $6 billion. The governor and the Legislature have approved $800 million in school-construction bonds for the June ballot; the November number is undecided.

This means that California’s school districts must jockey for the money. They are thus loathe to do anything that might lose them their place in the funding line. This fear was the main reason that the L.A. district was reluctant to accept an alternate site for its new high school.

Yet even if school-construction money was more readily available, the district would still have to overcome various city obstacles. The City of Los Angeles, for example, doesn’t include schools in its planning. In the Porter Ranch development, the largest ever proposed in the city, no provision was made for schools. Though some city leaders don’t want a high school on the Ambassador site, they have not rushed to help the district find an alternative.

Actually, some local politicians have preferred to throw brickbats at the L.A. district for destroying housing in the past. Because of this and the school board’s evolving moral aversion to displacing low-income residents, the district’s policy is to go after potential school sites where little or no housing exists. The district would reconsider its opposition to condemning commercial property if someone could be found to build replacement housing for displaced residents at non-commercial sites.

Why didn’t Trump Wilshire just offer to build such housing? Due to the district’s fear of losing state funding, it was never clear that building replacement housing would solve the problem. Second, with years of negotiations with city officials still ahead, it would be foolish for Trump Wilshire to let the school district take the first bite--replacement housing--out of the apple before the entire package of development rights was determined. Indeed, it is likely that the city will soon be assessing a fee on all commercial development to fund affordable housing. Trump Wilshire, of course, would have to pay the fee. But it would receive no fee credit for any housing it provided to help the school district now. Only a fool would pay twice.

Last week, the State Allocation Board again postponed a decision on the school district’s application for $120 million to buy the Ambassador site and build a 2,500-student high school on it. Previously, the board reserved only $50 million in site acquisition and planning funds, far short of the $73.5 million the district has offered for the property and ridiculously short of the $150 million that Trump Wilshire says it is now worth. The allocation board will reconvene in 30 days.

Whatever the outcome, this is no way to build a high school.