Washed It!

More of the shine of the Golden State’s real estate market lost a bit more of its luster as the total value of California’s properties fell for the second year in a row — and for the second time since records were first kept in 1933 at the depths of the Great Depression.

The value of all types of properties fell 1.8% this year to $4.4 trillion, the California Board of Equalization reported Thursday. The total value fell 2.4% last year.

Forty-eight of California’s 58 counties saw totals fall — nine by more than 5%. Only two counties, oil-rich Kern and tourist-destination San Francisco, posted expansions of their property tax rolls of 2% or more.

The negative numbers make for more bad news for county governments. They’ve had to curtail spending on basic municipal services because falling values have resulted in lower property tax revenues.

“It’s a decline that’s outside of their control” and unlikely to reverse itself until California starts creating tens of thousands of new jobs, said Board of Equalization Vice Chairman Jerome Horton.

The contraction of the last two years contrasts with California’s historic growth in its real estate value, Horton said, with “constant increases of 5% to 15% per year” for the last 77 years.

“Those numbers tell us we have a ways to go, and we have some work to do to bring balance back in our economy,” he said.

Some experts suggest that things could get even worse before they get better.

Many homeowners purchased or refinanced residences in 2005 or 2006 and could face interest rate hikes from the variable-rate mortgages, said Tracey Seslen, a real estate professor at USC’s Marshall School of Business. Tight financial markets and underwriting standards could make it hard for them to refinance at lower rates, she said.

“With the stricter lending measures in place, removal of the home-buyer’s tax credit and with uncertainty in the economy and the jobs picture, we have a large confluence of factors that are all going to be putting downward pressure on the housing market,” she said.

Other housing specialists, though, think that the board’s data, based on Jan. 1 figures, already may be out of date.

“In many areas of California, prices have found a floor and have even recorded three or four months of guarded recovery,” said Stuart A. Gabriel, director of the Ziman Center for Real Estate at UCLA’s Anderson School of Management.

“Hopefully, we have found or are close to a bottom” of the market,” Gabriel said, “and, we’ll be able to see some recovery of prices.”

The board’s data found that Los Angeles County, which accounted for about a quarter of the value of all property statewide, lost 1.8% of its property value. The steepest drops were in the high-desert cities of Lancaster and Palmdale, local officials said.

Plummeting commercial property values also are contributing to the reduction in the size of tax rolls, Los Angeles County Assessor Robert Quon said.

The county got hit with a one-two punch of “fewer changes of ownership and less new construction,” he said.

The weak market spurred Los Angeles assessors to review about 600,000 homes and condominiums. They lowered annual property tax bills on 400,000 properties purchased between July 1, 2003, and June 30, 2009, Quon said.

By getting their properties reassessed to reduce taxes, homeowners were able to save an average of $1,800 on a single-family home and $1,500 on a condominium, according to the county.

Across Southern California, property values fell 4.4% in Riverside County, 4.3% in San Bernardino County, 1.5% in San Diego County, 0.5% in Orange County and 0.3% in Ventura County.

Inland areas lost about twice as much of their property value as coastal areas did. The state’s hardest-hit counties were in the Sacramento and Northern San Joaquin valleys and the Inland Empire, the board said.

marc.lifsher@latiimes.com
Value of California’s properties falls 1.8% to $4.4 trillion

As employers struggle with rising healthcare costs and a sour economy, U.S. workers for the first time in at least a decade are being asked to shoulder the entire increase in the cost of health benefits on their own.

The average worker with a family plan was hit with 14% premium increase this year, pushing the bill to nearly $4,000 a year, according to a survey by the nonprofit Henry J. Kaiser Family Foundation and the Health Research and Educational Trust.

That is the largest annual increase since the survey began in 1999 and a marked change from previous years, when employers generally split the rise in the cost of premiums with their employees.

The average employer contribution to a family plan did not go up at all this year, meaning the entire increase was borne by workers.

At the same time, nearly a third of employers reported that they either reduced the scope of benefits they are offering this year or increased the amount that workers must pay out of pocket for their medical care.

Workers saw average copayments for routine office visits increase 10% and deductibles continue their surge upward.

In 2010, more than a quarter of American workers with employer-provided health coverage were in plans with deductibles of at least $1,000.

“It’s really bad news for everybody,” said Helen Darling, president of the National Business Group on Health, an organization of large employers that provide coverage to about 50 million workers, retirees and dependents.

Overall, premium growth slowed slightly this year to 3%, with the average annual cost of a family health plan reaching $13,770. Workers picked up 30% of that bill. The average plan for an individual cost $5,049.

The squeeze, reported by employers between January and May, largely reflects the fallout of the ongoing economic slowdown and may be ameliorated in future years as the new healthcare law is implemented.

But it could further complicate the Obama administration’s efforts to rally support for the law, which is expected to do relatively little in the short term to contain rising medical bills.

“There have been times when employers have been able to absorb costs. This is not one of those times,” said James Gelfand, health policy director at the U.S. Chamber of Commerce, a leading critic of the new law.

The law, which focused on expanding coverage for Americans who don’t get insurance through work, was designed to largely preserve the existing employer-based healthcare system.

Independent analyses of the law estimate that most Americans will continue to get insurance through their employer, as about 157 million do now.

Administration officials Thursday pointed to two new studies from the Rand Corp. and the Commonwealth Fund that predicted small businesses in particular would probably expand coverage in coming years, in part with help from billions of dollars of in new tax credits.

“We have really just begun our efforts,” said Nancy-Ann DeParle, director of the White House Office of Health Reform, emphasizing the growing number of tools government regulators have to control insurance premiums.

The Kaiser survey found that the percentage of firms offering health benefits rose to 69% from 60% this year, an unexpected increase that analysts speculate may reflect the failure of many businesses that didn’t offer benefits.

But the survey suggests that the coverage workers are being offered is becoming increasingly unattractive as employers try to control their costs in the down economy.

“We were all so focused on the reform debate that I think we took our eyes off the fact that what we call heath insurance in this country is changing,” said Kaiser foundation President Drew Altman. “What workers get looks less and less like the comprehensive coverage their parents had.”

U.S. employers push increase in cost of healthcare onto workers

After a difficult August, Wall Street began September with a big rally thanks to encouraging news about the manufacturing sectors in the United States and China.

The Dow Jones industrial average shot up 254.75 points, or 2.5%, to 10,269.47. The broader Standard & Poor’s 500 index soared 3%, as did the tech-dominated Nasdaq composite index.

In Europe, key stock indexes shot up 3.8% in France and 3.5% in Spain.

The surge came after the major U.S. indexes sank more than 4% in August on economic data that indicated a slowdown in economic growth and raised fears of a double-dip recession.

The manufacturing data Wednesday encouraged investors who thought the bearish sentiment had gone too far. Only 20.7% of investors ended August with a bullish outlook, the smallest percentage since the stock market hit bottom in March 2009, according to a index of market sentiment compiled by the American Assn. of Individual Investors.

“The catalyst allows you to look at things with a clearer head,” said Jim Paulsen, the chief investment strategist for Wells Capital Management. “The pessimism got extreme at the end of August there, and extreme pessimism is a sign that people are overdoing it.”

Wall Street opened higher Wednesday after a report from China indicated faster-than-expected growth in the country’s manufacturing sector.

The rally soon accelerated on an unexpected increase in a similar index of U.S. manufacturing activity. The Institute for Supply Management’s gauge rose to 56.3 from 55.5 last month; anything above 50 suggests the sector is growing.

The manufacturing numbers were particularly encouraging because factory sector has been one of the leading drivers of the economic recovery since it began.

The positive news relieved some of the pressure on the market for U.S. Treasury bonds, which some investors had bought as a hedge against a worsening of the economy. The yield on the benchmark 10-year T-notes jumped to 2.58% from Tuesday’s 19-month low of 2.47%.

The shift in sentiment Wednesday was such that investors appeared to shake off some economic reports that were less encouraging.

ADP, a payroll-service company, said private companies cut a net 10,000 jobs in August; analysts had expected an increase.

Analysts on average expect the Labor Department to report Friday that U.S. employers, including governments, shrank their payrolls by 100,000 jobs in August.

Other reports Wednesday showed weak car sales in August and a bigger-than-expected drop in construction spending in July.

Despite Wednesday’s sharp gains, stocks are unlikely to see a sustained rebound as long as the U.S. continues to suffer from high unemployment, said John Stoltzfus, chief market strategist at Ticonderoga Securities.

“The reality is we’ve been here before where we’ve seen rallies followed by sell-offs,” Stoltzfus said. “We expect that until some substantial catalyst arrives on the landscape the market is likely to be a giveth and taketh market, with short rallies and short sell-offs.”

nathaniel.popper@latimes.com

Stocks surge amid signs of growth in manufacturing

Federal officials investigating conditions at the two Iowa mega-farms whose products have been at the center of the biggest egg recall in U.S. history found filthy conditions, including chickens and rodents crawling up massive manure piles and flies and maggots “too numerous to count.”

Water used to wash eggs at one of the producers tested positive for a strain of salmonella that appears to match the variety identified in eggs that have sickened at least 1,500 people, according to preliminary Food and Drug Administration reports of inspections at facilities operated by Wright County Egg and Hillandale Farms of Iowa Inc.

FDA officials who briefed reporters on the findings in a telephone conference call declined to say how serious the violations were for facilities that house millions of birds. Between them, the two producers have 7.5 million hens. But FDA Deputy Commissioner for Foods Michael Taylor said that “clearly the observations here reflect significant deviations from what’s expected.”

Food safety experts said conditions described in the reports are some of the worst they’ve seen in decades.

The reports offer clues to what may have caused the salmonella enteritidis outbreak that prompted the recall of half a billion eggs.

Investigators began examining conditions at the Wright County operation Aug. 12, the day before the company issued its first recall. Inspectors completed their work at that facility Aug. 30, according to documents released by the FDA.

They found:

•Barns with dozens of holes chewed by rodents that mice, insects and wild birds used to enter and live inside the barns;

•Flies on and around the egg belts and hen feeders;

•Manure built up in 4- to 8-foot-tall piles in pits below the hen houses, in such quantities that it pushed pit doors open, allowing rodents and other wild animals access to hen houses;

•Dozens of hens, which had escaped their cages, roaming freely, tracking manure from the pit to other caged parts of the barns;

•Hen houses with significant structural damage and improper air ventilation systems.

Investigators checked out the Hillandale site Aug. 19-26. Their tests of spent water from an egg wash station came up positive for salmonella, although it was not clear whether that contaminated water had been used to clean eggs, an FDA official said.

Wright County Egg recalled a total of 380 million eggs beginning Aug. 13, and Hillandale has since pulled 170 million eggs from the market. Last week, FDA officials said that salmonella tests taken at both operations came back positive.

In a statement, a Wright County Egg spokeswoman said that the company had fully cooperated with the FDA and that “to date, the vast majority of the concerns identified in the FDA report already have been addressed through repairs or other corrective measures.”

A spokeswoman for Hillandale said the company was “committed to taking the steps necessary to regain the full confidence of our customers and consumers.”

FDA officials declined to discuss what, if any, penalties the egg producers might face. Possible penalties include seizure of products, court orders requiring improvements in operations or criminal prosecution. Wright County Egg owner Austin DeCoster has a decades-long record of regulatory violations in at least three states and has paid millions of dollars in fines and settlements.

The agency also announced that next month it would begin inspection of the nation’s 600 largest egg farms, which produce 80% of the nation’s eggs. Those inspections, industry officials say, are expected to include some of the industry’s smaller operations — those with as few as 50,000 laying hens — as well as mega-farms such as those operated by the DeCoster family in Iowa.

Many of the eggs consumers eat are being produced by a shrinking number of farmers. There are 192 large commercial egg producers in the U.S. that control 95% of all the laying hens, compared with 2,500 in 1987, according to the trade group United Egg Producers. The majority of those operations are based in six states, including California.

Filthy conditions found at egg producers

Time for an update on one of my all-time favorite fees — the fee that telecom companies charge to not provide you a service.

That service is publishing your name in a phone book, which is undoubtedly a pricey endeavor for phone and cable companies.

So if a customer asks that his or her name not be included in the directory, you’d think you’d be saving the telecom provider a little cash. That’s one less entry in the database, for example, one less dollop of ink at the printer.

But this month, Time Warner Cable more than doubled its fee for an unlisted number to a whopping $1.99 a month, or nearly $24 a year.

The higher fee applies immediately for new customers. Existing customers will see their unlisted number charge go up in January.

Again, that’s a recurring fee — now one of the highest of its type in the telecom industry — for something Time Warner isn’t doing for customers.

What prompted the increase? I asked Jim Gordon, a Time Warner spokesman, if the company’s own costs had gone up.

He declined to answer that question directly, saying only that this is “an administrative fee” and that it’s “consistent with our competitors in this space.”

Actually, it’s higher. Verizon Communications charges $1.75 a month not to list your name in its phone book and not to give your number to people who call directory assistance. AT&T charges $1.25 monthly not to provide these services.

OK, so why is the unlisted number fee charged on a recurring basis? After all, your ongoing preference can be recorded with a few taps at a keyboard, and then it’s done.

“It’s a recurring service that you’re provided throughout the month,” Gordon explained.

Let’s savor that a moment, shall we?

Time Warner and other telecom companies are charging for a service that consists of them basically not doing anything. And because they continue not to do anything month after month, they keep charging you on the grounds that it’s a recurring service.

Time Warner’s fee is all the more remarkable because the company doesn’t produce its own phone book. It pays Sprint to compile all its customers’ names and numbers, and to then pass them along to whichever phone company dominates a particular market for inclusion in that firm’s directory.

Just to be clear: That’s $1.99 a month not to be in a phone book that Time Warner doesn’t even publish.

AT&T’s and Verizon’s fees are a little more understandable. After all, they make extra cash selling ads in their phone books. The more people who choose not to be listed, the less valuable the directory becomes to advertisers, so the phone company wants to discourage people from leaving.

But Time Warner isn’t in the phone book business. Its recurring fee for unlisted numbers is a money grab, pure and simple.

And the unlisted number charge isn’t the only way that the cable giant has started reaching deeper into people’s pockets.

As of Aug. 6, the company raised its fee for customers to pay their bill by phone to $4.99 from $2.99. It also raised it fee for ordering pay-per-view by phone to $4.99 from $2.99.

I’m not trying to tell Time Warner how to run its business, but are such heavy-handed charges really the best way to maintain customer loyalty, especially during economic times like these?

Time Warner Cable doubles fee to not list phone number

Afghanistan’s attorney general denied Sunday that a prosecutor investigating allegations of corruption in the upper reaches of the government had been fired, saying the official simply had reached the point when retirement was mandatory.

Atty. Gen. Mohammad Ishaq Aloko said during an interview in his Kabul office that prosecutor Fazel Ahmed Faqiryar stopped working Thursday in accordance with Afghan law after 40 years of service. The rules state that officials must step down if they are older than 65 or have served for four decades, he said.

The prosecutor was not forced out because of any conflict with President Hamid Karzai, Aloko said. Faqiryar’s claim Saturday that he had been fired “is absolutely groundless,” he said. “He wants to be admired by the public and the media. His retirement has no relation with corruption.”

Faqiryar’s exit from his post comes amid growing concern in Washington that billions in U.S. taxpayer money have been pocketed by Karzai’s inner circle. At the same time, some U.S. officials fear that pushing the shaky government too hard on corruption could undermine the wider war effort.

A senior State Department official said Sunday that the facts of the prosecutor’s case seemed unclear and that he was unaware whether anyone in the administration was raising the issue with the Karzai government. “We are watching this very closely,” he said.

Another U.S. official said an open fight with Karzai probably would make him more intransigent and complicate relations ahead of parliamentary elections and major military operations scheduled for the coming weeks. “It’s not worth the potential trouble over one prosecutor where the facts aren’t entirely clear,” the official said.

Both officials requested anonymity because they were not authorized to discuss the matter.

In an interview Sunday in his modest Kabul apartment, Faqiryar disputed Aloko’s account, saying he was authorized to work past 65. Like many Afghans, he doesn’t know his exact birthday but says he’s about 72. He also said he had worked only 39 years and five months, not counting schooling and five years under Taliban rule when he was off the government clock.

The prosecutor, who was also deputy attorney general, said his relations with the Karzai administration turned sour last year when he briefed a closed-door session of parliament regarding about 25 corruption cases the attorney general’s office was working on, naming governors, ministers and ambassadors who were targets of investigation.

The attorney general quickly expressed his unhappiness with the move, Faqiryar said, “so from that time, our relations went bad.”

Faqiryar said this rather tense atmosphere carried on until he sent a midlevel prosecutor to speak about corruption on a television station this month. After that, he said, his retirement was fast-tracked.

Faqiryar said he’d watched legal cases involving powerful officials delayed, sidelined and dismissed or the parties ruled not guilty. “We can implement the law on poor people,” he said, “but not on rich and influential people.”

Analysts said the Karzai administration appeared to be following a strategy used by other rulers in South Asia of diverting state resources to secure personal loyalties.

“It’s not aimed at using government money to make a good society but, rather, to cement alliances,” said Rasul Bakhsh Rais, a political science professor at Pakistan’s Lahore University of Management Sciences and the author of a book on war, ethnicity and governance in Afghanistan. “It’s a very heartbreaking story in Afghanistan.”

This month, Karzai stepped in to stop the prosecution of a close aide, Mohammed Zia Salehi, who according to investigators was heard on a wiretap demanding a bribe from another Afghan hoping to foil a corruption investigation.

The Salehi case was still under investigation, Aloko said Sunday, but there was no risk of his escaping since “he’s working in a high post.” He added that Salehi would remain free until his case was in the investigation process.

In many parts of the country, the government only recently has gained a foothold amid security concerns, Aloko added, and, although many lower-level officials have been prosecuted, cases involving ministers have not gone ahead since, under the constitution, they need to be tried in special courts, which have not yet been established.

“Corruption is greatly reduced compared with before,” he said. “Today, rule of law is revived, everyone fears the law and being prosecuted, and we have made progress.”

.

mark.magnier@latimes.com

Times staff writer Magnier reported from New Delhi and special correspondent Yaqubi from Kabul. Times staff writers David S. Cloud and Paul Richter in Washington and special correspondent Hashmat Baktash in Kabul contributed to this report.

Prosecutor investigating Afghan corruption wasn’t fired, official says

Five years after Hurricane Katrina, President Obama recommitted the nation to ongoing repair of the Gulf Coast as the region’s fragile recovery hung in the balance and his own popularity needed shoring up amid disappointment with the administration’s handling of the gulf oil spill.

Obama underscored the optimism and ongoing frustration felt in New Orleans, a city that had shown signs of renewal despite lingering devastation.

Residents worry the nation will leave them behind, fatigued over the one-two punch of the hurricane and BP spill. Obama seemed intent on convincing them otherwise.

“I wanted to come here and tell the people of this city directly: My administration is going to stand with you – and fight alongside you – until the job is done,” Obama said at Xavier University, a historically black college where he delivered the commencement address less than a year after Katrina.

After being criticized for his administration’s slow response to this year’s BP oil spill, Obama impressed on gulf residents the improvements he had made in streamlining Katrina aid — including $1.8 billion for Orleans Parish Schools announced Friday.

Obama pledged to finish the largest civil-works project in the nation’s history — shoring up the failed levees — by next year. He noted the June groundbreaking on a new Veterans’ Administration hospital.

The White House sent top administration officials as the region held days of panel discussions, art exhibits — even a funeral for Katrina where attendees hoped to bury their grief and move on from the largest residential disaster in the nation’s history.

Yet for a president who works to separate his legacy in the gulf from that of his predecessor, President Bush, the administration’s handling of the BP spill links the two by the perceived inability of government to adequately respond to disaster.

“We are going to stand with you until the oil is cleaned up, the environment is restored, polluters are held accountable, communities are made whole and this region is back on its feet,” Obama said.

Obama made an unscheduled lunch stop before the afternoon speech, ordering a shrimp po’boy at the Parkway Bakery and Tavern, a 100-year-old restaurant in the Mid-City neighborhood of New Orleans, eating with the first lady and their daughters. The president greeted patrons with hugs and handshakes.

“We’re just going to keep on building, we’re going to keep on working, alright?” the president said, according to the pool report.
Obama, in New Orleans, promises to ‘fight alongside’ Gulf Coast

The Commerce Department on Friday downgraded the nation’s economic growth in the second quarter, providing the most important evidence yet that the recovery has stalled.

The anemic annualized growth rate of 1.6% was down from last month’s estimate of 2.4%. The drop was slightly less than many economists had predicted, but the report still put an exclamation point on a week of bad economic news that has raised fears the nation could plunge into another recession.

Responding to those concerns, Federal Reserve Chairman Ben S. Bernanke said Friday that the central bank was prepared to step in if necessary to help provide additional stimulus to the economy and avoid the type of debilitating deflation that struck Japan in the 1990s.

He outlined three possible options, including expanding its purchases of long-term securities to pump more money into the economy and signaling that the central bank will keep its short-term interest rate near zero for longer than the vague “extended period” it has promised.

“The Federal Reserve is already supporting the economic recovery by maintaining an extraordinarily accommodative monetary policy, using multiple tools,” Bernanke told a major economic gathering in Jackson Hole, Wyo., according to a copy of his remarks released by the Fed.

“Should further action prove necessary, policy options are available to provide additional stimulus. Any deployment of these options requires a careful comparison of benefit and cost.”

In his highly anticipated comments, Bernanke added that despite the “recent slowing” in economic growth, “it is reasonable to expect some pickup in growth in 2011 and in subsequent years.” But the high unemployment – at 9.5% in July – is expected to “decline only slowly,” he said.

“The prospect of high unemployment for a long period of time remains a central concern of policy,” Bernanke said.

The Commerce Department’s Bureau of Economic Analysis said Friday’s downward revision was based on more complete data and “primarily reflected a sharp acceleration in imports and a sharp deceleration in private inventory investment” by businesses. Those drops were partially offset by an increase in residential and nonresidential investment, as well as increases in federal, state and local government spending.

Federal stimulus and other spending was a big boost from April through June, with expenditures and investment up 9.1% in the second quarter, compared with an increase of 1.8% in the first quarter of the year, the report said. But the nonpartisan Congressional Budget Office reported this week that the effect of last year’s $814-billion stimulus legislation would gradually diminish in the second half of the year.

The widening trade deficit was a major drag on the recovery in the second quarter. Real exports of goods and services increased 9.1% in the second quarter, compared with an 11.4% increase in the first quarter. Imports soared 32.4% in the second quarter after rising 11.2% in the first.

The government routinely revises its reports on domestic economic output, also known as Gross Domestic Product.

Friday’s revision comes after an advance estimate of second-quarter GDP that was released July 30. The average revision is about 0.5%.

Economists had projected second-quarter GDP could fall to 1.3% or lower. Still, Friday’s report was discouraging because growth below 2% reflects a very weak recovery. The economy had grown at a 3.7% rate in the first quarter and 5% in the final three months of last year.

The downward revision follows horrible housing reports that hit Tuesday.

Thursday brought some more potentially discouraging news on home foreclosures and unemployment. Investors demonstrated their concern, dropping the blue-chip Dow Jones industrial average 74 points to close below 10,000 Thursday for the first time since early July.

The Dow was up slight in early trading Friday. Consumer sentiment in August remained largely unchanged, according to survey results released Friday by Thompson Reuters and the University of Michigan. Only one in four households expected their finances to improve in the year ahead, the survey found.

The downward revision of second-quarter economic activity came as other forecasts projected slow growth.

Last month, Federal Reserve Chairman Ben S. Bernanke declared that the economic outlook was “unusually uncertain.” Concerned about the pace of recovery, the Fed this month decided to start buying U.S. Treasury bonds again to keep down longer-term interest rates.

The central bank this year had begun pulling back its extraordinary support for the financial system, but jumped back into the bond market this month because Fed policymakers said the recovery “appeared more modest in the near term than had been anticipated.”

Bernanke is set to address the economic situation later Friday morning in a speech at the Fed’s annual Economic Policy Symposium in Jackson Hole, Wyo., a high-level gathering of central bankers, finance ministers, academics and industry executives from around the world. It will be his first public comments since the Fed announced its plan to resume purchases of Treasury bonds.

But with the Fed’s benchmark short-term interest rate near zero, its policy options are limited. The Fed’s most recent economic forecast, in late June, called for economic growth of 3% to 3.5% this year, slower than the 4% growth in the last half of 2009.

Bernanke said Friday that the central bank could decide to expand its purchases of long-term securities, signaling low interest rates will last much longer, or lower the interest rate the Fed pays to commercial banks for their reserves, which would encourage them to lend the money.

He said there was not a significant risk of the economy “falling into deflation” – a harmful cycle of lower prices that damages growth. But he said the Fed was prepared to act in such a case to “strongly resist deviations from price stability in the downward direction.”

jim.puzzanghera@latimes.com
Downward revision of GDP growth a strong signal of stalled recovery

Construction on the long-stalled Grand Avenue hotel, condo and shopping complex may be delayed at least another two years because developers have been unable to secure financing.

The $3-billion Frank Gehry-designed Grand Avenue complex was supposed to be the centerpiece of an elaborate effort to rebuild the blocks stretching from the Walt Disney Concert Hall to City Hall. But while backers of downtown development cheer Eli Broad’s recent decision to build his new art museum on Grand Avenue and a new 16-acre park nearby, the latest delay is a reminder that the fate of the broader reimagining of the Civic Center area is still uncertain.

The project developer, Related Cos., said this week that it plans to request a two-year extension of its current February 2011 deadline to begin construction.

If the new deal is approved by city and county officials, groundbreaking would not have to start until 2013 — six years after work was first slated to begin. Bill Witte, the president of the developer’s California division, said Related may request yet another extension if the economy hasn’t improved by 2013.

“There is no chance of financing a significant project in the near term,” Witte said. “In fact, I’m not sure there’s much of a chance of financing even an insignificant project in the near term.”

Proposed in the early 2000s during the zenith of downtown’s building boom, the project’s plans call for a boutique hotel, thousands of luxury condos and acres of retail space for upscale restaurants, shops and art galleries. A 40- to 50-story Gehry-designed glass tower was to mark the spot as a cultural hub for tourists, shoppers and a new breed of wealthy downtown denizens.

Now it’s likely that Broad’s museum and the planned park — which was conceived as part of the overall development — will open before construction on Gehry’s tower begins.

The project remains popular with downtown boosters, but some concede that the plans may need to be tweaked to take into account the economic downturn.

Eric Richardson, the publisher of blogdowntown.com, praised the Grand Avenue project for “the attention that the idea brought to downtown revitalization.” But he said some residents feel that what the area really needs is more grocery stores, pharmacies and other basic amenities.

“We’ve been very slow to pull in the retail that kind of completes the picture of life downtown,” he said. “Some people are asking, ‘Does downtown really need a mega project at this point?’”

Grand Avenue, which was approved by city and county officials in February 2007, is one of the last of several proposed “mega projects” in downtown that are still alive since the real estate market crashed in 2008.

Paul Novak, the land planning deputy for L.A. County Supervisor Mike Antonovich, a longtime critic of the project, said he doesn’t think there is an appetite downtown for Grand Avenue’s upscale offerings.

“OK, you’ve got very high-end condos and a high-end hotel,” Novak said. “But the condo market is in the dumps downtown, and downtown already has a five-star hotel.”

Officials with Related said they have already secured millions of dollars in equity but have had trouble securing loans to pay the $1.1 billion required to build the first phases of the project.

During the last renegotiation of the construction deadline, Related agreed to pay a penalty of $3 million a year to push construction back. Under the new extension, which Related may ask for in the coming weeks, it must pay the joint city-county authority that controls the land an additional $1 million in penalties. The penalties would be paid once construction begins.

Witte and others say they hope the Broad museum and the new Civic Park will raise the profile of Bunker Hill and make it easier to secure loans for Grand Avenue.

Witte said Related is considering altering its plans for the project, but he would not say what changes are being considered.

Steve Needleman, who owns the Orpheum Theatre and lofts on Broadway, said Grand Avenue’s developer should consider making changes “like building office space or more modestly priced apartments.”

“I think the Grand Avenue project, by the time it gets built, will change again,” Needleman said. “You’re having to reevaluate what makes sense.”

Carol Schatz, the executive director of the downtown-based Central City Assn., also acknowledged that aspects of the development may have to be reconsidered.

“The Grand Avenue project made a great deal of sense at the time that it was approved,” Schatz said. “But things are different now.”

kate.linthicum@latimes.com
Grand Avenue project faces 2-year delay over funding

Just days after U.S. auto safety regulators stepped up a probe into the risk that more than 1 million Toyota Corolla and Matrix vehicles could stall because of defective electronic engine control units the Japanese automaker announced a recall of the vehicles.

Toyota Motor Sales U.S.A. Inc. said Thursday that it would recall 1.13 million 2005 to 2008 model year Toyota Corolla and Corolla Matrix vehicles sold in North America to address a problem with an electronic component called an engine control module that may have been improperly manufactured. No other Toyota or Lexus vehicles are involved in this recall.

This latest action brings the number of vehicles Toyota has recalled in the last year to about 10 million worldwide, a figure that is now approaching the total number of vehicles that will be sold by all manufacturers in America this year. The quality issues have hurt the automaker’s once sterling reputation for reliability and dependability and affected it sales position. Through the first seven months of this year, Toyota’s U.S. market share has dropped to 15.2% from 16.3%, dropping it to third place in the U.S. auto market behind No. 1 General Motors Co. and Ford Motor Co.

Toyota has been plagued by a rash of quality problems involving faulty gas pedals, floor mats, brakes, electronic stability control systems, steering systems and other defects.

In the Corollas, Toyota said there is a crack that may develop either at various points on or in the component. When this happens, the check engine light may go on and the driver may experience harsh shifting. The engine might not start and in some instances the engine can stall while the vehicle is being driven. Toyota said there are three unconfirmed accidents alleged to be related to this condition, one of which might have resulted in a minor injury.

Toyota plans to replace the module on all of the recalled vehicles at no charge to owners. It will mail notice of the recall to owners starting in the middle of September. People will be told to bring their cars to dealers as replacement parts become available. Owners who have already experienced the problem and paid for the repair will be instructed on how to collect reimbursement.

People with questions can go to http://www.toyota.com/recall and or call Toyota at (800) 331-4331.

On Wednesday, safety regulators began an engineering analysis of stalling in Corolla and Matrix cars.

The National Highway Traffic Safety Administration had received 26 complaints of vehicles stalling when it opened a preliminary evaluation in November. It reported 163 complaints when it opened the engineering analysis.

“The engine can stall at any speed without warning and not restart,” NHTSA said on its website.

jerry.hirsch@latimes.com
Toyota recalls Corolla, Matrix models due to an engine defect