Tuesday, July 27, 2010

Analysis of Management Changes at LA’s Planning Department

Although it is hard for the general public to fathom what takes place at City Hall, we know this much about recent changes imposed on LA’s Department of City Planning. Gail Goldberg, the Director of Planning, recently quit her job. One week after her last day at work, the Mayor nominated the Chief Zoning Administrator, Michael LoGrande, to become the new Director of Planning.

Many others have written about this management change, with plenty of ink and tears spilled over the new Planning Director’s level of knowledge, seniority, and servility to real estate developers. But, I don’t think the real question is the new planning director's history and style, but why the Mayor and his consigliere, Austin Beutner, decided they wanted a City Hall backroom player to take over the Planning Department.

Some turn to personal scheming for an explanation, but I think the deeper answer is the poor state of the local, regional, and national economies. As they continue to decline, the pols and the investors they enable increasingly turn to short-term real estate speculation, not long term business or city planning, as their preferred investment strategy. Despite the Great Recession, with its unemployment, foreclosures, bank failures, and declining stock markets, the large investment houses and corporations are awash with cash, but with few ways to profitably invest it.

Old fashioned options, such as taxing some of this money so the government can use it for planned infrastructure improvements, no longer compute. Such a public approach is too iffy, and it takes too long for a new subway or remodeled airport to produce a better business environment. Since major investors can’t make money like they used to, by investing in public infrastructure and actually making and selling things for a profit, they have turned to increasingly risky financialization.

In a nutshell, more and more of their business models consist of buying and selling financial instruments, most of which are based on real estate speculation. This desperation by large investors previously led to the Savings and Loan crisis of the 1980s, when over half of this country’s S and L’s failed in a giant real estate bubble. It also produced the bank meltdowns of 2008-9, when many a house of cards collapsed because borrowers could no longer repay mortgages on their real houses. In both cases losses at the top were covered by the Federal government.

The process which led to those speculative collapses is still alive and well in Los Angeles and much of the United States. Never mind that the crises of the 1980s and then twenty years later in the first decade of the 21st century showed the folly of such a high risk investment strategy. Never mind that it will not work again. After all, there simply is not enough demand to profitably fill new condos and shopping centers, especially in Los Angeles. The specter of empty buildings, just like the S and L crisis, is again at hand, except this time the Federal Government is broke.

Even those real estate investors who have no intention to build anything, whose investment strategy is to collect building entitlements so they can flip properties and make some quick money, will be blind-sided when they, too, run out of buyers and bailouts. Meanwhile, with public services cut and infrastructure underfunded, Los Angeles has become a less inviting place to live, to work, or to run businesses. Voila, a downward spiral appears in which each short term City Hall maneuver, like furloughs and layoffs, begets further urban decline.

Who wants to live or do business in a rundown city, like Los Angeles is becoming, if they have a choice?

As part of this pitiful race to the bottom, each “planning” decision is short term and designed to facilitate risky real estate speculation at the expense of adopted city plans and zoning. More to the point, why go through the pretense of maintaining plans or having a planning director who can talk the profession's talk, when you can quickly bring in a replacement from the dugout who claims he can walk their walk. Why should plans and zones get in the way of quick entitlements allowing commercial real estate to be flipped?

But, sooner or later, the truth will come out. Quick entitlements might produce a few small fortunes or even a modest building boom, an echo of the 1980s, but they will not revive Los Angeles. When the dust settles and the quick buck artists have moved on -- most of them avoiding a stint at “Club Fed” -- Los Angeles will need even better urban planning than it has occasionally had in the past and could still have and desperately needs in the present.

* Dick Platkin is a Los Angeles based city planning consultant. He invites comments on this article at rhplatkin@yahoo.com

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