by Paul R. Spitzzeri
Continuing on with our deep dive into the pages of the 15 March 1924 issue of the Municipal League of Los Angeles Bulletin, we return to the editorial page and the organization’s query, “Shall City Also Profit By Unearned Increment?” This phrase refers to the increase in the value of property without any improvements or investment by the owner and, with the prior year being the peak one of the latest boom in the Angel City and environs, it was a notable question to ask.
The piece began with the report that the Board of Education had not yet officially announced it, but a sale of school property at Grand Avenue and 8th Street in the burgeoning downtown section was determined to be imminent and this “raises the general question of the wisdom of the policy of local government units disposing of their most valuable down-town property realty holdings.”
While it was asserted that government was not be in the business of real estate, a progressive approach also concerned “the continuous necessity of purchasing land to meet expanding community needs.” The League wondered whether, if government was to be involved in dealing with real estate, was it to be an entity that “makes or loses money for the tax-payers?” Moreover, it asked “what is to prevent the community from developing its down-town properties as enormous revenue producers as private owners are doing?”
Otherwise, the piece noted, the city, by assiduously avoiding being identified as involved in realty enterprises, stood to lose significant amounts of money, as a few examples demonstrated. The intersection of Mateo and Violet streets just west of the Los Angeles River between 7th Street and Interstate 10 is a gritty industrial area now, but in 1920 there was a two-acre playground there that was sold by the city for $65,000, though its owner four years later had it up for sale for $150,000.
Mercantile Place, an open-air commercial section spanning a thin strip between Spring Street and Broadway, was opened in 1904 on property that, for twenty years was the second location of the Angel City’s first public school, previously situated at Spring and 2nd streets. The Board of Education, however, kept ownership of it until November 1919 (the Bulletin erroneously stated it was 1923), when it was sold to theater owner Adolph Ramish for north of $1.15 million. Almost exactly three years later, Ramish sold to A.C. Blumenthal of San Francisco (the publication, again, said this was in 1923) for $2.5 million, with the Arcade Building constructed there, and it was remarked that “the realty is worth more than that now.”
At Olive and 5th streets, the Public Service Commission sold a tract to W.W. Mines and Company for a quarter million dollars and, soon, part of the Biltmore Hotel, still operating today just over a century later, was constructed there. The Bulletin commented that “a realty expert gives ‘a very conservative estimate’ of it present value as $500,000.” The result was that, in this trio of examples, “the community has so far been shorn of $1,680,000 in realty values” and “it is probable that within a short period that figure will be multiplied several times.”
It was the League’s view that these high-value municipally-owned properties should not be sold, but leased, a position endorsed by Los Angeles Realty Board Vice-President W.L. Brent, who observed that long-term increases in value meant that “I would rather lease than sell” because “the community ought to get the benefit of the increasing values.” The executive added that “the leases should be for a long period of years,” with rents adjusted every decade” or on a scale determined by anticipated increases in value.
A contribution called “System in Assessing” by the League’s treasurer, Alexander MacKeigan, Jr., a realtor and briefly on the city planning commission at the dawn of the decade, praised the county’s assessment department, noting that it began in 1916 and quickly improved the rather unprofessional methods previously utilized. A Joint Bureau of Appraisal was established, after being advocated by the League, to that city and county property was revalued and MacKeigan was its expert on the valuation of land and was responsible for this within Angel City limits.
Los Angeles was divided into 211 districts, generally a mile wide and two long, and maps were created. The deputy appraiser met with property owner committees and, looking at market values of frontages, figures were approved and included on the maps. Another look was given to determine any errors, “equalization being of as much importance as the obtaining of a fair market value,” and the maps handed over a computation department of the bureau. The result was an increased valuation for the county of $75 million.
Moreover, a Building Department was established “and every building in the city and county was measured and classified” with corresponding unit costs and with residences specified as special, good, medium or cheap with their varying costs assigned. In that peak year of 1923, more than 100,000 new structures were entered into the system, among these the edifices of Walter P. Temple’s subdivision, established in the spring, of the Town of Temple, as well syndicates in which he was involved that constructed two office buildings in downtown Los Angeles. It was concluded that the county assessor were improved for 1923 and it was noted that his figures did not deviate much from those formulated by the local chapter of the Associated Contractors of America.
Another important real estate component concerned zoning, but the Bulletin warned that “the community’s efforts to direct its physical growth along lines determined by the study of experts and to avoid the confusion and waste of haphazard development appear to be a failure.” The problem, it added, was not the courts and the question of the municipal zoning ordinance, though a final determination was awaited. Instead, it was “the activities of organized realtors, city hall politicians and lobbyists.”
Until just a few months prior, however, and “during our first year of zoning the City Council kept its hands pretty well off the work of the planning commission” as “ordinances based upon careful study of the district zoned were passed” by the former on the latter’s recommendations, but, the current council, which included Boyle Workman, great-nephew of the Homestead’s founders, William Workman and Nicolasa Urioste, “has taken zoning matters into its own hands with the result that the planning commission’s zoning committee plays the role of a feeble and much discouraged adviser.”
This included “an alarming number of council reversals of the commission” and the Bulletin added,
The records show that in the case of the majority of these appeals the city fathers rejected the judgment of zoning experts as to the proper location of single family residences, apartments, retail stores, and industries and gave their assent to the invasion of residential sections by flats and business establishments.
While the League claimed to level no accusations, it added that “the people should be acquainted with the possibilities for pernicious activity of lobbyists arising out of the council’s zoning activities.” A core reason for this change was financial, as it was remarked that “it is possible for the city council . . . to raise market realty values as high as 300 per cent” and called this leap after reversing commission suggestions “astounding.” On Wilshire Boulevard, between Western Avenue and Westlake [now MacArthur] Park, rezoning of an apartment district to commercial uses sent the value from around $18 million to some $24 million.
In its analysis, the League “ascertained that lobbyists of high and low degree have been active in obtaining these zoning changes,” a situation deemed “appalling,” while adding that “there may be truth in the numerous rumors and charges of graft afloat in the western section of the city.” Moreover, the Bulletin continued, “city hall may never have seen any of the money which it is alleged has passed into the lobbyist’s hands.” Concluding that “the people ought to know the truth and the full truth regarding a dangerous situation,” the article ended that the results of the League’s investigation “has been placed in the hands of the district attorney.”
Another, shorter critique concerned the information that “without preliminary competitive bids, the Board of Supervisors has awarded to the Allied Architects Association of Los Angeles the contract for the plans for the $4,000,000 group of county hospital buildings to be erected out of the recent $5,000,000 bond issue.” This forced the League to ask the obvious query: “Should local government rely exclusively on one group in Los Angeles County to supply the brains for the solution of its technical problems?” Allied was to receive a 6% commission, or not far below a quarter million dollars, for its work and Supervisor John (Jack) H. Bean excused this by saying that the rate was typical for architects on similar work nationwide.
In fact, Bean averred that “we have all the brains we need for these jobs right here . . . I am for home products . . . for employing home people” and insisted it was mistake for the Los Angeles Public Library to hired outside architects when Bertram Goodhue of New York was selected to design the landmark structure, though Los Angeles’ Carlton Winslow ended up completing the project when Goodhue died in 1924, more than two years before completion.
Beyond this, the supervisor noted that there was competition in the sense that there was to be a series of entries submitted by members of Allied for selection by the Supervisors of whatever elements from them that it liked and he remarked that “if we had thrown the plans open to general competition and a single architect or firm of architects had won out, we would have had to accept the winning plan in its entirety.”
Countering Bean’s view was Albert C. Martin, who observed that 80% of Los Angeles’ fire-proof structures in the prior year were designed by non-Allied members, while he asserted that the more successful of Allied architects would not actually work on a project like the County Hospitable and this meant “the least experienced men” would be involved. He also challenged the normality of the 6% commission and suggested that other architects “should at least have been consulted before the contracts were let.” The piece ended with a League resolution asserting that public building plans should have been from “competitive architectural designs, in accordance with he code of the American Institute of Architects.”
Another interesting article in the Bulletin concerned the costs associated with “adjustment schools,” in which some 4,000 city school students received extra help in catching up on their studies so they could be promoted to the next trade and it was found that it was actually financially sounds to operate these schools compared to the general cost of educating students. It was added that this “takes no account of the development of spiritual and humanitarian values which result when pupils get upon their feet and really begin to work with intelligence and ambition.”
Notable, too, was a piece on the return received from city funds deposited in banks, with it pointed out that five-and-a-half years before, the Bulletin reported that no more than 2% was yielded, lower than other American metropolises and the State of California, so it was suggested that bids be taken from banks. A bill in 1919 was vetoed by the governor, but another attempt succeeded and, early in 1924, bids were received, with some banks offering the former 2.5%, others at 3% and one at 3.25%.
When the city treasurer told the banks with the lowest rates that there were others that offered higher ones, all but one agreed to go to 3%, increasing the yield by $50,000 and a chart showed the seven institution and the totals of monies involved. It is worth noting here that, in 1875, new City Treasurer James J. Mellus deposited city funds in the Temple and Workman bank on the promise of an astounding rate of 7% interest—when the institution failed about a year later, however, the city’s monies—all of $23,000 compared to the $11 million as of the end of February 1924—were lost.
Earlier in this post, the Los Angeles Board of Harbor Commissioners was criticized for its generous subsidies and favorable leases that went against the interest of the city and its taxpayers, with League President David Woodhead, a lumber company owner and former planning commissioner, sarcastically suggesting handing out checks to wealthy figures like William Wrigley, Edward L. Doheny and Frank A. Garbutt, who already enjoyed leases that worked to their advantage.
A separate article, “More Unprofitable Harbor Franchises,” noted that one to the San Pedro Transportation Company was such that the revenue remittances for the four landings, compared to the city’s investment at these sites, left a shortfall of more than $2,200 for needed repairs. The League suggested to the harbor board that an audit of the firm be undertaken, while action be instituted for a city ferry at San Pedro and Wilmington and the board replied that the city’s ferry landing improvements were not only for the company.
Meanwhile, another short piece remarked that the city’s Chief Deputy City Attorney, Lou Whitehead, working with the League lawyers, was making progress with the attorney of Doheny’s powerful Pan-American Petroleum Company, which had a thirty-year lease for Pier #1 at the port. The idea was to rework the arrangement so that it would be “a revocable year to year permit” instead and that this “was the suggestion which the Municipal League made to the Doheny Company at our conference with representatives of the Company several months ago.”
With voters to decide on a new city charter (which, among other changes, expanded the City Council roster to 15 members from nine) on 6 May, a speaker’s list was developed, with some of the orators specializing on such subjects as franchising, city housing and others. The vote was successful and the charter, effective on 1 July 1925, remains in place, though it was reaffirmed by a new one in 2000, allowing for a system of neighborhood councils.
We’ll return tomorrow with a fourth and final part dealing with the League’s parrying with the Los Angeles Record concerning the paper’s charges that the Los Angeles Coliseum, which opened the prior year, was plagued with corruption, so be sure to join us for that interesting topic!