Buy Land, No One is Making It Any More...Mark Twain
Los Angeles has always been about land - land development, land speculation, land zoning, and, for the past decade, land banking.
Since its founding, the city of Los Angeles has been acquiring real estate. The last time I checked, the portfolio included ~9,000 parcels, including vacant land, office, mixed-use, commercial, industrial, single-family, and multi-family properties throughout California, Arizona, and Nevada.
Today, and for decades, these parcels are the city’s most significant, underutilized, and under-leveraged asset.
To paraphrase Abraham Lincoln’s famous line to General George B. McClellan during the Civil War, let someone else borrow it for a time if the city of Los Angeles will not use its land to develop a better city.
And why not now, when we must rebuild from the fires and prepare for the Olympics? The time is now to be innovative and make some deals because we are no longer protecting our lead as a world-class city. The truth is we are behind and losing ground.
The key is, and will always be, leadership, which means doing the right things. And one cannot lead unless one manages.
The real question is who is managing and allocating the city’s most significant resources - the people who work there (great people), the land (the city has a lot of it), and capital (they do not have a lot of it) toward developing a stronger and more resilient and equitable city.
City Hall’s current approach to its estimated billion-dollar real estate portfolio is fragmented and balkanized.
Too many departments and agencies handle the decision-making, policies, budgets, management, and operations for L.A.’s unwieldy collection of assets. A lack of training programs and an outdated civil service system inhibit the portfolio's growth and development to meet the challenging landscape of rules, regulations, and market trends.
The city will continue to make decisions in scattershot ways, making it difficult, if not impossible, to envision and raise capital for the urban development we need most. In short, we’re winging it, and that’s a tremendous waste.
I am tired of bringing this up because I know people know the answers to how to move forward. However, bad outcomes will continue to occur in the absence of leadership due to risk aversion. We need to stop doing activities and focus on measurable results.
To be a world-class city with an actual city government, L.A. needs a chief asset manager or an economic development nonprofit overseen by a board of directors from the public and private sectors to develop a real economic development plan.
I recommend doing this in phases, starting as soon as possible!
Step One
Appoint the City’s first-ever Real Estate CEO to manage approximately 9,000 parcels. This individual should then develop a plan to marshal 300 acres of public land (partnering with the city, county, LAUSD, etc.) to stimulate interest in creating ten 1,000-unit development opportunities. This should involve developing a scalable housing model, committing to an equitable process and outcomes, and establishing a new infrastructure fund. Funding is available to help incorporate technology into this strategy - Council File No(s). 20-0753 - which is currently dormant. (I looked at this a few years back, so I don't know the current status.) This action would represent a significant first step toward building a comprehensive city-wide strategy led by centralized leadership and management overseeing the City’s construction, sales, leases, development, joint ventures, etc., of city-owned facilities. Its assets- such as outdated buildings, undeveloped land, brownfield sites, and air rights- could generate value and provide a revenue stream to support government budgets, lower taxes, or fund essential infrastructure. This appointment could bring more talent to city hall to help with all the work needed in the face of our current challenges.
Step Two
Transform the LA Development Fund into a strategic real estate hub, overseen by the real estate CEO, to assist the City in developing a comprehensive strategic asset management plan for all its assets. This would lead to the creation and implementation of innovative initiatives aimed at optimizing city-owned assets, led by a team of experts in land use law, marketing, finance, tech, etc. (I have a business plan for this.)
Step Three
Create a Public Wealth Fund. This independent, professional holding company would manage the city’s public commercial assets. This can be achieved through an independent balance sheet that fosters active, long-term governance to enhance societal and financial value. Without conducting a thorough analysis of the 2015 Los Angeles County Tax Roll, a rough estimate suggests that the real estate owned by the public sector within the jurisdiction of the City of L.A. is potentially worth a quarter of the total real estate market value or approximately $159 billion, covering 71,045 acres (288 km²). This would account for about 57 percent of L.A.’s GDP.
Step Four
Have the City's new real estate CEO lead the development of a new citywide economic development nonprofit (or convert the LADF into this better city brand) to centralize all real estate efforts. This nonprofit would be supported by a mix of public and private experts (legal, finance, marketing, etc.) who would deliver strategic analysis, negotiation, and management skills to assist the city in managing its long‐term economic development strategy and real estate assets. To stand it up, private sector philanthropic dollars could be invested in this 501c3. NYC is the most successful model, generating hundreds of millions of dollars a year into their treasury, and multiple other cities have copied their success. We are the nation's second-largest city and need one.
Otherwise, the city can continue imposing more fines, fees, and license requirements on Angelenos to compensate for its lack of business tax and sales tax growth…or in other words continue to watch its economy rage, rage against the dying of the light…
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