Comment
Rate
Audit Blasts El Pueblo
 |
| El Pueblo de Los Angeles Historical Monument was criticized for numerous issues in an audit from the City Controller’s office. The report said that having the Olvera Street merchants pay market-rate rents could increase the department’s revenue by more than $1 million a year. Photo by Gary Leonard. |
Controller’s Report Cites Low Rents, Other Shortcomings at Department That Requires Nearly $1 Million City Subsidy
by Richard Guzmán
DOWNTOWN LOS ANGELES - An audit released last week by the City Controller’s office blasted El Pueblo de Los Angeles Historical Monument for charging most of the merchants at the tourist attraction rents that are well below market rate. The report also cited low maintenance fees and some empty buildings as factors that force the city to supplement the department by almost $1 million a year.
The report, released by the City Controller on June 24, also criticizes the department for not making sure that merchants are authorized tenants, a potentially damaging find for shop owners who claim their familial ties to the facility justify the relatively low rents.
“The auditor’s report summarized many of the issues that have been outstanding for El Pueblo for decades,” said David Louie, a member of El Pueblo’s Board of Commissioners, and the only one of the commissioners who had reviewed the report a day after its release. Louie has also led a charge to examine raising rents at the monument.
“I welcome it and am encouraged by the fact that the controller for the city of Los Angeles has reviewed and concluded that there are many areas that our department needs to improve in,” he said.
The harsh 37-page audit gives El Pueblo officials until July 23 to advise the Controller’s office on how they plan to implement the report’s 28 recommendations.
“We asked for a response to our audit from El Pueblo management to get back to us within 30 days,” said Farid Saffar, director of auditing for the Controller’s office.
Saffar said copies of the report were given to officials including Mayor Antonio Villaraigosa and Councilman José Huizar, whose 14th District includes El Pueblo. Neither Villaraigosa nor Huizar’s office returned calls to Los Angeles Downtown News by press time.
Plan of Attack
The audit was released the day before a meeting of El Pueblo’s Board of Commissioners. At that session, department General Manager Robert Andrade said he would not comment about the audit until he had a chance to review it more thoroughly.
However, the report stated that a draft copy was provided to El Pueblo management on May 29, and that it was discussed with management on June 12.
On Thursday, El Pueblo Commission President Herbert Siguenza said he had received the report earlier that day and could not yet comment on it. He said the commission would study the document.
“As president I will be reading it and if there’s concerns here, then I’m concerned and I will be addressing all these issues and hopefully under my leadership they will be resolved,” he said. “Once I read it I would like a general discussion with the commissioners and start prioritizing what we want as a commission to attack first.”
Siguenza added that many of the findings are not new to El Pueblo leaders.
“We know about the leases that were not up to market value,” he said. “We’re working on them along with our general manager, along with the council member, along with the city, so ultimately it’s going to be their decision what those fees are.”
City Supplements
El Pueblo, a collection of shops and cultural attractions on the site of the city’s birthplace, operates as a city department with an annual budget of $4.1 million. It contains four museums and five parking lots with 74 stores on Olvera Street. It draws more than 2 million visitors a year.
Despite Olvera Street’s popularity, the department requires a subsidy every year from the city. In fiscal year 2007-08, the department earned $3.3 million, with about $2 million generated from parking and about $840,000 from rent paid by merchants.
That year, El Pueblo required a $921,000 boost from the city’s general fund. That was a significant rise from the $369,000 in city support just two years earlier.
The report highlights several key findings and offers recommendations to help El Pueblo become self-sufficient. Chief among them is that merchants pay market-rate rents.
“While general fund contributions to El Pueblo have increased each year for the past several years, rents from El Pueblo merchants have not. We found numerous opportunities for El Pueblo to increase its revenues by using assets more effectively,” the report stated.
Most merchants have not seen rent increases for about a decade. Seventeen tenants have 55-year leases, which have also been criticized by some real estate experts who say such long-term agreements are not beneficial to the city.
The audit states that 57 tenants operate without leases, and instead have “concession agreements.”
The average rent paid by all Olvera Street merchants is $1.35 per square foot per month. Market rates for comparable retail spaces currently range from $2.65-$6.75 per square foot, the report states.
If the 57 tenants who operate under concession agreements paid market-rate rents, the department could increase its revenue by an additional $1.1 million to $1.5 million a year. Boosting rents for the 17 tenants with existing leases could mean another $196,800 to $287,460 per year.
Messy Rents
Raising rents for Olvera Street merchants has long been a contentious issue, with most tenants saying their cultural contribution to the city and long ties with El Pueblo justify lower rates. They also maintain that the city has not delivered on promised infrastructure improvements.
“The leases have been a mess and they’ve been a mess for years, so we’re just cleaning it up,” said Siguenza. “It’s going to take a lot of cleaning up to bring everyone up to a uniform agreement and that’s what we’re doing right now.”
The commission’s Budget and Operations Committee, chaired by Louie, is compiling a report with recommendations on what the new rental rates should be.
The audit also criticized the department for the low common areas charges, also known as CAM fees, paid by tenants. These cover trash removal, restroom maintenance, cleaning and security.
El Pueblo currently collects $60,000 per year in CAM fees from tenants, though they should gather $356,000 a year from merchants, said the report. Maintenance costs the department $1.65 million a year, the study said.
Another problem area is that El Pueblo does not adequately verify that merchants are authorized tenants. The report stated that some tenants sold their businesses without the approval of the department, as required. The audit said some concession agreements went for up to $150,000.
The issue, said the report, is that the transfer of ownership could cost the city control over the process of managing the properties. It could also impact the city’s ability to “obtain the best rates available.”
Currently, there is a waiting list of 106 parties that want to rent space at El Pueblo, according to the audit. The report advises the department to put all available spaces out to competitive bid.
Another concern is the lack of oversight of nonprofit organizations that use El Pueblo, the report states. It said that nonprofit groups use about 19,000 square feet of space at El Pueblo without paying rent, costing the department approximately $342,000 annually in potential revenues.
The Controller’s report also criticized the department for not utilizing several buildings that could generate up to $1.5 million a year if rented out as office space.
Although she had yet to read the report, El Pueblo Commissioner Carol Jacques was critical of the audit, noting that interim City Controller Rushmore Cervantes was a former general manager at El Pueblo.
“I felt there was a conflict of interest there,” she said. “I think you have a guy that was here last time four years ago. It’s like him auditing himself about things he should have completed.”
Saffar said Cervantes had recused himself from participating in the audit because of his prior position with El Pueblo.
Contact Richard Guzmán at richard@downtownnews.com.
page 1, 06/29/2009
©Los Angeles Downtown News. Reprinting items retrieved from the archives are for personal use only. They may not be reproduced or retransmitted without permission of the Los Angeles Downtown News. If you would like to re-distribute anything from the Los Angeles Downtown News Archives, please call our permissions department at (213) 481-1448.
The report, released by the City Controller on June 24, also criticizes the department for not making sure that merchants are authorized tenants, a potentially damaging find for shop owners who claim their familial ties to the facility justify the relatively low rents.
“The auditor’s report summarized many of the issues that have been outstanding for El Pueblo for decades,” said David Louie, a member of El Pueblo’s Board of Commissioners, and the only one of the commissioners who had reviewed the report a day after its release. Louie has also led a charge to examine raising rents at the monument.
“I welcome it and am encouraged by the fact that the controller for the city of Los Angeles has reviewed and concluded that there are many areas that our department needs to improve in,” he said.
The harsh 37-page audit gives El Pueblo officials until July 23 to advise the Controller’s office on how they plan to implement the report’s 28 recommendations.
“We asked for a response to our audit from El Pueblo management to get back to us within 30 days,” said Farid Saffar, director of auditing for the Controller’s office.
Saffar said copies of the report were given to officials including Mayor Antonio Villaraigosa and Councilman José Huizar, whose 14th District includes El Pueblo. Neither Villaraigosa nor Huizar’s office returned calls to Los Angeles Downtown News by press time.
The audit was released the day before a meeting of El Pueblo’s Board of Commissioners. At that session, department General Manager Robert Andrade said he would not comment about the audit until he had a chance to review it more thoroughly.
However, the report stated that a draft copy was provided to El Pueblo management on May 29, and that it was discussed with management on June 12.
On Thursday, El Pueblo Commission President Herbert Siguenza said he had received the report earlier that day and could not yet comment on it. He said the commission would study the document.
“As president I will be reading it and if there’s concerns here, then I’m concerned and I will be addressing all these issues and hopefully under my leadership they will be resolved,” he said. “Once I read it I would like a general discussion with the commissioners and start prioritizing what we want as a commission to attack first.”
Siguenza added that many of the findings are not new to El Pueblo leaders.
“We know about the leases that were not up to market value,” he said. “We’re working on them along with our general manager, along with the council member, along with the city, so ultimately it’s going to be their decision what those fees are.”
El Pueblo, a collection of shops and cultural attractions on the site of the city’s birthplace, operates as a city department with an annual budget of $4.1 million. It contains four museums and five parking lots with 74 stores on Olvera Street. It draws more than 2 million visitors a year.
Despite Olvera Street’s popularity, the department requires a subsidy every year from the city. In fiscal year 2007-08, the department earned $3.3 million, with about $2 million generated from parking and about $840,000 from rent paid by merchants.
That year, El Pueblo required a $921,000 boost from the city’s general fund. That was a significant rise from the $369,000 in city support just two years earlier.
The report highlights several key findings and offers recommendations to help El Pueblo become self-sufficient. Chief among them is that merchants pay market-rate rents.
“While general fund contributions to El Pueblo have increased each year for the past several years, rents from El Pueblo merchants have not. We found numerous opportunities for El Pueblo to increase its revenues by using assets more effectively,” the report stated.
Most merchants have not seen rent increases for about a decade. Seventeen tenants have 55-year leases, which have also been criticized by some real estate experts who say such long-term agreements are not beneficial to the city.
The audit states that 57 tenants operate without leases, and instead have “concession agreements.”
The average rent paid by all Olvera Street merchants is $1.35 per square foot per month. Market rates for comparable retail spaces currently range from $2.65-$6.75 per square foot, the report states.
If the 57 tenants who operate under concession agreements paid market-rate rents, the department could increase its revenue by an additional $1.1 million to $1.5 million a year. Boosting rents for the 17 tenants with existing leases could mean another $196,800 to $287,460 per year.
Raising rents for Olvera Street merchants has long been a contentious issue, with most tenants saying their cultural contribution to the city and long ties with El Pueblo justify lower rates. They also maintain that the city has not delivered on promised infrastructure improvements.
“The leases have been a mess and they’ve been a mess for years, so we’re just cleaning it up,” said Siguenza. “It’s going to take a lot of cleaning up to bring everyone up to a uniform agreement and that’s what we’re doing right now.”
The commission’s Budget and Operations Committee, chaired by Louie, is compiling a report with recommendations on what the new rental rates should be.
The audit also criticized the department for the low common areas charges, also known as CAM fees, paid by tenants. These cover trash removal, restroom maintenance, cleaning and security.
El Pueblo currently collects $60,000 per year in CAM fees from tenants, though they should gather $356,000 a year from merchants, said the report. Maintenance costs the department $1.65 million a year, the study said.
Another problem area is that El Pueblo does not adequately verify that merchants are authorized tenants. The report stated that some tenants sold their businesses without the approval of the department, as required. The audit said some concession agreements went for up to $150,000.
The issue, said the report, is that the transfer of ownership could cost the city control over the process of managing the properties. It could also impact the city’s ability to “obtain the best rates available.”
Currently, there is a waiting list of 106 parties that want to rent space at El Pueblo, according to the audit. The report advises the department to put all available spaces out to competitive bid.
Another concern is the lack of oversight of nonprofit organizations that use El Pueblo, the report states. It said that nonprofit groups use about 19,000 square feet of space at El Pueblo without paying rent, costing the department approximately $342,000 annually in potential revenues.
The Controller’s report also criticized the department for not utilizing several buildings that could generate up to $1.5 million a year if rented out as office space.
Although she had yet to read the report, El Pueblo Commissioner Carol Jacques was critical of the audit, noting that interim City Controller Rushmore Cervantes was a former general manager at El Pueblo.
“I felt there was a conflict of interest there,” she said. “I think you have a guy that was here last time four years ago. It’s like him auditing himself about things he should have completed.”
Saffar said Cervantes had recused himself from participating in the audit because of his prior position with El Pueblo.
Contact Richard Guzmán at richard@downtownnews.com.
page 1, 06/29/2009
©Los Angeles Downtown News. Reprinting items retrieved from the archives are for personal use only. They may not be reproduced or retransmitted without permission of the Los Angeles Downtown News. If you would like to re-distribute anything from the Los Angeles Downtown News Archives, please call our permissions department at (213) 481-1448.
 |
 |
|
| East West Players Receive Grant, Award | Another Big Project For Little Tokyo |
Reader Comments
The following are comments from the readers. In no way do they represent the view of ladowntownnews.com.
Popular Searches
bethechange wrote on Jun 30, 2009 8:25 AM: