The Greek Theatre has become a hornet’s nest of controversy as the L.A. City Council prepares to vote on whether to open up the city-owned theater’s operating contract to competitive bids or grant a five-year extension to Nederlander of California Inc.
Critics of the current contract call the minimum yearly rent of $50,000 paid to the city a sweetheart deal that is shortchanging taxpayers.
“(Not putting the contract out to bid) is going to cost the city millions,” said Councilman Joel Wachs, one of the more vocal opponents of a contract extension. “This is a classic case of a backroom deal negotiated behind closed doors.”
In exchange for the five-year extension, Nederlander has agreed to a tenfold increase in its minimum annual rent from $50,000 to $500,000 as well as making $5 million in improvements. (Over the past five years, the annual net revenue at the Greek has ranged from $243,000 to $568,000.)
“You need (the five-year extension) to amortize those costs,” said David Green, senior vice president of Nederlander-Greek Inc., which has run the Greek Theatre since 1975.
But while other operators might agree to even richer terms, they may not get the opportunity to bid.
“I’ve literally been drooling at the opportunity to at least bid on this contract,” said Brian Murphy, president of Avalon Attractions, the local arm of SFX Entertainment Inc., one of the nation’s largest concert venue operators.
In addition to SFX, Universal Concerts last week hired lobbyist Rick Taylor to make its case for bidding on the contract. Universal Concerts, which owns the Universal Amphitheatre, was bought last month by House of Blues Entertainment Inc.
Wachs and others are especially infuriated that Nederlander and its attorney, Neil Papiano, have long ties with Recreation and Parks Commissioner Mike Roos, Councilman Hal Bernson and council President John Ferraro.
The City Attorney’s Office, a citizens advisory group, and the Department of Recreation and Parks interim general manager all have recommended that the contract be put out to bid. But at Roos’ urging, the Recreation and Parks Commission on June 2 voted 3-2 to grant Nederlander another uncontested five-year contract extension.
With that approval, the contract extension now goes to the City Council, where it will first be heard early next month by the Arts, Health and Humanities Committee.
Roos, Papiano, Ferraro and Bernson (who sits on the Arts, Health and Humanities Committee) did not return repeated phone calls last week.
Wachs characterized Papiano and Roos as being “as close as two peas in a pod.”
Green acknowledged the close connections Nederlander has with city officials. “We want to think we have good relationships with people in the city of Los Angeles, including city officials. Relationships are what business is all about,” he said.
It is those relationships, however, that may lead to Nederlander’s contract being extended which would “cost the city millions of dollars,” Wachs said.
“It’s going to be a very tough battle because Neil (Papiano) has a lot of friends on the City Council,” he said. “I’ve been around long enough to know how difficult it will be. There’s no rational reason for doing this other than taking care of your friends.”
Councilwoman Rita Walters, who chairs the committee, said she met last week with SFX lobbyists Mark Armbruster and Steven Afriat and that she is still studying the Greek Theatre issue.
“We’re going to hear it in committee and a decision will be made at that time,” she said. “My personal preference is that city contracts should go to the competitive-bidding process.”
That was also the recommendation of others.
With Nederlander’s contract coming to a close in late 2001 and the process of seeking proposals a long one the city’s Department of Recreation and Parks, which oversees the Greek, began preparing a request for proposals earlier this year. The department also formed the Greek Theatre Advisory Committee, made up of nine community members, to help prepare the RFP.
But before the RFP was put before the board for approval, Nederlander in April submitted its unsolicited proposal for a five-year extension.
The unsolicited proposal was sent to the L.A. City Attorney’s Office for comment. Assistant City Attorney Mark L. Brown wrote in a May 17 letter to the Board of Recreation and Parks commissioners that accepting Nederlander’s proposal, rather issuing an RFP, would violate the city’s charter.
“We believe that the needs of the city as presented by staff and the nature of the unsolicited proposal are such that it is instead compatible with the city’s interests to utilize an RFP process,” Brown wrote in his recommendation.
Both Richard A. Sessinghaus, who was interim general manager of the department until mid-June, plus all nine members of the Greek Theatre Advisory Committee, also recommended that the commission decline the Nederlander proposal and instead put the operation out to bid.
Nevertheless, the commission on June 2 voted to approve the contract extension. Commissioners Mike Roos, Maria Elena Durazo and LeRoy Chase voted for the extension, while Lisa Specht and Commission President Steve Soboroff voted against it.
Chase said that giving Nederlander a five-year extension in exchange for building much-needed bathrooms and other improvements is no different than the justification for the previous extensions.
In June 1979, Nederlander was given a 10-year extension on its original three-year lease while the company, at the request of the Department of Recreation and Parks, prepared an environmental impact report on expanding the Greek Theatre. In 1982, the commission approved another lease extension through Oct. 30, 2001 in exchange for Nederlander making $1.5 million in capital improvements, including the addition of 1,162 seats.
Green also said the extension is justified based on the previous lease extensions Nederlander has been given. “This is not necessarily a lot different,” he said.
But Specht, who voted against the latest extension, said that one company holding a city contract for more than three decades as would be the case if the extension were granted is unacceptable.
“It’s my understanding of the city charter that we’re required to go out for bid on this concession. I basically want to follow the law,” Specht said.
She added that with at least two other companies wanting to bid on the Greek, the city could likely get more money both in annual rent and capital improvements if it were to issue an RFP. “This is just about wanting to get the best deal possible for the taxpayers,” she said.
Unlike Specht, Soboroff believes that Nederlander’s proposal is a good deal for the city even better than it would get if it were to issue an RFP. Nonetheless, he said he voted against the company’s proposal because of the city charter’s requirement for competitive bidding.
“I voted against their proposal because of the process the integrity of the process,” he said. “The process of RFP should be followed.”
Green said Nederlander is supplying information to members of the City Council and is hoping to win final approval for a proposal that he characterizes as providing “the most benefit for the city.”
“We hope we will receive a positive vote,” he said. “I can’t predict the future, though.”
