A $704 million retail, hotel and recreation project designed to make the Port of Los Angeles a more community-friendly complex will barely generate a tenth of the initially projected return on the port's investment.
The Bridge-to-Breakwater project, approved by the Board of Harbor Commissioners Sept. 29, was expected to generate a 5 percent annual return when it was conceived in 2003. But a Sept. 27 memo from Lou Colleta, a port financial manager, to Salvador Zambrano, a port civil engineer, said the return would actually be about 0.56 percent.
"Financial management has concerns that the board is still under the impression this project is close to 5 percent as presented in the last board meeting," the memo stated, referring to the Board of Harbor Commissioners' meeting held that day. "Also, the internal rate of return (is) calculated to be 0.56 percent. Perhaps this should be disclosed as well at this time." Colleta did not respond to a request for an interview.
Top port officials acknowledged that large portions of the project highways, parks, museums and portions of the promenade would generate little or no income.
But they stressed that the memo is misleading because it does not take into account the estimated $127 million identified in state, federal and private funding the port has a "high to medium" probability of obtaining.
"That number probably includes total project costs but doesn't include public funding," said Stacey Jones, the port's engineering and development director. "It doesn't take into consideration outside grant money or tax increment funding. These are typically not included in a rate of return."
She added, however, that most of the project is still in the preliminary phases, with environmental review documents not expected to be complete for 18 months. Additional feasibility studies are planned, she said.
Port officials also said the rate of return is not the sole factor for moving forward with the project because its main purpose is to give something back to the community.
"Bridge-to-Breakwater is driven by the vision to revitalize the San Pedro waterfront in terms of public access, open space," said Arley Baker, a spokesman for the port.
Obtaining $127 million in outside funding would still represent only 18 percent of the total project cost and would not have enough of an impact to bring the return to the 5 percent level port officials were hoping for.
"I'm glad somebody noticed," said former L.A. City Councilwoman Ruth Galanter, who chaired the council committee overseeing the port. "Now they've found out there is an 'Oops' quality to that memo, are they still going to go through with it?"
'Don't bother me'
The 20- to 25-year project would consist of an eight-mile promenade stretching from the Vincent Thomas Bridge to the harbor's breakwater connecting San Pedro to the waterfront for the first time in decades.
Retailers, restaurants and a hotel would cover 40 percent of the 400-acre project, with open space, an expanded marina, pocket parks, museums and other cultural facilities taking the balance.
The first portion of the project, a $6.5 million promenade running 1,000 feet from the bridge to the port's cruise ship terminal, broke ground in February and will be complete by year's end.
Even harbor-area community groups, which have for years decried the pollution and traffic congestion created by steamships, terminal equipment and trucks at the port, are less concerned about the rate of return than improving their quality of life.
"Don't bother me with the return on investment," said Noel Park, president of the San Pedro and Peninsula Homeowners Coalition. "What's the rate of return on the investment of Griffith Park? This is an opportunity for the city not just San Pedro to gain beautiful public amenities."
The project's major proponents are Mayor James Hahn and his sister, L.A. City Councilwoman Janice Hahn, who both live in San Pedro and have placed a priority on improving conditions at the port.
That's what concerns Galanter. "The port decided to invest in this thing because Janice and mayor told them they had to," she said. "Nobody who operates a port thinks about these types of things. They think about container ships."
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