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Feature Stories

City College's $4.5 Million Vacant Lot

From Issue: Volume XXII - Number 7

By Steve Propes

In the real estate game, much in the way of construction, improvement and transactions can happen in a decade. One noticeable exception to this rule is a $4.5 million dollar property at 3340 Los Coyotes Diagonal, once occupied by a one story building worthy enough for use as a Northwest Airlines national call center, which was demolished and allowed to languish after being acquired by Long Beach City College (LBCC) in 2004.

The college actually acquired two separate buildings at this site for a total cost of $9 million, and has justified this entire purchase as a winner since the neighboring medical building generates $300,000 to $500,000 a year in rentals, a four percent return.

However, the adjacent fenced-in, tarp-covered vacant lot sits as testimony to changed plans, a poor economy, or both. As a dozen vocational programs were cut last year in order to save the college $2.5 million in costs, some have been asking whether spending almost double over that amount on a vacant lot made financial sense considering the college’s primary mission.

LBCC spokesman Mark Taylor contends the two decisions are not connected. The property was purchased by way of “certificates of participation,” Taylor explained, meaning it was purchased by debt. “It’s a financing mechanism,” said Taylor. “After it was purchased, it was rolled into the bond program” that had recently been passed by voters, meaning LBCC District residents financed this vacant lot through a property tax assessment. Had the bond measure not passed, the debt would have been financed through the rents.

Retired LBCC Professor Gabor Vass recalled when he was told his program was to be cut.

“In August 2012, we were told to provide data and prove our program is viable as the college has to save $2.5 million. I started questioning; I began looking at the budget. This is when I found this land deal. There had been rumors after they bought that land. I knew of plans to put culinary arts there. But now they said we’re going to have to save $2.5 million; they spent $4.5 million for this land.”

LBCC Board of Trustees President Jeff Kellogg appeared surprised when told the building had been acquired ten years ago. “How long?” Kellogg asked, displaying incredulity. “Ten years?”

“I have to question the timing,” said Kellogg. “The only other time this issue has been raised was by a former student trustee, who threatened multiple lawsuits last year. He never clarified what he meant by that.”

When asked why he abstained when the vote was taken on the property, Kellogg said, “That property had about four owners, I was involved in commercial real estate at the time. You have 30 to 40 brokers working for a local brokerage firm, so I thought I should abstain for cautionary reasons. I had no ties at all to any of the owners. I did the same thing on the city council when votes on oil policy were taken as we have oil investments.”

“People have said that there was contamination there. Our questions about contamination proved to be false. We’ve had testing done there, the site was scrapped, it was a worthless building,” said Kellogg.

“There is a reason there is no interest in the land,” said Vass. “I asked a colleague, why would the college spend $4.5 million, then do nothing with the land?”

On April 23, 2013, the board declared the property surplus for leasing purposes and began soliciting offers, of which there currently are none.

“The college is considering a 30-year ground lease on the site,” said Taylor. “We’re taking proposals from interested parties, but right now, nothing’s moving. It’s a fact this all happened during one of the worst recessions since the 1930s. Only recently the price on properties such as this has begun to escalate.”

“The city has restrictions on that property right now,” said Kellogg. “It generates income for the college in rent, which we are allowed to use in a lot more areas of the college. We are looking at having some people come in and look at the property to purchase, develop or lease the land, but none have come through that were accepted.”

Kellogg added any profits could not have addressed the college’s budget shortfall which led to classroom cuts in 2012. “When it does sell, the profit goes back to the bond. It can’t be used for classrooms. I’m sure there’s been an appraisal, and if we have people making offers, there will be an appraisal. There’s no motivation to do a fire sale for that property.”

“All of the property would be sold, not just a portion of it,” said Kellogg. “The college would continue getting income or would need to get out of the property management business.”