Subsidies For Billionaires

Art Heist

When Eli Broad, the billionaire founder of KB Homes and SunAmerica (now part of AIG), needed a place to warehouse his art collection, the city of Los Angeles hoped he would choose to build a new museum in downtown L.A. So the city's Community Redevelopment Agency gave him a choice chunk of real estate for a bargain price: $7.7 million for a 99-year-lease on 2.5 acres of hilltop land next to Disney Hall—a neighborhood where 1,000-square-foot condos list for $500,000.

Broad called the museum "our gift to the city that has been so good to us." But when you look closer at the deal, it's not so clear who's giving and who's receiving. Broad is effectively renting most of a block on Grand Avenue for a century at $6,481 a month. One-bedroom apartments go for $1,500 to $2,000 a month in the same rapidly growing section of town. You could fit dozens of them in the 50,000-square-foot building that Broad proposes to build.

While the deal is bad for L.A. taxpayers, it makes plenty of sense for the participants. Broad, convinced that a town full of artists, writers, performers, and filmmakers is starved for culture, has a longstanding mission to civilize the City of the Angels. The permanence of a museum also adds credibility and value to his often questionable art collection.

On the other side, a coalition of downtown institutions—including the redevelopment agency, the Los Angeles Times, and a politically powerful neighborhood association—desperately wants to see ground broken on the moribund Grand Avenue Project, a subsidy-rich development swindle of which Broad has been a major supporter. An official on the Grand Avenue Committee tells reason that the city might have done the deal for even less: "We'd do that for the value it brings—value to the city and the county."