This Hollywood Lot Seeing Little Action

Hollywood has a costly flop on its hands, but it’s not a movie. It’s a 3,000-space parking garage.

With demand and revenue falling far below expectations, the behemoth garage underneath the new Hollywood & Highland shopping center is costing its owner, the city of Los Angeles, an average of $500,000 a month to cover the shortfall and is gobbling up cash set aside to build public parking facilities in other parts of the city.

A recent cut in the parking rate designed to draw more business to the struggling mall and its garage was hailed by Hollywood advocates eager to see the landmark project stabilize. But city officials concede they don’t know whether the strategy will pay off.

“This is the parking lot that could eat all the other new parking lots in the city of Los Angeles,” Councilman Jack Weiss said.

Public garages are considered an essential element in reviving urban areas but are viewed as a risky investment by private real estate developers, who often turn to government to help finance garage construction.

The city of Pasadena, for example, built three parking garages to help spur development of its popular Old Pasadena district. Los Angeles’ redevelopment agency financed the 1,700-space garage at the new Cinerama Dome theater and retail project in Hollywood. Without government participation “there would be no project,” Cinerama Dome site developer Neil Haltrecht said.

As part of its deal with Hollywood & Highland developer Trizec Properties Inc. (formerly Trizec-Hahn), the city agreed to build a giant public parking garage underneath the redevelopment project, which includes 500,000 square feet of retail space, a hotel and the Kodak Theatre.

The six-level, approximately $80-million garage--by far the city’s most expensive--was financed by bonds to be paid off with garage income. For the first time, the city pledged its Special Parking Revenue Fund--which pays for parking lot and garage maintenance and construction--to cover any shortfall.

But instead of operating as planned at a modest deficit, before breaking even in 2004, the Hollywood & Highland garage was in trouble soon after it opened in November. Average revenue has been about 50% below projections. The number of cars parked each month has averaged about 76,000, well below what is needed to break even.

In contrast, the public garage underneath Pasadena’s recently opened Paseo Colorado mall, also developed by Trizec Properties, has been drawing about 25,000 cars each weekend, city officials said.

Trizec executives and L.A. city officials said the shortfall is primarily the result of a sharp drop in foreign tourism after last year’s terrorist attacks along with parking rates set too high for the tolerance of local shoppers.

“Without affordable parking, it won’t work,” said Lee Wagman, president of Trizec’s retail and entertainment properties division. “Why would [residents] come here to pay $10 when they can go someplace else to pay $2?”

But many parking specialists say rates are often unfairly blamed for a property’s other shortcomings. Critics have faulted Hollywood & Highland, for example, for its confusing layout as well as a limited number and selection of stores.

“If you don’t have things that will attract [customers] to the site, then lowering the parking rates won’t solve the problem,” Councilman Dennis Zine said.

The city this month approved a new reduced rate plan that offers four hours of validated parking for $2. The validation was expanded to apply to nearly all area merchants, not just those at Hollywood & Highland.

“We’re absolutely sure that the new rate structure will be a boon to the tenants that rely on local business,” Wagman said. “The [parking] revenue will increase, not decrease, from this.”

However, some parking experts said they doubt the city can generate enough revenue to cover its costs through cheaper rates and expanded validation. The strategy could backfire, they said, clogging the garage with $2 parkers and attracting visitors who normally would have parked in privately owned lots and garages.

“You are giving away too much time,” said Janice Rhodes, parking manager for the city of Pasadena, who has worked in the industry for 25 years. “With that kind of rate structure in place ... you’re not going to generate enough revenues.”

City leaders said they had no choice but to take a chance with the rate cut.

“A lot of merchants were saying they were hurt; a lot of people were saying the parking was too much,” Hollywood area Councilman Eric Garcetti said. “It was important to create a different kind of buzz with $2 parking.”

Before the rates were cut, the Hollywood & Highland garage was projected to lose more than $4 million annually, forcing the city to chop funds earmarked for new parking construction by 25%. The potential effect on proposed parking projects in Chinatown, downtown Los Angeles and Studio City might set back urban renewal efforts, a real estate specialist said.

“When you impair the development of other [parking] projects, you could be impairing the improvement and revitalization of some other important neighborhoods,” Los Angeles consultant Larry Kosmont said.

The city could have avoided raiding its parking fund if the Hollywood & Highland garage had been financed and owned by its Community Redevelopment Agency. The bonds to finance the Cinerama Dome parking garage, for instance, are backed by property tax revenue generated by improvements in the agency’s project area in addition to a multimillion-dollar letter of credit issued by the developer, Robertson Properties.

City officials could not explain why the city--not the agency--ended up with ownership and financial responsibility for the Hollywood & Highland garage. “Nobody here now was part of the negotiations,” said John McCoy, who heads the agency’s Hollywood redevelopment efforts.

The redevelopment agency might be asked at some point to help bail out the garage if the parking-rate cut does not work, city officials said.

Three weeks after the rates were cut, it’s too early to say what the effect has been, city transportation engineer and parking specialist Alan Willis said. Trizec has just begun to promote the cheaper rates and to distribute validation stamps to area merchants.

Visitors who parked there one recent weekday seemed split on the benefits of the rate change. Hollywood business owner Arnold Castaneda decided to visit the mall for the first time after hearing the rates had been cut.

“I wouldn’t have come here for $10,” said Castaneda, 36, a bail bondsman. But 21-year-old Glendale resident Heripsime Assadourian, who already had visited the mall several times to shop and eat, said the bargain rates wouldn’t make her visit more often.

“The mall itself doesn’t really interest me,” Assadourian said. “There are better malls elsewhere.”

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Parking Rates

The public parking garage under the Hollywood & Highland shopping center has slashed rates to attract customers and remain competitive with nearby malls.

Beverly Center

$1 for first 3 hours

Daily maximum: $8

Spaces: Data not available

Glendale Galleria

Free

Daily maximum: None

Spaces: 6,400

The Grove at Farmers Market

$1 for first 3 hours without validation or for 4 hours with theater validation. Free for up to 2 hours depending on store validation.

Daily maximum: $12

Spaces: 3,500

Hollywood & Highland

$2 for first 4 hours with validation

Daily Maximum: $10

Spaces: 3,000

Westfield Shoppingtown Century City (formerly Century City Shopping Center)

Free for first 3 three hours or for 4 hours with theater validation

Daily maximum: $18

Spaces: 3,000

Source: Times research