KPCC's business analyst Mark Lacter talks about money in LA politics.
Steve Julian: The LA mayor's race is in early March, and already the top candidates are pulling in record amounts in campaign contributions. Mark, why are so many people giving them money?
Mark Lacter: Well, presumably because they believe their person will do a good job. But also because many of them believe their person could be helpful when it comes time to ask the city for something. Maybe it's approval of a big real estate development (that's one reason you see so many developers and their attorneys on the list of contributors), or maybe it's getting a break on shooting movies and TV shows in the city (and that's one reason you see so many entertainment executives on the list). Whatever the explanation, Councilman Eric Garcetti and Controller Wendy Greuel, the two front runners, each has more than $4 million in contributions and matching funds from the city. Except that whoever does become mayor will have only limited ability to do the things that these contributors want them to do. The mayor of Los Angeles is just not that powerful.
Julian: Being friends with the mayor gets you only so far.
Lacter: Steve, it’s kind of a package deal. You have to contribute to all the City Council members - as well as the folks running for council seats - because in Los Angeles it's the council that has to sign off on any major policy action, whether it’s the budget or medical marijuana stores. Let’s also not forget the city attorney and city controller. And, of course, checks have been written over the years to more obscure office holders, such as the L.A. County Assessor.
Julian: Who's currently in jail...
Lacter: Here's an elected official who has received virtually no public attention, and yet it's one of the most influential positions in local government. He’s accused of providing favorable treatment to property owners who also were campaign contributors. Now, it's important to point out that this kind of brazen activity is unusual, but making friends at the city and county levels is one of the oldest games in L.A., and it clearly can make a difference. Otherwise, why would so many of these people contribute to local campaigns?
Julian: Speaking of money, there was a big real estate deal in Malibu, Mark. How big?
Lacter: Very big, Steve - an L.A. billionaire named Howard Marks, who is chairman of an investment company called Oaktree Capital, has sold his 9.5-acre oceanfront estate for $75 million in cash. It is the highest price ever paid for a Malibu property (one of the highest ever paid in the U.S.), and the buyer, according to press reports, is a Russian billionaire who made the purchase without the home even being put on the market. We don't know his name or how he made his money or whether he plans to actually live here (you know, foreign buyers of real estate are often in L.A. for just a few months of the year). He’s buying a 20,000 square feet home with eight bedrooms, 14 bathrooms, two guesthouses, a standalone gym, tennis courts, and a pool facing the ocean.
Julian: This is not Motel 6, no offense. When did Marks buy the property?
Lacter: He bought it in 2002 for $31 million, so he appears to be making millions of dollars on the sale. I bring this all up because when we talk about City Hall and campaign contributions, some perspective is in order on real power in L.A. Howard Marks has a net worth estimated at $1.4 billion, according to Forbes. He's made that in large part by purchasing distressed debt - real estate, corporations, whatever is priced at deep discounts. And his firm is one of the major creditors of the Tribune Co., parent company of the Los Angeles Times that’s just out of bankruptcy protection. Marks is certain to have a big say in determining who ends up buying the L.A. Times, and I’d say that's a pretty powerful position in determining the future of Southern California.
Julian: Is he involved in local politics?
Lacter: Not at all. I didn’t see his name on the list of contributors to the mayoral campaigns, and he's not among the high-income guys who you find focusing on local issues. People like Eli Broad or Rick Caruso. He’s virtually invisible, at least as far as City Halls politics is concerned. But he’s a very big deal.
Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.