State rescinds $73.4-million grant for proposed San Pedro rehab center
The state has rescinded a $73.4-million grant for a new mental health and drug treatment facility in San Pedro, putting the future of the controversial project in jeopardy.
Neighbors had picketed outside the property at 2100 S. Western Avenue and packed a town hall in April to oppose the project, with some expressing fears about drug users coming to the area.
The nonprofit Fred Brown Recovery Services was seeking to acquire the five-acre property and turn it into a 106-bed inpatient recovery center for “veterans, the justice-involved, the unhoused, and those with co-occurring conditions.” The facility also would serve about 200 outpatients a day.
About 70 elderly residents who live in a nursing home on the property would have had to move, some opponents of the project said. Others said they supported mental health treatment in general but argued that the proposed center would be too close to nearby schools, day cares and churches.
The grant, which would have covered most of the project’s cost, was funded partially by Proposition 1, a $6.4-billion bond measure approved by California voters in 2024 to improve mental health and addiction treatment.
In a letter dated July 15, the California Department of Health Care Services said it rescinded the grant because Fred Brown Recovery Services failed to meet a cash match requirement and did not address discrepancies in an appraisal document.
The matching funds cannot come from the seller of the property, and the match documentation was signed by Brian Dror, a manager for the current property owner, 9 Gem Capital Group, said the letter, which was addressed to Fred Brown Recovery Services. The letter also noted that there is no process to appeal the decision.
Dror, a partial owner of the property, said that state bond guidelines do not prohibit an owner from providing matching funds.
In a statement Thursday, Fred Brown Recovery Services said it is “reviewing the Department’s decision and evaluating next steps. Regardless of the future of this particular project, our commitment to serving individuals and families struggling with substance use disorders remains unchanged, and we will continue looking for opportunities to expand access to treatment for those who need it most.”
Los Angeles City Councilmember McOsker, who represents the coastal neighborhood, opposed the project and rallied community members to send letters to elected officials and state decision makers, urging them to review the grant application.
In a Facebook post, McOsker said he had raised concerns to the Department of Health Care Services for months over the project’s financial structure and lack of transparency.
Previously, McOsker had applauded Fred Brown for its work on recovery group homes elsewhere in San Pedro. But he said he was doubtful that the nonprofit could scale up from 20-person homes to the larger one proposed for the South Western site.
“I am grateful to the many residents, neighborhood organizations, and community leaders who remained engaged throughout this process,” McOsker wrote in the Facebook post. “Today’s action demonstrates why thorough review, public scrutiny, and accountability matter.”
L.A. County Supervisor Janice Hahn, who lives in the neighborhood and was booed at the April town hall for saying that rehab facilities like the proposed one are sorely needed, said Thursday that halting the project “might be for the best.”
“There was so much opposition in San Pedro, I don’t think this proposal was ever going to work,” she said.
Richard Scandaliato, president of San Pedro’s South Shores Community Assn., said the reversal was “unbelievable” after months of near-weekly picketing and hundreds of letters that neighbors wrote to state officials.
The most important thing, he said, is that the senior citizens living on the property can stay there. He said he’s gotten at least a hundred phone calls from neighbors since the grant was rescinded.
“It really shows what a community can do,” he said.
