Lately, LA's officials have been touting some high-profile acquisitions and relocations in their attempts to claim that LA is a business-friendly city. For example, the BYD electric car company, Gensler architecture firm, and Balqon Corp. Yet, the city's unemployment rate continues its steady, steep climb to intolerable levels.
In March 2010, when Newsweek reported on the hiring of city "jobs czar" Austin Beutner, Newsweek noted that the city's unemployment was at a staggering 11.3%.
Just 13 months later, in April 2011, when the Los Angeles Times reported that the city's "jobs czar" was leaving, The Times noted that unemployment "stood at 13.5%" - a significant increase and a full 50% higher than the national average.
Those stats say it all about LA's brief foray into the concept of a "jobs czar."
Notably, this 13 month period was when many of the high profile acquisitions were rolled out - the products of the Business Tax Holiday implemented by Mayor Villaraigosa, First Deputy Mayor and "jobs czar" Beutner, and City Council President Eric Garcetti. After all, the 3-year Business Tax Holiday was their program - their answer to overwhelming unemployment.
Not only have such gimmicks done nothing to slow the city's unemployment rate, they have actually cost hardworking taxpayers millions for what might end up being nothing in return.
Let's start with BYD. In a front-page story in the September 6, 2010 edition of the Los Angeles Business Journal, Staff Reporter Albert Lee's story was headlined "Sticker Shock? - Electric car maker's jobs to cost LA millions."
Lee writes: "The incentive package extended to BYD will amount to some $5 million over five years, according to a Business Journal estimate, and could cost even more if the company experiences financial difficulties and the city is forced to assume BYD's lease obligations as it has pledged."
Lee continued, "That means even if the company creates 102 jobs, each one will cost taxpayers more than $50,000 - at the same time city businesses grapple with some of the highest municipal taxes in the country."
The Balqon deal isn't any better. According to the June 6, 2011 Los Angeles Business Journal, Balqon won its contract in a "no-bid process." (Of course it did).
Staff Reporter Albert Lee points out that "The Port of Los Angeles had plucked the company from obscurity, given it money to develop a prototype and ordered millions of dollars worth of its zero-emission trucks for use at the port. In return, the company agreed to move from Aliso Viego and hire local workers."
But, according to the Business Journal, "Two years later, the Balqon trucks are parked in a maintenance yard, doing nothing. Their batteries, it turns out, only last half as long as they need to when carrying the heavy loads common at the port." The price-tag per unusable truck - $392,000 for a grand total of $5.88 million (for 15 trucks), according to the Business Journal.
And the Gensler deal. According to Martin Berg, writing for the L.A. Weekly, "In a February press release, city officials bragged that they lured Gensler and its 250 employees from Santa Monica by granting the company a three-year tax holiday on revenues.
City leaders were far quieter about the $1 million subsidy." What $1 million subsidy? According to Berg, and the Weekly, Mayor Villaraigosa "has decided to spend $1 million in federal grants - money that had been avidly sought by residents of Skid Row - ... to create a hip new atmosphere for (Gensler's) relocated employees at the ‘jewel box' building [downtown]."
The Weekly reports that "According to city documents, Gensler has agreed to a modest, and very vague, payback: In return for the $1 million in renovation funds, it will hire an unspecified number of temporary, low-to moderate- income workers to do the job." Nice work City Hall.
Furthermore, what do these tax holidays and incentive packages do to the new company's competitors, the existing businesses? They punish them. The older business does not get the tax holiday or the incentive package so their business costs remain the same while the new business gets huge breaks, compliments of elected officials, that enable the new business to lower their prices thus hurting their competition - seemingly at any cost to the taxpayer.
There are more examples of bad deals, but I'm already pushing my space limitations.
If no Business Tax Holidays or incentive packages, then what.
A true pro-jobs policy of a fair and equitable across-the-board reduction in our business tax burden and simplification of our business tax structure, that's what.
I refuse to believe that our great city has to buy jobs with taxpayer money. The fact that city officials believe that has to be done demonstrates what failures their policies have been.
A real reduction in our business tax burden and significant simplification of our business tax structure will not only lure more employers, but it will be easier for existing employers to stay. (I do realize that such fairness will eliminate elected officials' ability to hand out favors and taxpayer funds to friends, donors and other special interests).
There will be other benefits too. I refuse to accept the current level of general fund revenues as the best Los Angeles can do. Current leadership has offered little, if anything, in the way of ideas to grow general fund revenues. Tax and fee increases and tax incentive gimmicks do more harm than good.
Los Angeles can do better. We can increase our general fund revenues without raising taxes and fees. A fair and equitable across-the-board reduction in our business tax burden and simplification of our business tax structure would make operating any business easier and encourage new businesses to come.
The increase in volume will cause an increase in business tax revenue, sales tax revenue, utility users' tax revenue, parking users' tax revenue, and even revenue from licenses, permits, fees and fines. In other words, we would see an increase from numerous sources of general fund revenue.
It really is that simple.
The fact that city officials are either unable or unwilling to grasp this further demonstrates the need for new leadership.
(Kevin James is a radio broadcaster, former Asst. U.S. Attorney, and Candidate for LA Mayor
For more information: www.kevinjamesformayor.com. This column was posted first at foxandhoundsdaily.com) -cw
Vol 9 Issue 61
Pub: Aug 2, 2011