MAYORAL
RACE
Driving
Biz to Burbank
Neither
candidate sees what economic growth can do for L.A.
he
issue that in many ways drives all others — the economy — has
remained in the background in the L.A. mayoral election. In part, the
real estate bubble is to blame. Everrising housing prices have
stimulated investment, construction and consumer spending.
But according to more
meaningful measurements of economic activity — the number of new
jobs, creation of high-wage jobs, per capita income growth — Los
Angeles lags behind the region and the nation. Yet not a word of
anxiety from Mayor James K. Hahn and his challenger, Antonio
Villaraigosa.
Los Angeles has a national
reputation for hostility to business — and it's getting worse. Recent
business surveys by Kosmont & Associates, a private consulting
group, and the Rose Institute at Claremont McKenna College rank the
city as the second most expensive in which to do business in
California.
Larry Kosmont, co-author of
the Kosmont-Rose Institute report, says business costs in L.A. average
between 2 1/2 to five times those of more business-friendly cities.
For instance, a $10-million
office or retail operation pays about $59,000 in annual utility taxes
and license fees to do business in L.A., compared with $9,300 in
Pasadena, $904 in Burbank and zero in Rosemead.
There is nothing inherently
unfair in taxing business when the revenue is spent on critical public
services. But the business-tax burden in L.A. is way out of line with
neighboring cities, which provide similar services while taking less
from entrepreneurs.
Former Mayor Richard Riordan's
business teams helped companies maneuver their way through the city's
labyrinthine bureaucracy, a practice the Hahn administration all but
halted. Hahn has not assembled much of an economic team, which may
explain why the city failed to complete the necessary paperwork to be
considered as the home of the state's new $3-billion stem cell
institute.
It also helps explain why
entrepreneurs not politically connected to City Hall feel local
government has little interest in them. "There's a sense that they
are against us … like they feel what's good for employers can't be
good for employees," said Marx Acosta Rubio, president of One Stop
Shop, a computer parts marketer in Woodland Hills. "At best, we
are regarded as a necessary evil."
Complaints about L.A.'s
regulatory environment are rife among manufacturers, most notably in
the food processing and garment industries. The regulations drive
business from the city.
Over the last two decades,
much of the new studio construction in the movie industry has occurred
in Glendale and Burbank. Michael Jimenez, a senior DreamWorks
executive, says Glendale not only has lower taxes but is far more
responsive in arranging police protection or facilitating new permits
when a shooting schedule suddenly changes.
Although he is advising
Villaraigosa on the economy, Kosmont is not optimistic that the
councilman would do better than Hahn if elected. Like the mayor,
Villaraigosa is a strong backer of public-employee unions. He also
supports ordinances — living wage, zoning that requires construction
of low-income housing in new developments — that drive business
people crazy, or to another city. Uncertainty about how the city will
treat business in the future makes L.A. even less attractive.
Ironically, remedial
legislation doesn't benefit most working people, while the
contributions of business expansion to the working class are clear.
During the city's severe
economic downturn in the early 1990s, the income gap between its
poorest workers and its most affluent widened, according to a study by
the Public Policy Institute of California. The state's poverty rate
rose from 13% to 17%. During the subsequent recovery, the wage gap
narrowed and poverty fell to 13% despite continued heavy immigration
from poor countries. As blue-collar manufacturing and middle-tier
service jobs expanded, the percentage of workers in middle-income
ranges surged.
Many working-class people
aren't faring as well in today's business climate. Job growth is mostly
occurring outside the city, in the San Gabriel Valley, Burbank,
Glendale and the Inland Empire. According to a recent UCLA study, Los
Angeles lags behind the Inland Empire not only in total jobs created
but in those paying better than $55,000 annually since the mid-1990s.
Investment in infrastructure
is a big engine of better-paying jobs, yet neither mayoral candidate
has forcefully called for modernizing and improving the clogged,
increasingly inefficient Port of Los Angeles. Their neglect is
especially worrisome. Not only are U.S. competitors lining up for a
piece of the action, but Baja California is planning to construct rival
facilities.
There is nothing more critical
to L.A.'s economic prospects than the maintenance and expansion of its
port and other trade-related facilities. Since the 1950s, world trade
has consistently grown faster than U.S. gross domestic product. Goods
and service exports account for as much as 20% of Southern California's
economy. Much of this employment is highly paid, and some is unionized.
Hahn and Villaraigosa are also
relatively silent about preserving the city's still formidable
industrial base, roughly half of which is obsolete by modern industrial
standards. Roads in many of the city's industrial areas — most
notably near downtown — are run-down and pothole-infested. Many of
the workers employed in these factories are immigrants. That they are
nonunion may explain City Hall's lack of interest.
The city's early 20th century
leaders didn't have reservations about promoting economic growth. They
knew that a favored climate and spectacular topography weren't by
themselves going to turn Los Angeles into an economic powerhouse.
Public investment in ports, roads, water and power systems was also
needed. Their capitalist expansion produced the city's famed wealth and
social mobility.
Hahn and Villaraigosa don't
understand the connection between boosting the local economy and social
progress.
Yet until the growth of the
private economy returns to the political front burner, Los Angeles will
continue to squander its economic advantages to other cities that,
although less favored, are more intelligently governed.
