CAPITOL OFFENSES Brendan Huffman Hopefully, champagne corks were not popping at City Hall last week after the annual Kosmont-Rose Institute cost of doing business survey revealed that Los Angeles was no longer in the nation’s top 10 most expensive large cities to do business. Nope, we’re now only in the Top 20 of 413 cities ranked across the nation in terms of business climate with emphasis on business and property taxes. Still, we’re the fifth most expensive city in California right behind Inglewood, Culver City, Beverly Hills and Berkeley. Countywide, the city of L.A. is among the ten most expensive cities along with Bell, Beverly Hills, Culver City, Compton, El Segundo, Hawthorne, Inglewood, Pomona and Santa Monica in alphabetical order. Two of the least ten expensive cities in L.A. County are here in the San Fernando Valley including Agoura Hills and Westlake Village. So what has City Hall done to improve our ranking from Top 10 to Top 20 most expensive cities? Not much. I suspect that the cities that overtook us as most expensive raised their fees more than we did. In fact, I think some of the baby steps taken by city officials might look good on paper but in reality send a wrong message. Case in point, the city council recently voted to exempt some businesses that are relocating to L.A. from paying the gross receipts tax, which is ranked among the highest in the nation. What kind of message does that send to businesses that have been paying L.A.’s comparatively enormous gross receipts tax for years? Based on an unscientific sampling of business owners and business groups, they don’t like it. In a way, they feel penalized and put at a competitive disadvantage when businesses in the same industry are given a free pass on taxes just because they were located in another city. We need more than baby steps to turn L.A.’s business climate around. Why stop there? Last year, the city stopped at 15 percent in its gradual reduction in the gross receipts tax. Why stop there? City Hall needs to get serious about further reductions in our gross receipts tax, which is often cited as the number one reason why businesses leave Los Angeles for greener pastures such as Burbank and Santa Clarita. (Those cities are far cleaner too!). Naturally, the instinct of many city officials is to oppose tax cuts when the city’s budget deficit is so large. And there lies the Catch-22 – the longer we keep our gross receipts taxes so high, the more businesses and jobs we see leave for neighboring cities, taking their tax revenues with them. Thus, the longer we wait to further cut the gross receipts tax, the fewer tax revenues we bring in. But there is a glimmer of hope! Nearly four years after former City Controller Laura Chick’s audit showing that the city has a horrendous job of collecting on debts owed, there is finally some interest among some city council members to address this problem which is costing taxpayers roughly $550 million each year. Perhaps improved collections could help offset any losses in reduced gross receipt tax revenues? Until a better plan is enacted to collect more of what the city is owed, don’t count on it. I continue to ask why some cities contract out to collection agencies that take a cut of all new collections with proven results, and Los Angeles does not? Recommendations At any rate, Los Angeles has a long way to go before it gets out of the nation’s top 50 most expensive cities to business, but that should be the next goal with a clear timetable. Some recommendations that have been made over the years to increase revenues and subsequently have been largely ignored include: • Encourage more awareness and support for LA INC. and “Shop LA” to increase tourism and sales tax revenues. • Create advertising opportunities on more city vehicles and facilities (i.e. parks, libraries). • Sell naming rights and create more advertising opportunities at city’s airports and L.A. Harbor terminals. • Implement “Industry Specific Development Zones” to foster vital industries such as technology and entertainment It’s interesting to note that when such recommendations have been made to city officials, they have shown initial interest in pursuing them. Alas, that interest usually goes away quickly as more important things come up such as the elephants at the zoo, allowing more pets per household, and boycotting Arizona. With a few exceptions of making L.A. more film friendly, it is hard to find any evidence of anything else the city has done to help its businesses want to stay within city limits. Nevertheless, DWP ratepayers just received an 11-cent decrease on our utility bills – so at least we’ve got that going for us! Brendan Huffman is the owner of Huffman Public Affairs, a Valley-based consulting firm specializing in association management and issue advocacy. He is also the co-host of “Off The Presses,” weekly public affairs radio show streaming live every Wednesday between 10-11 a.m. via LATalkRadio.com.
Business Climate Still Ranks Poorly, But Don’t Tell City Hall
