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Wednesday, Jun 7, 2023

Attitudes Don’t Follow Economic Forecast

The official economic forecast was largely good but many Valley-area businesspeople speaking at the 2007 San Fernando Valley Economic Summit at the Universal Sheraton on May 17 weren’t all smiles. Lack of space, the high cost of doing business, not enough trained employees and mounting bureaucracy are threatening to push out businesses in the San Fernando Valley to more business-friendly environments, they said. Calling the Valley a poor place to do business, business leaders in industries across the board said their businesses are suffering as a result of the business climate in the region and state. Representatives of the retail, manufacturing and entertainment industries each discussed the various challenges of doing business in the Valley and encouraged business owners and leaders to be proactive and write to legislators to express their mounting frustration. “California is becoming very business unfriendly,” said Nolan Bushnell, founder and chief executive officer of uWink. Bushnell, a Valley entrepreneur, knows something about business. He created the video game system Atari, later started the Chuck E. Cheese restaurants and most recently founded the restaurant and entertainment center uWink located in the Westfield Promenade mall in Woodland Hills. Among the challenges, Bushnell said, is the threat of litigation that keeps innovators from developing new technology. Although the technology is in place to develop an auto-piloted car to help solve the state’s sub-par public transportation system, people are afraid to test the technology because they could be sued if something goes wrong, he said. In addition, the state faces a middle-market labor shortage, which is compounded by its failing education system. Doing business in the San Fernando Valley is a mixed bag, with the negatives far outweighing the positives, Bushnell said. The positive aspects of doing business in the Valley, he said, are that residents have high incomes, the area has a good test market and is close to major markets. The downsides, he said, include high costs, regulation difficulties, an unpredictable environment, the rising cost of workers’ compensation benefits and zoning problems. In addition, the high cost of living is driving out the middle class. “We’ve got problems and we have to fix it,” Bushnell said. To Steve MacDonald, president of Film L.A., a private, non-profit corporation that offers permit coordination and assistance to filmmakers, fixing the problem would entail California offering tax incentives to keep the film industry in the state. More and more film production and state income taxes are being lost to other states that offer such incentives, he said. In 2006, regional gains in the film industry were less than 1 percent, MacDonald said. And further erosion is expected. “It does not look good this year,” he said. Brad Ward, president of the Small Manufacturers Association of California, echoed the sentiment for the manufacturing industry. Cuts in the Star Wars program will result in layoffs in the region, he said. More than 300,000 manufacturing jobs have been lost in the state over the past several years, he said. Despite this, “manufacturers in the San Fernando Valley are doing better than many throughout the state,” he said. The credit for that, he said, is owed to “the tenacity of San Fernando Valley business owners.” The same challenges for manufacturers exist all over the country. Because of the mounting cost of doing business in the area, Ward fears that businesses will “get fed up and leave.” The cost to manufacture products is higher in this country than in Third World countries, causing many businesses to use labor from other nations to manufacture their goods. In addition, the lack of a skilled labor pool has translated to companies having difficulty finding even qualified entry-level workers. The health care crisis is further adding to the problem. “What it looks like is small business is going to have to carry health care on its back,” Ward said. The retail sector is feeling the heat too. According to Clifford Goldstein, senior partner at development company J.H. Snyder, the lack of retail space in the Valley, and skyrocketing rents for the space that does exist, are causing more retailers to build upward instead of horizontally, creating more dual-level structures. The high cost of building surface parking is forcing more customers to use parking structures and paid parking. In addition, a 30 percent spike in the cost of such building materials as steel is also affecting retail growth. “There’s a thin margin of profitability for retailers,” Goldstein said.

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