Much has been written about the so-called pro-business
policies of "Business Tax Holidays" and "incentive packages" (including steep
discounts in DWP rates) – all in order to attract business to Los Angeles. When a politician holds a press conference
with business owners, standing behind a glossy logo, clamoring on about how his
or her pro-business policies are attracting business to the city (with glowing
headlines to follow), re-election seems like a certainty.
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 L.A. 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.
For more information please visit
www.kevinjamesformayor.com.