In January, the LA 2020 Commission’s report, A Time for Truth, pointed out that the City of Los Angeles had 10% fewer jobs than two decades ago despite a 30% increase in its population. We also have one of the highest rates of unemployment in the country with almost 20% of our residents living in poverty.
Good paying manufacturing and entertainment industry jobs have been replaced with jobs in the “relatively low-wage fields of education services, healthcare, and hospitality.” As a result, median income is lower today than it was in 2007. At the same time, major corporations like ARCO, Union Oil, Northrup Grumman, and Boeing have been acquired or moved to more business friendly environments.
You would think that job creation would be Job Number One for the City Hall.
Unfortunately, while City Hall pays job creation a lot of lip service, its actions and rhetoric are creating an environment where businesses, employers, and investors do not trust City Hall.
In the City’s defense, the State is the City’s major obstacle as California’s high taxes, onerous work place and environmental regulations, unfriendly judiciary, smothering bureaucracy, failing infrastructure, and unbalanced budgets drive employers and investors out of the State faster than the top speed of Governor’s proposed High Speed Rail boondoggle.
Just last week, the City Council unanimously approved an ill-conceived motion sponsored by Paul Koretz that essentially threatened to end all relations with two money center banks if they did not waive a contractually determined $25 million termination fee on an interest rate swap agreement relating to Wastewater System Bonds.
The City has also engaged in other bank bashing rhetoric and litigation which damages the City’s reputation in the business and financial community.
Earlier this year, the City authorized the formation of 11 Exclusive Trash Franchises to service commercial establishments and large apartment complexes that is expected to increase the annual cost of trash collection by $150 to $200 million. This action was taken despite the strong opposition of the business community and apartment owners and was contrary to the City Administrative Officer’s call for a non-exclusive arrangement.
The City is also pushing to establish a mandatory $15.37 living wage for workers in downtown hotels with more than 100 rooms. But this City imposed mandate is opposed by the hotel operators who believe they will be unable to pass this additional cost onto their guests because of the highly competitive environment, especially as it relates to the convention trade.
These strong arm tactics also scare the hell out of investors and employers because of the legitimate fear that our cash strapped City will target their businesses if they are tied down by large investments in plant, property, and equipment located within the City limits.
City Hall is engaged in counterproductive behavior at the Port of Los Angeles and Los Angeles International Airport that will hurt the domestic and international competitiveness of these two important economic engines that are responsible for the creation of many decent jobs throughout the City and Southern California.
The City is also at a competitive disadvantage because its gross receipts business tax is by far the highest in the region. And despite promises to lower this burdensome tax, the City does not have the financial flexibility to lower or eliminate this tax because it is expecting a cumulative budget deficit of $425 million over the next three years.
The City may tout Silicon Beach; its three year tax holidays for car dealers; and corporate giveaways to hotel operators serving the out of date Convention Center, real estate moguls whose developments create massive traffic problems in Hollywood, and the $70 billion Westfield Group. But these are not enough to overcome the business unfriendly reputation of the City Council and all their campaign funding cronies; the City’s failed streets; and the burden of over $30 billion of debt, unfunded pension liabilities, and deferred maintenance.
City Hall needs to earn the trust, confidence, and respect of employers, businesses, and investors if it wants to create a strong and sustainable private sector economy that can thrive in the competitive international markets and, at the same time, provide decent jobs for hard working Angelenos.
For starters, the City Council and Mayor Garcetti should work with the LA 2020 Commission to follow up on its findings in A Time for Truth and a number of its recommendations in A Time for Action.
The Los Angeles Times, our paper of record now headed by Austin Beutner, the Co-Chair of LA 2020 Commission, the Daily News, KPCC, and the rest of our local media need to expose the City Hall’s shenanigans and financial follies and urge our elected officials to develop long term plans that will stabilize the City’s finances and support the growth of our local economy.
Otherwise, the unfocused and undisciplined City Council will continue to kick the can down our lunar cratered streets as LA morphs into a virtual service bankruptcy, where our City is unable to provide the necessary services needed to preserve our neighborhoods and our quality of life and allow the City to effectively compete in the world economy.
Cross-posted at CityWatch LA.