Anxious to maintain the city's increasingly tenuous hold on the entertainment industry, the Los Angeles City Council took the first step Wednesday toward offering a major tax concession that could save multimedia companies tens of thousands of dollars.
The near-unanimous decision signaled the council's growing concern over becoming more business-friendly and its sensitivity to the city's slipping profile as the movie and entertainment capital of the world.
In recent years, economists and industry insiders have bemoaned the flight of entertainment firms to places like Burbank or Arizona, which aggressively court such companies with sweeter deals than Los Angeles can offer.
"This is a tremendous boost in the effort . . . to retain, attract and create opportunities for expansion for entertainment and multimedia firms already in Hollywood and North Hollywood," said Councilwoman Jackie Goldberg, who sponsored the motion with Council President John Ferraro.
The two members represent Hollywood and North Hollywood, where the tax break would apply if ratified at a later meeting after the exact wording of the proposed ordinance is worked out and again subjected to debate by the council.
Despite the 12-1 vote, the tax proposal ran into opposition from council members who said it amounted to preferential treatment for a glamorous industry, while no such deals are being brokered for less-visible concerns, such as the garment business--the city's top employer.
"I don't want to be one to play favorites," Councilman Joel Wachs, who cast the lone dissenting vote, told his colleagues. "It's bad policy. It'll be very, very hard to justify your decision to other businesses with comparable or even more urgent needs in other parts of the city."
He and others pressed City Hall staff to move forward quickly on crafting a uniform citywide policy of providing financial incentives for companies to stay in or move to Los Angeles. Councilwoman Laura Chick criticized the council's current "piecemeal approach" of granting tax exemptions on a case-by-case basis for various pockets of the city, including the controversial approval two months ago of a $500 tax break for businesses in riot-torn South-Central Los Angeles.
The measure approved in concept Wednesday designates Hollywood and North Hollywood as incentive areas because of their status as redevelopment zones. The proposal follows intensified efforts in the past few months to accommodate the entertainment industry and polish the city's image as the world's filming mecca.
In November, Riordan invited multimedia executives to the first in a series of business round-tables organized by his office. Participants cited taxes as one of the chief obstacles to growth.
Last month, the City Council voted to merge its filming office with the county's to create a single nonprofit agency charged with making it easier for filmmakers to shoot their projects in the area.
The new tax break, which would go into effect July 1, 1996, caps an eligible company's tax liability at $25,000 or 10% of its usual payment, whichever is greater. Officials said the measure would currently cost the city between $100,000 and $250,000--considerably less than a previous estimate of $800,000.
Legislative analyst Jeffrey D. Druyun said fewer than a dozen companies stand to benefit from the tax concession at present, with one or two broadcast firms easily saving tens of thousands of dollars apiece.
Although the companies are all in Hollywood, the tax break has its origins in recent discussions with a Burbank firm about relocating to North Hollywood, officials said.
The company, Saban Entertainment, which distributes the popular children's show "Mighty Morphin Power Rangers," considered moving to a redevelopment site in the planned "NoHo" entertainment district, but local taxes could have cost the firm between $500,000 and $1 million a year--hundreds of times more than the firm's payment in Burbank, said an official familiar with the negotiations.
"This was a giant issue for them," the official said.
The discussions sparked the effort by Ferraro, Goldberg and the mayor's office to work out a plan to offer tax breaks to multimedia companies, officials said. A Saban representative declined to comment.