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Business Leaders Oppose New Taxes to Bail Out County : Finances: Government first needs major restructuring, key Downtown group tells supervisors. Chairwoman Molina says its stance is 'irresponsible.'


In an unusually strong show of opposition, leaders of the Los Angeles business community told the Board of Supervisors on Thursday that they flatly object to any new taxes to bail the nation's largest county government out of its worst-ever fiscal crisis until it is fundamentally restructured.

Without deep reform in the way the county does business, raising taxes is "like giving drugs to a drug addict," said Carol E. Schatz, president of the Central City Assn.

Schatz's remark, which she said she first heard from a Downtown businessman, drew an immediate retort from three supervisors, who were clearly miffed at the business community's failure to join them in seeking new taxes to ease the county's budget crisis.

"That's a great line," Supervisor Zev Yaroslavsky said, "but even drug addicts, as they are taken off their habit, are given methadone and other things."

Yaroslavsky pointedly told the business leaders that they will get their wish for a smaller county government soon because the county will have no choice but to downsize operations, threatening the safety net for the poor and those lacking health insurance.

"We figure you've had several years to move in that direction and that has not happened," Schatz replied.

She told the board that members of the Central City Assn., which includes more than 250 major Downtown businesses, believe that the board has not put a county restructuring plan on the table.

"The county has been avoiding any serious downsizing and layoffs, mortgaging its major assets and now the wolf is at the door," she said. "When the wolf is at the door, you do what you always do--raise taxes on the business community."

Lee Harrington, president of the Economic Development Corp. of Los Angeles County, said the issue is simple: "It's time to rethink government before we think new taxes."

Board Chairwoman Gloria Molina said the business community was being "irresponsible" in opposing new taxes when the county is faced with having to close most of its health centers and clinics and possibly hospitals.

"We've cut drastically in this budget," Molina said. "We've been as tough as we possibly can. We're trying to cut aggressively."

Under consideration are proposals to impose a variety of taxes in unincorporated areas, including a gross receipts tax on all businesses, a new tax on tickets to Universal Studios and Magic Mountain, higher disposal fees at county landfills, an increase in the hotel tax, and new charges on water, sewer and cable television bills.

The supervisors, in adopting the county's troubled budget earlier this month, included $6 million in new revenues from the landfill, hotel and amusement park taxes. None of the other business taxes--considered more politically unpalatable--were built into the budget.

In addition, the supervisors are considering an increase in an existing charge for fire protection and a new property tax to fund libraries.

"The business community is not the only one being asked to share in the financial burden," Yaroslavsky said. "Most of the taxes being proposed are for residents in unincorporated areas."

But Harrington warned that Los Angeles' recovery from the worst recession since the Great Depression is fragile and that new taxes may cost more than they raise by driving out businesses when the area needs new jobs.


Businesses considering Los Angeles are concerned about what the county's financial crisis may portend. "They want to know that the county is going to fix its problem going forward," Harrington said.

"Stop and thoughtfully ask yourselves what business can you and should you be in the future," he said.

Supervisor Yvonne Brathwaite Burke, refocusing the debate on the business community, said the county is being forced to provide health care for 3 million residents in part because many private employers do not provide medical insurance to their workers.

"We're providing health insurance to all of them," she said.

And in a response to charges that the county is anti-business, Burke said taxes are not the only measure of a community's desirability. So are parks, libraries and health services, she said.

The board delayed action on any tax increases until Sept. 19.

Everyone who spoke at Thursday's hearing--from owners of small businesses to large developers, from anti-tax activists to representatives of a small San Fernando Valley water district--objected to paying more for government services.

The message was clearly disappointing to the board, which is frustrated that its search for significant new revenues has failed so far to produce results. Efforts to win authority from the Legislature to impose a tippler's tax on drinks sold in bars and restaurants were blocked by the liquor lobby. And Gov. Pete Wilson vetoed a hastily crafted bill to raid the Metropolitan Transportation Authority, although a scaled-down compromise proposal still is under consideration in Sacramento.

The supervisors this week endorsed a new legislative effort to give them the power to impose a local cigarette tax to help finance health programs.

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