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L.A. politicians push for perks for businesses

Though the city already spends millions to lure companies, Measure E would grant more financial incentives that supporters say are needed to create new jobs.

February 22, 2009|David Zahniser

To lure a Lowe's home improvement store to Pico Boulevard, the city of Los Angeles agreed to spend $14.3 million.

To bring a Costco and a Best Buy to Pacoima, the city provided $18.7 million. And to attract a seven-story residential project to Chinatown, city officials agreed to contribute at least $41 million in state, federal and local funds.

So it might seem odd that the city's politicians and business leaders are pushing Measure E, a proposal on the March 3 ballot that asks voters to explicitly allow Los Angeles Mayor Antonio Villaraigosa and the City Council to give taxpayer money to businesses.

Supporters of the measure say the City Charter amendment is needed to spur L.A. to create a standard strategy -- one that includes tax breaks and other programs -- for luring new businesses.

Saying 50,000 jobs disappeared in Los Angeles from 1990 to 2005, Measure E enthusiasts argue that a menu of incentives is necessary to bring new jobs.

"What happens now is, we say [to businesses], 'If you want to come to Los Angeles, come,' " said Stuart Waldman, executive director of the Valley Industry and Commerce Assn. "We won't do anything to help you. We won't do anything to keep you here. And you might as well go somewhere else."

With so much debate focused on Measure B, the solar energy plan also on the March ballot, Measure E has moved largely under the city's political radar. Still, critics of the solar measure say voters should be equally wary of Measure E, which they describe as financially risky and overly broad.

"At best, it's a misguided attempt at economics. And at worst, it's welfare for the rich," said attorney and mayoral candidate Walter Moore, who signed the ballot argument against Measure E.

Moore disputed the need for such a measure, given the number of subsidies that already have been approved. If the City Charter needs to be amended to give companies financial incentives, then the city has been illegally cutting deals up until now, he argued.

Backers of Measure E counter that the vast majority of those subsidies have been in redevelopment zones, which cover only a small portion of the city. In those areas, property tax revenue can be used to eradicate blight.

Meanwhile, Villaraigosa and Police Chief William J. Bratton have signed the ballot argument in favor of Measure E, saying the proposal will improve the city's budget outlook and therefore ensure that "public safety remains the city's top priority."

The Los Angeles Area Chamber of Commerce also supports the initiative, saying it will help Los Angeles lure companies that have traditionally set up shop in smaller, more politically nimble municipalities, such as Burbank, Santa Monica and Culver City.

To back up their case, politicians and business leaders have repeatedly cited the city's failed effort to lure the Internet company Yahoo. After looking at Monrovia and downtown Los Angeles in 2005, Yahoo opened an office in Burbank, providing 1,500 new jobs there.

"They were able to offer different incentives that we were not," Councilwoman Wendy Greuel, a backer of Measure E, said at a recent news conference.

Burbank city officials tell a starkly different tale, saying they gave no financial incentives. Instead, Yahoo was made aware of their city's positive qualities -- safe neighborhoods, clean streets and a streamlined permitting process. If Los Angeles wants to lure businesses, the city should make its business taxes as low as Burbank's, they added.

"We don't try to bribe people to come to Burbank," said City Manager Michael Flad. "We find ways to encourage businesses, not buy them off."

Since 2005, Villaraigosa's administration has shown a willingness to support real estate projects that are considered "catalytic," or likely to attract additional growth. He and the council approved up to $270 million in tax breaks over the next 25 years for the 54-story hotel being built at L.A. Live, an entertainment complex downtown next to Staples Center. The city also agreed to give up to $123 million in tax breaks for the hotel that is planned as part of the Grand Avenue project, a Frank Gehry-designed skyscraper that would go up across from Walt Disney Concert Hall.

L.A. city government also supports businesses by lending them hundreds of millions of dollars from city employee pension accounts. Villaraigosa regularly boasts that city pension dollars have gone toward development of environmentally friendly technologies and construction of new housing.

For example, two city pension agencies, departments whose boards have a majority of their members appointed by Villaraigosa, have committed up to $50 million to CityView, a real estate fund headed by Henry Cisneros, a Cabinet secretary in the Clinton administration.

Measure E was spearheaded by Councilman Greig Smith, a representative of the northwest San Fernando Valley who argued that the proposal would spur the council to craft specific incentives tied to the number of jobs a new business would bring. Those details are not contained in the language of Measure E, however.

Smith said he originally planned to pursue a more detailed ballot measure for 2010 or 2011 but changed his mind as the economy slid deeper into recession.

"What has changed dramatically are the amount of people losing their jobs in L.A., the amount of business that can't compete right now," Smith said. "So we moved real quickly to the ballot and said, 'Let's be generic about this.' "


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