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Los Angeles approves business tax break

Backers say the measure, for new, large firms, could create 55,000 jobs. The council also took steps to lure a Chinese car maker and Eli Broad's proposed museum.

August 07, 2010|By David Zahniser, Los Angeles Times

The Los Angeles City Council approved a series of initiatives Friday aimed at invigorating the city's stagnant economy, offering a tax break for new, large businesses and taking steps to lure a Chinese car maker and a museum planned by billionaire Eli Broad.

Hoping to get more of its constituents back to work, the council voted 10 to 0 to waive the business tax for the next three years for companies that move into the city and receive more than $500,000 in yearly gross receipts.

The council also extended an existing tax break for new, smaller businesses until Dec. 31, 2012.

Backers of the proposal, including Mayor Antonio Villaraigosa, said they expected the changes to create 55,000 jobs and prevent new businesses from choosing other Southern California cities over Los Angeles.

"We are in a tough, competitive environment with our neighbors — the 90 or more jurisdictions that surround us, the vast majority of whom do not charge a gross-receipts tax," said Councilman Richard Alarcon.

In a separate action, the council agreed to spend $2 million to persuade BYD, an electric car maker headquartered in China, to open an office on Figueroa Street just south of the 10 Freeway. And in a third vote, the council unanimously approved a financial agreement with Broad to bring a new museum to the Grand Avenue corridor, across 2nd Street from Walt Disney Concert Hall.

As part of that proposal, the city's redevelopment agency would provide up to $30 million for a new parking garage to serve the museum. The deal still needs approval from the county Board of Supervisors.

Of the three votes, the only serious debate focused on the business tax break. Because the city currently expects $411 million from its gross-receipts tax this year — roughly 10% of its total revenue — some council members asked for assurances that the new tax break would not put the city's budget deeper in the hole.

In a written report to city officials, professor Charles Swenson of the USC Marshall School of Business said the measure could produce a "slight increase" in revenues while helping the city add an estimated 55,000 jobs.

Still, Councilman Paul Koretz had doubts about the thoroughness of the study, saying he expected some businesses to move into the city regardless of its tax policy.

"There's no question that we'll help sell an image that the city is starting to become more business-friendly," he said. "But I'm not so sure that we can say with certainty that we'll end up with more revenue as a result."

Koretz voted for the measure anyway. The new tax break would not apply to companies that are already in Los Angeles, which pay $1.01 to $5.07 for every $1,000 of gross revenue, depending on the business category to which they belong.

The vote drew praise from the Valley Industry and Commerce Assn., which issued a statement thanking city officials for "listening to the business community's concerns."

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