Garcetti: Making L.A. business-friendly will aid its economic recovery

The City of Los Angeles is facing its most difficult fiscal challenge in 80 years, said Los Angeles City Council President Eric Garcetti. Crippled by a $450 million deficit this fiscal year and facing a $500 million deficit next year, the city faces the prospect of eliminating 4,000 positions — the equivalent to one in every three civilian employees.
Talk.garcetti.In an April 15 talk before an overflow audience in a School of Public Affairs classroom, Garcetti laid out some of the most pernicious problems that are undermining L.A.’s efforts to recover from the Great Recession and highlighted some strategies to address them.
“Right now, I feel that Los Angeles is having a crisis of confidence,” said Garcetti, whose talk was sponsored by the school and by the UCLA Burkle Center for International Relations. “We don’t know who we are anymore. This used to be a place where we never questioned that we could do anything.” In fact, many Angelenos believe traffic congestion, dirty air and still-high housing costs are intractable problems that the city can’t solve.
An attitude of negativism also prevails, he said. While many people are eager to say “no” to an idea or a proposed building project, Garcetti said, “we have lost our way to saying ‘yes,’ to saying what we stand for and learning how to compromise to move things forward.”
Garcetti, who attended Corinne A. Seeds University Elementary School as well as law school here, is serving his third term as a councilmember representing the 13th Council District, which includes Hollywood, Atwater Village, the Wilshire Center, Silver Lake and Echo Park. A former Rhodes Scholar at Oxford University, he has been elected and reelected president of the city council three times.
To regain its economic footing, he said, the city needs to do two things: Los Angeles needs to become a more welcoming place for businesses and a friendlier place for workers. Currently, the city sustains a “barbell” economy, where the 300 wealthiest individuals have the combined wealth of the 3 million poorest.
“We are gutting out that middle class, partially because of housing prices, partially because of our education system and partially because we are encouraging businesses that do have those middle-class jobs to locate someplace else,” he said.
In order to start a new business in L.A., for example, entrepreneurs must navigate their way through a tangle of government red tape. It’s a bureaucracy that is “not user-friendly, not inviting and not customer-focused,” he said.
To help the city attract and retain businesses that generate jobs, Garcetti cited his fight to reduce the city’s gross receipts tax and his push for a new tax classification for Internet companies as two key efforts.
By helping the Nielsen Entertainment take advantage of a little-used law, Garcetti was able to get the gross receipts tax waived for the firm for a few years, providing it with the key break it needed to make a move to Hollywood financially feasible. As a result, Nielsen brought to the city 500 jobs that average $70,000 a year. It’s brought new housing and new businesses to the neighborhood, including restaurants, a bookstore and a Trader Joe’s.
By imposing a gross receipts tax, he explained, “we were taxing businesses in Los Angeles, whether or not they made money. It wasn’t an income tax.” This has put an additional burden on entrepreneurs and motivated them to leave L.A. for cities with more generous terms. A few years ago, he led a fight that resulted in the council exempting the city’s smallest businesses from paying the tax.
Garcetti also authored legislation that was passed last month by the City Council that cut business taxes for Internet-based firms after some companies threatened to leave the city. “They said, ‘We’re an Internet company. We can be anywhere. We don’t need to be in L.A.,’ ” he said. “So we created a new tax category that will keep more of them here in Los Angeles.”
Garcetti said the city needs to do more to train a workforce to fill jobs that are in growing areas. At one time, Kaiser and other health-care companies had stopped advertising for nurses and nurse assistants in Los Angeles “because we were producing so few people with those skills. We weren’t providing a career path for people to enter those areas.”
So the city set up a program that trained people to occupy entry-level positions in health care. Once they were employed, the program helped them advance along a career ladder. Fueled by a $3.6 million grant from the U.S. Department of Labor, this program will now become a model to train people for other industries where job growth is expected.
There is still much for the city to do in terms of controlling pension costs, health-care costs and employee perks, he said.
“Will we be able to say not only what we want, but what we will give up to get there? If we do, this city will be unmatched in the world. This will be the Los Angeles to come if we can make those decisions,” he said.