Having read former Beverly Hills City Manager Rod Wood’s commentary in the Sept. 13 issue of the Business Journal (“A Healthy Prescription?”), it appears to us that Wood has either developed severe amnesia since his retirement or he never read some of the extensive (and expensive) studies that he authorized during his tenure.

His statements about medical office buildings and the long-term economic health of the city of Beverly Hills are in stark contrast to the city’s and the Beverly Hills Conference & Visitors Bureau’s own studies, along with a study that we commissioned earlier this year, and what we see every day owning and operating medical office buildings throughout the city..

In 2006, Wood commissioned MBIA MuniServices, a respected firm that provides financial modeling and other services for municipalities, to research and create a report titled “Beverly Hills Economic Profile: Sharpening the Competitive Edge.” This 74-page report was based upon a review of the city’s tax collections, several publicly available indexes and a telephone survey of businesses. Interestingly, the telephone survey portion was weighted against medical offices because it was structured (according to the survey methods published on page 72 of the report) to give greater weight to businesses with higher business license taxes. Medical offices in Beverly Hills, like law offices, are taxed based upon the number of employees in the office rather than gross receipts. 

However, despite this calculated bias against medical office space, the MBIA report showed that “Health Services” (no definition given) provided 9 percent of the city’s business tax revenue, for a total of $2.57 million. The only category of businesses in the city that exceeded that was commercial building operations, which provided 33 percent for a total of $9.01 million. Under this city-sponsored report, Health Services was found to generate 14-times higher tax revenue than motion picture production and 30-times more tax revenue than talent agencies, both of which Wood cites in his op-ed piece as “major sources of revenue for the city.”

Wood wrote that medical offices pay higher rents than other businesses in the city. What he did not mention while discussing Beverly Hills’ “archaic” tax structure is that the taxes paid on commercial office rents are substantially higher in Beverly Hills than in the city of Los Angeles and other neighboring cities. Similarly sized buildings in Beverly Hills and Los Angeles have a disparity that is overwhelming.

Wood made numerous other statements that are in stark contrast to the MBIA report – but let’s turn to another report.

Earlier this year, our company retained Robert Charles Lesser & Co. to undertake a third-party analysis of the economic development and fiscal benefits of the health service sector in Beverly Hills.

Substantial impact

This study showed that industry’s fiscal impact on Beverly Hills was substantial and that the taxes received from this industry comprised a substantial slice of the city’s revenue pie. Using the midpoint range of revenue, medical offices produced $2.4 million in business taxes, or about 8.2 percent of the city’s total business tax.

The study went further and found that that by adding property taxes, sales taxes and transient occupancy taxes paid by people who came to Beverly Hills for medical procedures, the health service industry provided approximately $7.4 million in revenue to the city, or about 6.5 percent of the city’s entire budget.

Wood also claimed that medical offices do not generate much spinoff business, never citing any facts or statistics. The survey of patients, though, found that more than one-third of all patients planned to shop or eat in Beverly Hills before or after their appointments. The research further showed that they spent between $39 to $44 per visit. Assuming the industry standard of 70 patients per week per medical professional, this equates to a range of $28 million to $37 million spent in Beverly Hills stores and restaurants by medical patients. To call the revenue generated for merchants and restaurateurs in the city, as well as the city’s own tax revenue, insignificant is just plain wrong. 

Hotels have also been beneficiaries of the plastic surgeons in Beverly Hills. The survey also estimates that 14 percent of plastic surgery patients stayed overnight in Beverly Hills’local hotels and the typical length of stay ranged from 2.1 to 4.2 nights. Using the results of a survey prepared by the Beverly Hills Conference & Visitors Bureau in 2005, (and not updated for inflation) retail expenditures attributed to plastic surgery patients staying in Beverly Hills is are estimated at more than $7 million.

The Lesser study, along with the MBIA study and the Conference & Visitors Bureau study, contain many more facts that show how medical uses are beneficial to the city. We could continue citing more facts from the studies, such as the survey that found medical office workers buy almost $15 million each year from Beverly Hills merchants – but by now, you get our point.

Medical office buildings in Beverly Hills are a great economic benefit and contribute to the economic well-being of our city. We don’t know why Wood, without any facts to back up his statements, continues to attack medical office buildings after his retirement, but we hope that in the future, he at least reviews the studies he commissioned before trying to claim that medical offices provide no positive benefits to Beverly Hills.

Dan Gottlieb and Steve Lebowitz are principals in G&L Realty Corp., which owns five Beverly Hills office buildings in which about 80 percent of the tenants are in health services.