A long-awaited tax equity study billed as the means to stop businesses from leaving Los Angeles was released last week to jeers from business advocates who said it was long on jargon and short on solutions.

The study offers multiple scenarios for rewriting the city’s business tax code, but leaves it to city officials to ask for further analysis of up to 25 different tax scenarios.

“Basically what it looks like to me is that we’ve waited close to two years for this tax-equity study that tells us that if we want any recommendations, they could study some more,” said City Councilwoman Laura Chick.

Chick is currently trying to stop five health maintenance organizations from leaving the city by revising what the HMOs claim is an unfair tax rate.

“That’s frustrating, to say the least,” Chick said. “I didn’t need to wait two years to find out that we have an overly complex tax code.”

The $331,000 study, formally known as “The Competitiveness of City Taxes and Fees,” was prepared for the city by a consortium composed of UT Strategies Inc., Arthur Andersen LLP, Landmark Partners and the Milken Institute for Job and Capital Formation.

Representatives for Arthur Andersen, which developed the set of recommendations, did not return calls last week to address the criticism of their work.

Larry Kosmont, president of Kosmont & Associates Inc., a firm that surveys tax rates in various cities, said business interests had hoped the study would recommend clear-cut solutions that could be implemented quickly.

With the study falling far short of that, he said, L.A. now risks losing more companies to competitor cities.

“Now we’re looking at more work, more analysis, which means more time,” Kosmont said. “The exposure increases with the amount of time it takes to restructure the business tax program.”

The city’s current business structure contains 64 different categories with a tax of between $1.18 per every $1,000 in gross receipts a company brings in, and $5.91 for every $1,000 in gross receipts. The tax code is so archaic that it still includes a separate tax rate for a traveling circus.

The study offers three suggested tax structures to replace the current one:

– a gross receipts tax with five tax categories with rates ranging from $1.30 per $1,000 in gross receipts to $4.90 per $1,000 in gross receipts;

– a gross receipts tax with a flat rate of $2.65 for $1,000 in gross receipts; and

– a payroll tax with a 1.1 percent tax on payroll.

Rocky Delgadillo, deputy mayor for economic development, said that while the study does not offer any strong recommendations for revising L.A.’s business tax code but rather a group of scenarios it is a good first step.

“This is the beginning,” Delgadillo said. “I guess the way to best think about it is we’re building a house and this is simply pouring the foundation. And we have a lot of work ahead of us, but we think we have commenced our efforts to bring simplicity to our city tax system.”

Delgadillo said that the next step is for the mayor’s office to work with the City Administrative Office, the City Clerk’s Office and the council offices to develop recommendations to present to the council’s Budget and Finance Committee.

Hilary Norton, chief of staff to Councilman Richard Alatorre, who chairs the committee, said that it could take several months before those recommendations reach the committee.

“We think the tax equity study is a damn good idea we always have,” Norton said. “But you cannot leave the gate with a proposal that reduces people’s taxes and then find out it doesn’t cover your costs.”

Norton, like Chick, also said she was disappointed the study did not offer a clearer recommendation for revising the city’s business tax code.

“There is a sense of frustration that there isn’t more of an ‘all things being considered, here are the ways we think things should go.’ After all, we hired them for their expertise,” Norton said.

The study’s lack of conclusions did not surprise Michael Gagan, a Rose & Kindel lobbyist who is representing five HMOs Blue Cross of California, CareAmerica Health Plans, Health Net, Maxicare Health Plans and Prudential HealthCare that are negotiating a change in their business tax rate with the city.

Gagan said he does not expect any overarching change in the city’s tax structure to come from the report because he thinks elected officials fear that any alteration would hurt the city’s revenue stream.

“What I am struck by is the deafening silence by which the report has been received by the city,” Gagan said. “It’s like nobody wants to embrace it and take the initiative to run with it.”

Gagan said the lack of response is especially troubling since he and others representing the business community have been told repeatedly by city officials that they wanted to wait to make changes to the city’s tax structure until they receive the study.

“They said, ‘If you’ll just be patient, when that comes out then we’ll take some action,'” Gagan said. “I don’t see any action being taken any time soon on the study.”

Gagan said the situation with the HMOs will not be affected by the lack of specifics in the study. “We’ve been pursuing a parallel but quite separate track. We knew the study did not address the HMOs specifically,” he said.

Chick said that she is not sure what will happen with the study, particularly since it lacks clear recommendations.

“I worry that unrealistic expectations were given to the City Council and, more importantly, the business community, who were expecting some strong results to come out of this,” she said. “I guess the strongest message is ‘simplify, simplify, simplify,’ but it’s unclear what road that will take.”