The 11-year effort to reform the business tax structure in Los Angeles is poised to clear one of its last major hurdles this week.


Mayoral candidate Bernard Parks, chairman of the Los Angeles City Council Budget Committee, indicated that he will guide the reform package through his committee, rather than use his post to hold up the reform effort.


Parks, who is challenging incumbent mayor James Hahn in next year's primary, said a recent study had addressed most of his concerns about the measure's potential impact on the city's budget. He said he expects a vote to come either at the end of the Nov. 9 hearing or at the next committee meeting.


"My main concern was that we not pass business tax reform without knowing what the impact on the general fund would be," Parks said. "Measures have been put in place that give us some assurance that there won't be a major void in the budget if the business tax is cut."


With Parks presumably on board, business tax reform could pass in time for tax cuts to kick in by July of next year. Business groups had set an Oct. 31 goal for City Council passage.


Both Parks and Councilman Eric Garcetti, one of the co-authors of the reform package, said they believe there are enough votes on the five-member budget committee to pass the measure onto the full City Council. "Obviously, five votes would be really nice and we're pushing for that unanimous statement," Garcetti said last week.


Besides Parks and Garcetti, councilmembers Cindy Miscikowski, Tony Cardenas and Greig Smith sit on the budget committee. Cardenas and Smith have already voted for the package in an earlier committee vote.


Trying to reform the city's business tax system has been the subject of countless studies, proposals and lobbying efforts, going back to the days of the Riordan administration. L.A.'s labyrinthine taxing methods have been routinely decried by business interests, who consider it a hindrance to attracting and retaining companies in the city. Most recently, it could have been a factor in the decision by Overture Services Inc. to move its headquarters from Pasadena to Burbank instead of downtown L.A.


The reform package now on the table would cut business taxes in Los Angeles by up to $95 million a year from the current $380 million. The package includes a 15 percent cut for businesses over the next five years, amounting to about $60 million a year, plus an exemption for all businesses with less than $100,000 in gross receipts another $20 million cut. In addition, the measure includes exemptions for artists making less than $300,000 a year and lowers the rates for entertainment firms.


The study by MBIA Corp. said these tax cuts would be offset by additional revenues from businesses already here and businesses that move into the city. Also, the City Council has set up a business tax reform fund with revenues from a business tax amnesty program; that fund now has more than $20 million to offset any business tax cuts.


Hahn, who a year ago was hesitant to push through business tax reform for fear over its impact on the city's budget deficit, has recently said he is eager to sign the reform package. With his re-election campaign under way, being able to claim credit for the measure could help him with the business community.


There is widespread consensus that the package will easily garner the eight votes necessary to pass the full Council, probably around Thanksgiving and then go to Hahn for his signature.


Schwarzenegger Initiatives


Gov. Arnold Schwarzenegger is about to get on the housing bandwagon with a major new initiative next year.


Sunne Wright McPeak, Schwarzenegger's Secretary for Business Transportation and Housing, said the governor intends to change state law to require each city and county to come up with plans to provide adequate housing for its residents.


"If we do not do this, the consequences will be very serious. Not only will we not provide decent shelter for all California residents, but we will be crippling our competitive advantage," said McPeak, who spoke to the Valley Industry and Commerce Association. "Adequate housing makes the difference on whether or not employers decide to keep their workforce here or go elsewhere."


McPeak did not say whether the state would earmark any more funds to help cities and counties boost their housing stock. She also said that Schwarzenegger intends to pursue reform of the landmark California Environmental Quality Act, the law that requires environmental impact reports on large construction projects.


Developers and other business interests have long complained that CEQA has become a tool opponents use to slow or stop major projects even if there is little evidence of potential damage the environment. They also say too much paperwork and time are needed to meet CEQA requirements.


However, environmental groups say CEQA is essential to ensure projects don't disrupt natural ecosystems or surrounding neighborhoods.


"When CEQA was passed in the 1970s, it was well-intentioned, but it's so misused now," she said. "It's time to tackle this and see how our resources that are now spent on environmental impact reports and lawsuits could actually go towards positive actions to protect the environment."


Staff reporter Howard Fine can be reached at (323) 549-5225, ext. 227, or at hfine@labusinessjournal.com .

For reprint and licensing requests for this article, CLICK HERE.