By LARRY KANTER

Senior Reporter

The cover charge at L.A.’s most exclusive club just got a lot steeper.

Last year, when the Business Journal compiled its list of the 50 wealthiest people in Los Angeles, the price of admission was $300 million.

This time around, that won’t get you past the front door.

The “poorest” people on this year’s list managed to squeeze in with estimated net worths of $500 million there were five of them. But the high price tag left a number of notables including TV mogul Aaron Spelling and former Dodgers owner Peter O’Malley out on the sidewalk, stuck behind the velvet rope with the other mere multimillionaires.

It’s one of the peculiarities of life in Los Angeles even those with personal fortunes worth hundreds of millions of dollars can have a hard time standing out from the crowd.

“You could be earning millions of dollars a year, and you still wouldn’t be one of the wealthy elite in this city,” said James P. Smith, senior economist at the Rand Corp. in Santa Monica. “What defines the truly wealthy in L.A. is really extreme. It gets to be beyond imagination.”

Beyond imagination that’s as apt a term as any to describe the staggering gains being seen by those on the highest rungs of L.A.’s economic ladder.

With the bull market stampeding forward, real estate prices hitting new heights and the regional economy roaring back after a half-decade of recession, people in Los Angeles are accumulating wealth at a rate not seen since the heady days of the ’80s. Many of those on the Business Journal’s list of the 50 wealthiest Angelenos have seen their personal fortunes surge by as much as 30 percent over the past year or two alone. The number of billionaires jumped from eight last year to 18 this time around.

And it’s not just billionaires who are cleaning up. Here in L.A., plenty of people are rich perhaps not in the $500 million range, but certainly rich enough. A Business Journal analysis has found hundreds of people with annual incomes of more than $5 million and thousands more in the million-dollar-plus range.

The number of L.A. County residents in households with adjusted gross incomes of more than $1 million jumped 52 percent between 1994 and 1996, from 8,529 to 12,930, according to statistics compiled by the Assembly Select Committee on the California Middle Class at the request of the Business Journal.

The committee’s findings, which will be released this week, are based on an analysis of income-tax returns for Los Angeles and California as a whole and provide a rare look at what’s happening among tax filers at the farthest reaches of the economic spectrum.

Although the state Franchise Tax Board regularly issues data based on the tens of millions of tax returns it receives each year, such reports generally lump all high-income earners into a single category of $100,000 or more. The report compiled for the Business Journal breaks out specific data on income levels between $100,000 and $25 million.

What the report shows is a striking, double-digit increase in the number of people with high to exceedingly high incomes between 1994, when Los Angeles finally emerged from the recession, and 1996, when the economic recovery was well under way (and the last year for which data is available.)

The report also indicates a swelling of the ranks at lower income levels, as well as a hollowing out of the middle class suggesting that despite the strength of the recovery, most of the effects so far are being enjoyed disproportionately by the region’s high-income earners.

The further up the income ladder, the faster the growth rate accelerates.

The number of Angelenos in households with incomes between $500,000 and $1 million, for example, jumped 34 percent between 1994 and 1996, rising from 16,587 to 22,227.

By contrast, the number of L.A. County residents in households with incomes between $5 million and $25 million grew at almost twice that rate swelling 62 percent, from 794 1,289.

And the number of L.A. County residents in families reporting incomes of $25 million or more soared 120 percent over the same period, from 65 to 143.

Statewide, the number almost tripled, from 131 to 376.

Adjusted gross incomes reflect the amount of money an individual or family earns in wages, stock dividends, alimony payments, tax refunds and the like, before paying taxes and after making minor adjustments for IRA contributions, self-employment expenses and other provisions.

It does not take into account the value of non-income assets, such as real estate and stock holdings, both of which can contribute much more to an individual’s or family’s net worth. Nor do the figures account for the gains enjoyed by both the local economy and the nation’s financial markets in the last year or so.

“I wouldn’t be surprised if you find that the numbers are even higher in 1998,” Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange. “There is no question that the upper-income group is getting bigger.”

There currently are about 73,700 households in L.A. County with more than $1 million in liquid assets to invest, according to PSI Global, a Tampa, Fla.-based consulting firm that collects data on the nation’s wealthy for banks, brokerages and mutual funds.

About one-eighth of the nation’s millionaires live in the L.A. region second only to the New York metropolitan area, which boasts 93,000 households with over $1 million in investable assets, according to John J. DeMarco, an executive with PSI.

So what’s driving today’s good times? Clearly, L.A.’s economy is as strong as it’s been in years, driven by robust growth in entertainment, high tech and international trade. Unemployment is at 6.3 percent, compared with over 11 percent in 1993. New jobs are being created at a rate of 2.8 percent a year, with the economy adding 108,000 new jobs annually, according to the Economic Development Corp. of L.A. County. That compares to about 90,000 new jobs a year being created during the last peak in the business cycle in the late ’80s.

“We came out of this recession later than everybody else, but we have caught up very rapidly,” said Thomas Weinberger, executive vice president of Sutro & Co. Inc. “We’ve seen a tremendous amount of catch-up over the past 24 months.”

The stock market deserves much of the credit. The Dow Jones Industrial Average, which threatens to break 10,000 this year, hovered at 2,000 in 1990. The S & P; 500 index is up 48 percent in the past four quarters alone. As a result, plenty of investors, through no ingenuity of their own, have suddenly found themselves flush.

Wall Street also has led to a sharp increase in executive compensation, as companies increasingly link pay to performance through the granting of stock options.

The bull market is rippling through the L.A. economy in other ways, as well leaving numerous new fortunes in its wake.

“As the valuations of public companies are going up, the valuations of private companies are going up, too,” said Dan Genter, president and chief executive of RNC Capital Management LLC, a Brentwood-based money management firm which specializes in high-net-worth individuals. “Because these valuations are so high, people are looking to sell their businesses, or sell pieces of their businesses, or take their companies public. The amount of money they are raising is astronomical.”

Added Lloyd Grief, president and chief executive of the investment banking shop Grief & Co.: “Before, they had paper wealth. Presto-chango all of a sudden, it’s Uncle Sam greenbacks. There are a lot of overnight millionaires being made. Los Angeles has always been a stronghold of entrepreneurship, and when the economy picks up those entrepreneurs start taking advantage of it.”

That, in turn, has been good news for L.A.’s business-service sector, which is being buoyed along by the rising tide.

Grief’s 15-person shop did $1 billion in deals in 1997 double the amount in 1996 and 1998 is on track to be another record-breaking year, he said.

Genter, for his part, now has nearly $1.5 billion under management, up from $600 million in 1992. He has 1,000 clients, and the average account size has tripled over the past decade.

Who are those clients? While RNC Capital boasts a thriving entertainment practice, “the biggest area of new clients is people who are selling their businesses,” Genter said. “It could be a service company, a travel agency, a temporary help firm, a grocery store chain, a manufacturing entity anything.”

Whatever they may do, there’s no question that they are getting richer. RNC Capital turns away anyone with less than $250,000 to invest.

The presence of extreme wealth in Los Angeles is not a new phenomenon. Those with money have been flocking to Los Angeles since the 1880s, when wealthy Midwestern and Eastern families, eager to escape bitter winter cold, began settling in lavish mansions along “Millionaire’s Row” on Orange Grove Avenue in Pasadena.

In the decades since, thanks in large part to the Hollywood myth-making machine, countless others have flocked here to make their fortunes. The year-round sunshine, the newness of the city and the absence of established hierarchies all encouraged the notion that in Los Angeles, anything was possible.

And prosper they have first in real estate, oil, movies, aerospace and banking, and more recently in such “new frontier” industries as health care, global trade and multimedia.

Thanks to the relative newness of their money, the wealthy in Los Angeles have tended to be different from their counterparts elsewhere harder working, more entrepreneurial, and less apt to retreat behind the walls of their mansions or languish on the decks of cruise ships.

That’s especially the case today.

“There is a very different kind of upper class growing and developing,” said Assemblyman Wally Knox, D-Los Angeles, who chairs the Assembly Select Committee on the California Middle Class. “Most of those folks came right out of the middle class not a generation removed, but they themselves came right out of the middle class. The absolute level of income is astonishingly high, and it’s an immense number of people. I don’t think it’s ever occurred in human history before that so many people are so well off.”

Even if they are not as extravagant as their forebears, they certainly seem to enjoy spending their newfound fortunes, according to Rick Wolf, managing director of Sotheby’s West Coast.

The auction house’s last jewelry sale in May, for example, was its strongest ever in Los Angeles, generating sales of $3 million. A tiny turn-of-the-century garnet broach worth an estimated $5,000 sold for $23,000. A diamond necklace appraised at $60,000 fetched $118,000. Wine sales also are strong, said Wolf, with some California Cabernets selling for as much as $2,000 to $3,000 a bottle.

“There’s a lot of discretionary spending going on,” said Wolf. “People are feeling very, very good about their net worth. The local economy is strong. The entrepreneurial companies are just cranking out money. Some of the prices are getting a bit silly.”

The question is, how long can the good times last? Many worry that an overheated stock market is overdue for a large correction. The future of the struggling Asian economies, which have played such an important role in L.A.’s recovery, is in question. Continuing struggles among those at the bottom end of the economic spectrum have sparked fears that L.A. may be perched along a dangerous social fault line.

Serious concerns, indeed. But given the furious pace of today’s business climate, few in the trenches have much time to ponder them.

“We’re all working seven days a week. It’s a lot of fun, but it’s also really tiring,” said Gerald Porter, president of Metrospace/CRESA, a commercial real estate brokerage in Brentwood.

Thanks to escalating demand for new space, Porter is doing more deals than ever this year and he expects to make twice what he did last year. And he’s not going to stop until the market does.

“This business is so cyclical just as fast as it starts, it could stop,” he said. “Someday, when the cycle slows down, so can you.”