Los Angeles is at a tipping point. As a city, we must develop clear policies that demonstrate we are open for business. This means developing tax structures and guidelines that are consistent and directly tied to job creation and development.
I recently voted against extending the New Business Tax Holiday because it is not the best policy for the city of Los Angeles. By exempting businesses that locate in the city from the gross receipts tax for three years, we are creating an unlevel playing field for existing businesses that still must pay the tax. It also depletes general fund revenue from the city that is needed for core services like fire and police, and it does not guarantee job creation.
The city can and should provide targeted tax incentives to attract investment in a strategic way that demonstrates job creation. But we will not accomplish this through one-time tax relief that ultimately reward some businesses and not others. This will not help our reputation as a business-friendly city.
As a council member, I have worked to attract new business with tax incentives that include provisions to benefit L.A. residents. Examples of this include the new JW Marriott hotel (also known as the Los Angeles Convention Center hotel) and the redevelopment of the Wilshire Grand Hotel. I worked to gain support for the establishment of a community-taxing district to provide financial assistance to the JW Marriott. The financial assistance was provided from the city’s transit occupancy tax.
This agreement allows the hotel to retain a portion of the transit occupancy tax to offset some development costs in exchange for community benefits. Community benefits include local-hire requirements, participation by minority and local business in the development, and designating the city as the point of sale for all construction materials.
The construction of the Convention Center hotel resulted in 1,752 direct and 3,077 indirect jobs; the community benefits package requires that the developer hire at least 50 percent of the workforce from within three miles of the project site and poverty census tracts within the city. The hotel created 777 permanent jobs.
Legislatively, I worked to develop the Transit Occupancy Tax Subvention Agreement for the redevelopment of the Wilshire Grand, ensuring that Los Angeles will continue to receive an amount of city tax revenue equal to that which is currently generated by the property throughout construction. The agreement also provided for extensive community benefits including:
• The creation of 7,300 construction jobs and 10,900 direct, indirect and induced permanent jobs, of which 9,700 would be net new jobs.
• A first-source hiring policy and local minority business recruitment program for exempt employees, subcontractor opportunities and permanent jobs to facilitate the employment of local and minority job applicants and businesses.
• A comprehensive health care, welfare and severance agreement for the existing 480 Wilshire Grand employees. The developer also agreed to a collective bargaining agreement that is applicable to the new hotel.
There are also some redundancies in the city’s business tax code that need to be addressed. That is why I championed the ordinance that provides a business tax exemption on certain mutual funds. The city created a redundant tax that put us at a disadvantage and created a disincentive for mutual funds to operate in our city. The ordinance eliminates the tax on mutual funds over a three-year period to ease the impact on the general fund and was implemented this year.
Policies that might sound good on the surface could come back to haunt us. When the city implements policy changes, we often fall short simply because we fail to do the necessary postanalysis to determine if the goals we set out to accomplish were met. We need a cohesive strategy that puts job creation and economic development above all else, supports our local businesses and changes the way people see our city. We also need a clear metric for determining our success.
We are currently working on comprehensive business tax reform; as a city, we need to create tax incentives that attract investment in a strategic manner and support existing and new businesses while ensuring that they are linked to job creation. The key to this is a measured, systematic and clear approach that levels the playing field, and leaves no one behind.
Jan Perry is a member of the Los Angeles City Council, representing the Ninth District. She is a candidate for mayor in next year’s election.