California’s Economic Summit: A Question of Will & Leadership

California is obviously at a cross­roads. We’ve lost over 800,000 jobs during the last few years. The jobs we are creating tend to be lower paying than the ones we are losing. Other states are openly and successfully competing for our businesses. Meanwhile, our population is steadily growing. 

The fastest growing age segments are the very young — primarily Hispanic, Asian and African Americans, and the “old” — who are predominantly white. Immigrants seem to be the popular scapegoat, while in cities like L.A., voting and residential demographics are more disparate than ever. Thus, the clever politician in the L.A. mayoral contest must appeal to the hearts and minds of the white voters to win the right to govern the destiny of residents, two-thirds of whose origins are in the Third World.

In order to create new jobs, we must encourage economic development. The word “development” is especially important because, during the last 15 years, it has been viewed with contempt in California. Yet, development does not just mean high-rises and bulldozers; it also means housing, hospitals, retail centers, libraries, infrastructure, and yes, JOBS. It is a neutral phenomenon which cannot go unplanned, but should not be stopped either; for, in doing so, our society stagnates and the ladder of opportunity becomes frozen in place. 

Have we planned well these last 15 years for the economic development needed for our growing population? Not really. We’ve not prepared for and funded an adequate physical or social infrastructure at the Stale level and, all too often, the politics of selfishness and exclusion have prevailed at the local level. We’ve devised a planning system which does not consider economic growth as part of its mission. 

So, today, despite our great climate, our vigorous and variegated work force, our excellent higher education system, and strong business and cultural infrastructure, we are struggling with high unemployment, serious underemployment, and the not unrelated diminution of revenues at all levels of government.

Do we need to fix it? Will it heal itself? Maybe, if you believe the optimists. But it took years for our decline to occur, and it may take years for the economy to become restructured, and we don’t know if the restructuring will be good or bad. In the meantime, the human and economic toll suffered by our citizens and our governments alike will be truly painful. 

What can we do to remedy all this? Here are my suggestions: 

1)    Fix our Attitude Positively toward Private Capital Investment. We must recognize that there is a worldwide shortage of capital, and we must compete for it by creating conditions which attract it. This affects everything from new tax impositions on business to restrictive banking regulations. And please don’t solve the State’s current budget problem by passing the burden on to cities — they’ll just tax business more — and that’s no solution. 

2)    Fix Workers’ Compensation. As Chair of the L.A. Chamber of Commerce, I hear it everywhere, but particularly from small businesses. We must get these premiums down. 

3)    Develop a State Priority for Public Investment. Our policy must accept our population growth and prepare for it so that our quality of life is not destroyed. We simply can’t ignore population growth and hide it under the bed or in the ghettos and barrios. We need long-term financing for infrastructure development which is not exclusively dependent on bond revenues. We need also to pursue potential infrastructure funding from the administration in Washington, D.C.

4)    We Need to Fix our Water Policy Crisis. We have a political/distribution problem, not a supply problem. We need to protect our environment, but not to the exclusion of our massive urban population, particularly in So. California. We need a balanced and fair program. The appointing authorities must remember that urban populations are greatly affected by our water policy and they — particularly those representing large minority populations in cities — need to be represented on such bodies at the State Water Resources Board. 

5)    We Need to Change Tactics on Air Quality. For over a decade, we’ve beaten the living daylights out of stationary sources of pollution. But we’ve had enough of command and control techniques that have increasingly questionable actual net benefit to society. The real air fight is in Washington. D.C. — our Congressional delegation and State legislators must get the focus on mobile sources — i.e., the Automobile and mass-transit modes. We need to convince Congress and the EPA that the Nation can’t save Detroit from itself, at the cost of wounding California. 

While we’re at it, let’s stop relying on behavior modification techniques like Reg. 15, and instead get every old “polluting” clunker off the road by giving economic, AVR and VMT credit for doing so. 

6)    Let’s Get Our Environmental Priorities in Order. There are simply too many overlapping agencies, too many agendas. We need to clarify each agency’s role and eliminate conflicting and confusing jurisdictions. Also, we’ve got to figure out how to re-use critical parcels of urban land now unusable because of environmental litigation, statutes, and unending bureaucratic requirements for “clean-up.”

7)    Let’s Develop a Joint HUD­State Urban Policy. We cannot let our cities, especially in the South, rot. As a starter, we should not abandon State-created redevelopment agencies or gobble up all tax increment funds to solve a short-term budget crisis. If the Federal government must downsize defense and aerospace spending, we lose, so let’s be first in line to work with HUD for housing and community development strategies. As one example, let’s make our State Enterprise Zones co-extensive with federal designations. 

8)    Let’s Figure Out Where Our Transportation is Going and Why. Thank goodness, the voters approved Prop. 111. We have some money for at least one major State problem. When I look at priorities for our newly-formed MTA, however, I become confused about its mission. Is it — (1) to provide greater mobility between and within existing population and job centers? (2) to become a stimulus for new economic growth in transportation corridors? or (3) to create new manufacturing jobs? These are all important goals, but I’d be happy if our transportation agency did one of these right. I suggest strongly that the MTA focus on transportation while allowing the cities and the private sector to create the development and job opportunities. 

And with respect to transportation planning, the roles of SCAG, AQMD, and transportation agencies need to be clarified to avoid potential conflicts. From my perspective, the transportation agencies must clearly have the lead role. 

9)    Deal with the Development Maze. I ask each of you to buckle your seat belts and become a developer for a moment — the ride ahead has lots of spills and chills. 

First, you must figure out the local planning and zoning scheme. In the City of L.A., this requires a lawyer, a lobbyist, lots of checks for City Councilmembers (because every case requires their approval), and a psychiatrist; 

Second, you must get through the CEQA process. Remember that CEQA processing suspends and makes almost meaningless the so-called 1-year permits streamlining law — in L.A. 4-5 years is common for EIR processing:

Third, if you’re lucky and Planning staff recommends approval of your project, you then get the privilege of paying for “mitigation” measures such as housing, child care, schools, roads, highways, community facilities and whatever social problem local Government wants to solve, but can’t pay for, 

Fourth, you must establish State mitigation monitoring and your project must be bound to conform with the Air Quality Plan, the Congestion Management Program (whatever that means), and anything Sacramento can dream up; 

Fifth, if you are still around and get approved, you can then be sued by anyone for not doing perfectly any one of the aforementioned; and 

Sixth, if you survive and build, you pay staggering fees and charges for intense bureaucratic scrutiny of your construction activity. 

No wonder our construction industry is in a depression. This is not a system in which either the Hoover Dam or the Suez Canal could have been built. Yet our infrastructure needs are almost as great. Moreover, the maze applied to low-income housing projects applies as well to shopping centers and high rises. Given the acute shortage of capital for real estate investment, this system is anti­thetical to stimulating economic growth. 

How to Fix This 

First, to increase the availability of capital, support efforts to ease the regulatory burdens on lending institutions. Also, support restoration of passive income tax benefits for multi­family residential construction. 

Second, on the regulatory front, start with the Governor’s recent recommendation from the Growth Management Council.

Finally, look at CEQA and do at least two things: (1) reaffirm that it is an informational document, not the decision-making document; and (2) cleanup the legalistic regulations and guidelines and figure out a way to make the process begin and end totally within 18 months. 

The last issue, State budget reform, will have to wait for another day. We have the resources to revive the greatness of this State… All we need is the will and the leadership.