L.A. City’s Business Team Confronts Municipal Competition Head-On

Lesa let’s pick up with an interview we did in November with Deputy Mayor Rocky Delgadillo, in which he talked about his six-point plan for the City and its three overarching goals—one, to establish Los Angeles as an information age city for the 21st Century; two, to identify Los Angeles as an international trade mecca; and three, to become the model city for revitalization of the urban core. How are we doing in achieving these goals and what is the Business Team’s role in taking us towards those goals?

We've made phenomenal strides in achieving these goals. The Mayor's trip to Asia is a milestone which has generated a large amount of business activity, both public and private.

And people are already talking about what is literally a new California Gold Rush, to the Digital Coast. It's centered in Los Angeles, and the gold is technology. Multimedia companies are starting or moving here and are flourishing in the City of Los Angeles—companies such as Panasonic Broadcast & Television Systems, which just moved the headquarters of its largest unit from Secaucus, New Jersey to North Hollywood primarily because of what's happening in this City and our access to Asia. We are doing a phenomenal job in pushing this forward.

Playing off Rocky's Six-Point Plan football metaphor, we on the Business Team are the halfbacks and the fullbacks pushing forward every day. We are doing everything from policy to shear pavement-pounding, knocking on the doors of businesses and making cold calls saying, 'Have you looked at Los Angeles, lately? Great things are happening here from a social, political, and financial point of view. You need to be here.' 

Over the past several years, the Glendales, Burbanks, Pasadenas, Culver Citys and Santa Monicas of the region have all claimed to be outperforming Los Angeles in attracting and retaining businesses. What are your comments on the claims that these cities are cleaning L.A.'s clock in terms of attracting and retaining new businesses?

They must be referring to a grandfather clock, because right now everything is digital!

I have a press release on my desk saying Digital Facades is moving from Santa Monica back into the City of Los Angeles specifically because, according to the company's CEO John Lin, "Mayor Riordan's commitment to the digital industry and the dedication of his L.A. Business Team and Ruth Galanter's office to servicing our needs make L.A. an attractive partner."

Incidentally, sibling rivalry can be a good thing at times. But we also cooperate with our neighbors on other matters, particularly larger regional policy efforts.

Importantly, Burbank and Glendale, to a certain extent, are almost over built. Their vacancy rates have dropped dramatically, and that's a benefit to the City of Los Angeles. People who might not have considered L.A. before are now doing so simply because of the space issue.

Something even more substantial runs on top of this: things have changed in the City of L.A. The attitude of government has changed. And the process of dealing with government has changed dramatically—from Building & Safety to the fact that Mayor Riordan will call a CEO to say, What can we do to get you to move to L.A.?

In our March issue of TPR, Jeanne Armstrong, who has led the City of Glendale's Redevelopment Agency, said the following, “We’re still getting a good share of businesses that want to relocate within the L.A. Region. The reason is we provide a traditional downtown setting where you can walk to a lot of services and where you can live close to your job. In some areas of Los Angeles, that's just not possible. With the greening of America and the retreat to a more convenient way of life, we offer the ability to live and work in a more attractive setting. Some other locations just can’t compete with us." That was in reference to the City of Los Angeles.

We are attracting plenty of service jobs to our Downtown center. But some areas—high technology, multimedia, entertainment, certain types of manufacturing—neither want nor to require that type of atmosphere. Those that do are creating it themselves, such as was the case with Capitol Records and other people in the Hollywood area with the Business Improvement District. 

So, corporations are not moving outside of Los Angeles to find the environment they want. Instead, they' re organizing themselves and investing in their communities investing in their own property to create that type of atmosphere that they're looking for. 

Lesa, tell us about the incentives the City must use to entice companies to relocate here, especially given the coming Empowerment Zone and the Enterprise Zones. And are the Zones going to be able to compensate for our higher-than-regional-average business taxes?

First, the Federal Empowerment Zones currently in the Valley, Downtown and South Los Angeles areas are a big plus to manufacturing-based businesses. Manufacturing is a primary focus of our attention effort here in Los Angeles, specifically because of the multiplier effect and wage effects. Corporate headquarters are vitally important, too—and we are targeting them as well.

To answer the second part of your question, we have taken steps on top of the Empowerment Zone that should address the business tax issue. One major item, that the Mayor recently passed is the City Tax Free Zone, which overlays the Federal Empowerment Zone, meaning, if your company moves into an Empowerment Zone, you will not only get a Federal Tax Employee Credit (assuming an employee lives within the zone), but you would also not have to pay L.A. City taxes for 5 years.

And if the employee doesn't live in the Zone, do you get a benefit? 

You don't get the federal tax credit at this point. But that may change. 

Let's say you were sitting down with the Real Estate Vice President of on entertainment company—representing an industry I understand you are targeting increasingly—who is considering relocating from out-of-state to the Downtown Empowerment Zone. What would the City be able to put on the table to entice them to relocate from out-of-state? 

First, we have the relatively new Multimedia Industrial use category, so any costs that would have previously gone into a zoning change for a particular piece of property will no longer be an issue.

Let's say, for instance, that a media company is interested in a great, old, funky warehouse building in the Zone. Previously the new use would have been classified as office space. But that's no longer the case given the new category. As a result, thousands of dollars of mitigation costs to upgrade that building would no longer be triggered. Uses in this category are now treated as though they are industrial companies moving into industrial sites, thereby avoiding a lot of red tape and entitlement work typically associated with the change of use.

Secondly, land will be cheaper in Downtown Los Angeles than in Glendale and Burbank. And that's the bottom line. Also, as we talked about, you might be eligible to take a $3000 Federal Tax Credit for any employees residing in the Zone. On top of that, the Tax-Free Zone means no City taxes for five years.

Electricity deregulation is also important, and DWP's rates for most office needs are going to be in line if not better than what you're going to find in other places.

Also, if you are interested in purchasing a building and want to do some upgrades, we have Industrial Development Bonds that we could push through for you faster perhaps than any other city could. Every city has access to Industrial Development Bonds from the State, but we happen to do more of them. And because we do more of them, we're better at administering them, getting them going and getting cash on hand for you.

In addition, if you want job training programs, the Mayor is extremely committed to education—and even more so to new media education. The Mayor consistently talks about how there are jobs here that cannot be filled because we don't have the skilled workers. He's working with the Private Industry Council—with Donna Tuttle and Debbie Beavers and others—along with JTPA and ETP, to ensure that we can get training for your employees, and further, train the employees that you have for the positions that you're creating. Indeed, I think we are leaders in customized training programs.

Also, access to capital—financing through an IDB or, if you're in the Empowerment Zone, you now have access to the Community Development Bank for gap financing. This could prove very helpful if you're moving from out of State and you're big.

Can you give us an overview of what's happening in Hollywood and North Hollywood—is there some energy observable there in terms of Economic Development?

Absolutely. It's good news for the City of Los Angeles, but bad news for Glendale and Burbank. More and more companies, because of very low vacancy rate in Glendale and Burbank and the accompanying increase in land prices, are seeing North Hollywood and Hollywood as extremely viable. 

These areas are attractive to a lot of companies, as well, because of the Hollywood renaissance—the investment in infrastructure, the success of the Hollywood Boulevard Business Improvement District, and the commitment to build and develop from the likes of Pacific Theaters, TrizecHahn and Regent Properties. All this activity has set off a domino effect of people interested in making their home in Hollywood. In the entertainment industry it’s extremely palpable. You can see a real difference on the street.

Redevelopment plays a critical role in Economic Development efforts in many of the Region's smaller cities where the city council is also the redevelopment board. Compare that to the situation in the City of Los Angeles. What is the Business Team's relationship with the CRA and how could we better coordinate our efforts among agencies in L.A. to accomplish the goals you've laid out here?

First, our relationship with the people at CRA and CDD is a partnership that we believe in and are continuing to try to strengthen. A lot of the efforts that are underway in Hollywood, for example, would not have been done without the partnership of the CRA, the MTA and the Council office. Each one of those entities has the ability, both legislatively and financially, to add something to the pot. When this is combined with our efforts, it makes for a great deal for someone who is qualified. We've seen this process work in other areas throughout the City—Hollywood just happens to be one of the best examples, given all the confluence of activities happening there. 

On the other side, economic development in general has changed. For many years it used to be incentive based—'Here's an incentive, CEO Johnson. Go through the paperwork and if you have any questions, you can call this 800-number, and somebody will walk you through it. It's nice to meet you, and we're glad you're here. Bye-bye.' 

But the Business Team, which is more customer service-oriented, is there from the start through opening day. You deal with only one face who, from the very beginning, says this is an incentive for you, this is how it applies, this is what you must do, and this is what I can do to make sure it gets done and is applicable to you in the shortest amount of time. 

So, there is a difference. The council people in Glendale and Burbank, given their dual roles, can’t be out there and on call for CEOs and companies 24 hours a day. It’s not physically possible—you must run a city and you  have to deal with legislative matters. A CEO that's moving 150 or 500 employees needs a great deal of attention and support from a city when making the decision to relocate or expand. 

One of the big challenges facing the Business Team and the L.A. Economic Development Corporation has been selling a regional agenda to the L.A. City Council. Why should they entertain the notion of a regional agenda? Why is it important for the work you're pursuing? 

Los Angeles is perceived as a region, not as the multitude of municipalities that we in government know exist. When disaster strikes—and when success strikes—the effect is regional. Let's take the Oscars. People are not looking at Downtown Los Angeles, they're looking at Los Angeles—which incorporates Hollywood, Beverly Hills, Burbank, and the rest of the metropolitan area. 

So, the perception issue is a primary reason to make sure that efforts are unified—not to mention the fact that we share infrastructure. The port, the airport, our transit system: these all represent vital shared infrastructure. 

If you don't have a regional approach, some of the extremities will suffer. If that happens, then we won't be as strong as a whole.