May 5, 2004 - From the April, 2003 issue

Wendy Greuel Appears Tough Enough To Champion And Secure City Of L.A. Business Tax Reforms

The city of Los Angeles is dogged with a tax structure that is particularly unfriendly to businesses. To address the issue, the City Council recently convened the Business Tax Ad Hoc Committee, chaired by Councilwoman Wendy Greuel. MIR is pleased to present a recent address by Wendy Greuel to the Los Angeles Area Chamber of Commerce in which she discussed the efforts of the Businees Tax Ad Hoc Committee, including the recent adoption of a single category filing for city businesses.


Wendy Greuel

I am honored to be here today and I have to credit the Chamber for helping me become a City Councilmember. Some of you may remember when I was running a year ago that there were a lot of naysayers who said I couldn't do it. But, many of you in this room supported me and the Chamber endorsed me.

During the whole campaign, I wondered "what are they going to get me on?" You know, they go back through your whole life-what have I done wrong, where have I been quoted and so forth-and they hit me on two things. The first target was the fact that I worked for Dreamworks and that the company was looking at a site at Playa Vista. The other target was that I was endorsed by the L.A. Area Chamber of Commerce and the CCA. Can you believe that? Their claim was that I was a pawn of the downtown business community. And I have to say that I am standing here because you stood with me.

I care very deeply about the business community. My grandfather started a building supply trucking company that has been in North Hollywood for sixty years. The years I spent driving a truck and operating a forklift have provided the foundation for why I am standing before you today and why I've been a strong advocate for business tax reform in Los Angeles.

When I went to Dreamworks, we obviously looked at Playa Vista, but we also had a facility in Glendale. We ended up choosing Glendale as a headquarters for three reasons. One, we were stealing animators from Disney and Warner Brothers and they lived in the Glendale area. Two, there is no business tax in the city of Glendale. And, three, we could build a facility for 1, 000 employees in fourteen weeks from start to finish. Now, how many of you think that happens in the city of Los Angeles? It just doesn't.

So we need to look at not only being business tax friendly, but also look at our planning and land use. As George Kieffer mentioned, last month I was appointed as chair of the Business Tax Ad Hoc Committee. There were a lot of individuals on the City Council who said, "why create a separate committee?" I have to thank the members of the BTAC, the Chamber and VICA who really pushed to have the Ad Hoc Committee created. We need to take the lead and demonstrate that business tax reform is important. The committee was created one month ago and we have had two meetings so far. And, believe it, we now have meaningful tax reform.

We don't need to tell all of you that we've been rated one of the least business-friendly cities-Larry Kosmont's studies have clarified this. However, allow me to illustrate exactly how the city fails to ingratiate itself with the business community. Just a few months ago in November, the city of Los Angeles sent out a letter to businesses relative to the passage of AB63. If you are not familiar with it, state legislators passed a bill that allows any municipality in the state of California to contact individual businesses that have paid state taxes and haven't paid local taxes.

Now, there was a problem with the way in which the city acted on the information provided by the state. The information did not detail the type of business and the kind of income generated in gross receipts for the year. So, just a few days after the vote on secession, the city sent out to 150,000 people in the city of Los Angeles a letter saying you owe taxes and we're going to charge you a 40% penalty and interest over the last two years. It turns out that the majority of people who received these letters were maids and artists-not the businesses that they are really trying to target. That kind of action sends a strong message that we weren't business friendly. I've been working hard to change that. To make a long story short, we introduced a couple of motions and we have now changed the way the city responds to AB63.

Two weeks ago, I got a call from one of my constituents who received three of these letters on one day. The letters said that she owes the city a total of five cents in unpaid taxes. Of course, it cost thirty-seven cents to put each of those in the mail. And, how much time did it take us to send those three letters to collect five cents. Again, this is emblematic of the problems we have within the city and where our focus should be.

There are many people in this city who say meaningful reform can't be done, that we're so dependent upon that gross receipts tax, which we are. The city receives $370 million from it. However, we can look at alternatives that make sense and do not impact the city's fiscal health. MBIA Muni Services is doing a study on business tax reform in Los Angeles and we should have a final report to distribute in early July.

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Since the formation of the Business Tax Ad Hoc Committee last month, we have adopted a single category filing in the city of Los Angeles. People said it couldn't be done, but we did it. Originally, opponents of the motion wanted a $5 million threshold or a $10 million threshold for the single category filing. They were worried because it would cost $2.9 million from the general fund, which, in a $4.5 billion budget, is a very small amount. But, it sends a clear message to the businesses of Los Angles that we do mean business. We believe that with tough economic times, we should not thwart business reform. Again, businesses are vital to the future of this city-if we send business out of Los Angeles, we send money away from the city of Los Angeles as well.

And, it's not just about the dollars and cents of businesses, it's about our employees, job creation, our children and their future. We can no longer pit the business community against the rest of our issues within the City of Los Angeles-the two are not mutually exclusive.

Our major speaker today is John Garamendi. He is going talk about the sharp rise in workers' compensation costs, which we have heard about year upon year upon year and that we have not yet addressed. The significant rise in costs is strangling our medium and small businesses here in the city of Los Angeles. We all agree that we have to provide some benefits to people who are legitimately hurt at work. But if you look at California, we have the highest workers' comp costs in the nation accompanied by the lowest amount of benefits. We need real meaningful reform and I know John is going to talk about that today.

Workers' comp is not just an issue for the business community, it's an issue for the city of Los Angeles. In our research, we found that between 1996 and 1997 the city spent $77 million on workers' comp. Last year, we spent $115 million. And, this year we expect it to go up to $135 million. That's directly out of our general fund and takes away from public safety, street repaving, and all of the other things that people care about in our neighborhoods.

As chair of the Business Tax Ad Hoc Committee, I'm willing not only to push through single category filing, which will go to the city council on Tuesday, but to encourage the review of all of the taxes that impact businesses throughout the city.

Talking about business tax reform is not new. What is new is a change in the way we as City Councilmembers need to look at business tax reform. I am pleased you asked me to speak to you today and I wanted to be able to be here to send a message-L.A. is open for business. Our Ad Hoc Committee on Business Tax Reform is about action, not about study. It's about getting something done.

So, I wanted to share with you our accomplishment this week, we hope to get it passed through City Council. The Mayor has been very supportive of our efforts and testified to help in pushing this through. We stood in this room in August of last year saying we're going to do business tax reform. It took us a little longer, but now we have this committee-the mechanics are in place. It is going to happen in our lifetime-perhaps not before my child is born in June, but it will happen in L.A. Once again, I would like to say thank you for having me and together we are going to make Los Angeles a business friendly city.

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