March 1, 2010 - From the February, 2010 issue

Bud Ovrom Now Leads L.A. Building and Safety; Advocates ‘12-to-2' Plan

The former head of CRA/LA and a former deputy mayor for business development, Bud Ovrom has had a distinguished career in brick and mortar economic development in metropolitan Los Angeles. With the hiring of Austin Beutner as "jobs czar" for the Villaraigosa Administration, Ovrom becomes the general manager of the Department of Building and Safety. The following TPR interview discusses his views on the "12-to-2" priority and on building economic stability in L.A.


Bud Ovrom

Before assuming your new position with the city of L.A. as the general manager of the Department of Building and Safety, you served as Mayor Villaraigosa's deputy mayor of business development. Regarding the latter, please reflect on your legacy.

I thoroughly enjoyed working for Mayor Villaraigosa. I have been in this business for 40 years; I have worked for more mayors and council members then I can possibly count, and he is as pro-economic-development as anybody I have ever worked with.

People will say, "Wait a minute he's a Democrat and he's progressive and he's liberal and he's from the labor movement. How can he possibly be the most pro-business person you've ever worked for?" He's a progressive that really gets it. He knows that you can't pay for better police, better schools, better libraries, better parks, without people having jobs, without people having homes, and without the city having tax revenues. He was just a tremendous person to work for, and I feel great about the four years I spent there.

He started the administration saying he wanted to make the construction crane the official bird of the city. In his first four years we had $17 billion worth of new construction-the best four years in the history of the city for new construction by a large margin, 30 percent higher than the next closet four years. If our goal during that first term was to have construction cranes as far as the eye can see, it was a very fulfilling time.

Now, through macroeconomic conditions beyond our control, the economic climate has totally changed and the crane has gone into hibernation. The second term is going to be very different than the first term, but the first term was the biggest building boom in the history of the city and it was a very, very exciting time to work for Mayor Villaraigosa.

Take one step even further back to your tenure at the CRA/LA, especially given the state's plans to take redevelopment funds.

I also enjoyed my time with the CRA/LA because what we did there was more organizational. We took a downtown-centric redevelopment agency and created seven regional redevelopment agencies. Part of me would have liked to stay there longer to see that through because we made some organizational changes for the CRA/LA that will better position it to deal with whatever the future might hold.

But right now I'm very concerned about the future of redevelopment in general, not just the CRA/LA. CRAs are going to experience a lot of challenges. Redevelopment professionals need to be thinking about new tools for redevelopment other than traditional tax increment financing. Traditional tax increment financing is in bad shape right now and I don't see it turning around. We've had ups and downs before, but there's no down that compares to what cities are going through now, particularly for redevelopment agencies. All redevelopment agencies face a real challenge. Smart redevelopment directors need to start thinking of new and different tools for doing economic development because tax increment financing is not going to recover for decades, if ever.

Returning to present challenges, while there were construction jobs during your first term, the city continued to bleed jobs-and the current recession has exasperated job losses. Mayor Villaraigosa, has now decided to create the position of "jobs czar," filling the position with Austin Beutner. Given the current economic environment, the weakness of the CRA/LA, and the absence of strong financial institutions who are willing to lend, what can be done by Austin Beutner to attract and retain jobs in the city of L.A.?

That's a big challenge. The mayor bringing in Austin Beutner is a great idea. I am, with over 40 years of experience, an economic development guy who does economic development through bricks and mortars, through building things. From my new window I can look down and see the convention center hotel, which was probably the flagship of our first term of bricks and mortars economic development. The construction of L.A. Live not only created a lot of construction jobs while it was under construction, it also created 3,100 permanent jobs after it opened. You can say the same thing about 2000 Avenue of the Stars, where Creative Artists went. You can say the same thing about the W Hotel in Hollywood. All of these bricks and mortar projects created construction jobs but they also house permanent jobs.

Now, we're bleeding jobs from the companies that are already here and have always been here. It's hard to talk to any business leader in town, no matter what his company is, that hasn't laid off employees in the last two years. I don't care if it's law firms, architecture firms, insurance firms, financial institutions, you name it, everybody is bleeding jobs. That is a whole different skill set and frankly not the kind of thing that I would have been an expert at, so I think it was a brilliant stroke by the mayor to bring in a person from the private sector like Austin Beutner to deal with that aspect of economic development. I will continue to work on bricks and mortar but Austin Beutner will add a whole different aspect to economic development that I couldn't possibly bring to the table.

As the new GM of the city of LA's Building and Safety Department, what are your top priorities?

The mayor gave me a mandate to work closely with Gail Goldberg to make development reform, what we call "12-to-2," real. The mayor and Eric Garcetti announced "12-to-2" with great fanfare probably close to two years ago and the development community hasn't seen the tangible results of that yet. With development activity down the pressure isn't quite the same, but what the mayor wants Gail and I to do is take development reform to a whole new level. He really believes that we can make the city of L.A. the gold standard for big city processing of development. Given our starting point, that's a pretty big challenge, but I share that excitement. Building and Safety and Planning working together can make meaningful, sustainable development reform.

A distinction I would make here: I just got through saying the first term was the biggest building boom in the history of the city, so we must have been doing something right if we had $17 billion worth of construction in four years. But we were in a big building boom and we did it on an almost ad hoc basis. I had the business team basically become a real estate development team-an ombudsman, an advocate, an expediter-for projects that were somewhere caught in the bureaucracy to make sure that they got through to the other end.

We didn't institutionalize that. That is Gail's, and my, challenge now. We have a lull in development activity, and if there is a silver lining in this terrible, terrible cloud it is that we can use this time to make substantive reforms in the process so it doesn't take a deputy mayor using the business team as a bunch of ombudsmen.

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What might our readers expect in way of department and program reforms? And, what ought the public look to as benchmarks of success?

They can expect greater certainty and better timeliness. A lot of developers would tell you they'd rather have a quick no then four years to get to yes, because in four years to get to yes the market can have gone through two cycles. With L.A. there was always this uncertainty that I could spend two years in the process and have no idea what was going to come out at the other end.

We need greater timeliness. We need greater certainty. We need clearer codes, we have a lot of projects that would go through the process and would have conditions imposed upon them that said things like, "you should do this to the satisfaction of the fire marshal," or, "you should that to the satisfaction of the city engineer." Well, what does that mean? What if one fire marshal has a different satisfaction level than a different fire marshal? We need to put more clarity in our conditions so that people know what they're getting into. A developer can know on day one, I'm going to be required to do x, y, and z, that's going to cost me this much, so I can work it into my pro forma and then decide if I can do the deal or not do the deal. But I can't spend two years waiting to see if something meets the satisfaction of somebody that doesn't have a codified standard.

Greater timeliness and greater certainty, the mayor really expects us to deliver that. We're in a construction lull right now, but I'd like to think that by 2011 things will be turning up and we better be ready to rock and roll by 2011.

The budget deficits that Los Angeles and other jurisdictions are coping with have forced staff furloughs and proposals to eliminate personnel from select departments. Does Building and Safety and Planning, for example, now have the capacity to successfully meet the mayor's expectations?

That is going to be a challenge. We can't fool ourselves about that. Frankly, I am more concerned about Gail's shop than my shop because planning, particularly real planning, is a general fund expense. Case planning, case processing, and building inspections are paid for by developer fees. The Building and Safety Department is set up as an enterprise fund the same way as DWP and LAWA. We live and die by our own revenues. Planning, general plans, and community plans are a general fund expense. When planning has to compete in the general fund against police, fire, paramedics, libraries, and parks, that's a tough gig.

That said, Building and Safety has it's own financial crisis, although independent of the general fund. Building and Safety and its enterprise fund live by the fees the developers pay. If construction is down by 50 percent, our revenues are down by 50 percent. Our revenues are down more than the general fund revenues even though we're separate from the general fund.

What I have to do is work with our unions and work with our personnel system to see if we can develop a process where we have a flexible workforce to deal with a variable work load. With city civil service employment processes, the work force tends to be very stabilized. I need to work with our unions-I need to work with our personnel system-to see if we can develop a personnel system model that is more reflective of the workload so we can bring on more people when the workload goes up and have fewer people when the workload goes down, and not do it through the meat ax approach of layoffs and furloughs and early retirements.

There has to be a better system there.

Lastly, Glendale and Burbank, which have, for example, no gross receipts tax, are viewed as much more business friendly than the city of L.A. How might the city of L.A. overcome the stigma of being "business unfriendly"?

The mayor feels very strongly that we have to try. He sent three letters urging the city council to promote a second generation of business license tax reform. The Hahn administration, with the leadership of Eric Garcetti and Wendy Gruel, did the first generation of business license tax reform, reducing the business license tax by 15 percent based on higher revenues: as the revenues went up, the rate went down. That was possible because we were in a boom economy.

The mayor has said he wants that effort to have a second chapter. The council has formed a committee with the mayor's office and council representatives to work on a second generation of business license reform. The mayor said it must be revenue neutral, finding ways to make the taxes more equitable but to do it in such a way as to not be a net loss for the general fund. That is going to be very hard in a down economy. They're going to have to do that for the future, just like I say Gail and I can work on development reform-we can clean up our practices and procedure so that when development does come back we're better equipped to deal with it.

They need to be better equipped to deal with business licenses reform. The council expects to take 18 months on the study but is gearing up for the second chapter of business license reform for when the economy does start to come back. That will now be on Austin Beutner's side of the store, not mine.

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