Subsidies for Developers: The Same Old Tired Strategy?

By EGP Editorial

Is it prudent for the City of Los Angeles to offer tax incentives to project developers who say they can’t consider a project without subsidies?

Especially at the same time they are considering asking voters to pass a $4 billion sales tax measure to help pay for sidewalk and road repairs?

We won’t even get into whether it is fair that some big businesses are allowed to keep the tax revenue their projects generate, while other businesses, some smaller, some not, manage to complete and expand their projects without a gift of city funds,

At issue for us is city of L.A. officials considering millions of dollars is subsidies for downtown developers when the city if facing a possible $240 million budget deficit, and they are considering asking regular Angelenos to raise the sales tax on product they buy. We are constantly told that without large tax breaks and incentives businesses will not come to Los Angeles, and those that are here will not stay. Without tax breaks, they will not create invest in growth or create new jobs.

That was the same thing we were told about the importance of shoring up Wall Street, which today has rebounded from Great Recession, mostly by cutting jobs and the size of paychecks.

Have our elected officials grown so out of touch with voters that they think they will agree to tax themselves at a higher rate and not see how lopsided the subsidies are?

The “Time for Action” report released Wednesday by the Los Angeles 2020 Commission  proposes a number of steps and structural changes aimed at putting the city on solid financial ground, and does not solely rely on more tax breaks.

We hope the City Council will take a close look at the report and find more creative approaches to improve the local economy, and not just fall back on the same old strategies.

Mayor Eric Garcetti will deliver the Annual State of the City Address today, and we hope he will deliver a more inspired view on how the city can move forward to benefit all its residents.

 

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April 10, 2014  Copyright © 2012 Eastern Group Publications, Inc.

Comments

One Response to “Subsidies for Developers: The Same Old Tired Strategy?”

  1. Michael Banner on April 13th, 2014 9:53 am

    Does Local Tax Policy Matter?
    During the last decade, in the City of Los Angeles (COLA), businesses have paid more than $4.3 BILLION in taxes into the City’s General Fund. At the same time, most economic research indicates that the number of net new jobs in the COLA has been virtually nonexistent. For many years, the metric of 1 job for every $35,000 of support was used by City Hall administrators to benchmark economic development performance. Based on the City’s own metric (1job/$35,000) would it have been reasonable to expect at least 122,000 people to be newly employed?

    Clearly, in the COLA, we struggle to attract new employers or retain our promising growth companies. We constantly battle the perception that we are NOT friendly to all businesses.

    I have volunteered as a member of the Business Tax Advisory Tax Committee since its inception and have been a local economic development practitioner for the past 25years. This is my call to action for any business owner that operates the City of Los Angeles and is subject to paying the Gross Receipts Tax. I urge you to join me in supporting Mayor Garcetti’s efforts to pass the Business Tax Advisory Committee recommendations to gradually phase out the City’s antiquated Gross Receipts Tax.

    Here is a simple example of the problem with our local tax policy.

    The Los Angeles Economic Development Corporation (LAEDC) continues to report that the business services sector is continuing to rebound and is adding jobs in the regional economy; however, if you are a professional services firm, located in the COLA, you pay one of the highest business tax rates in America $5.07/$1,000. I believe most reasonable people would think this does not make common sense. If our City is struggling to create jobs and we have one broad based sector that is showing growth, why is it taxed at your highest rate?

    Please help Mayor Garcetti get our City Back to Basics. -…

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