City Said to Be Impeding Businesses : Government: Report finds that piecemeal approach tends to hinder economic development. But a proposed solution of consolidating agencies draws criticism.

For the first time since the recession began more than two years ago, Los Angeles city officials have formally acknowledged that City Hall has tended to impede--rather than promote--economic development.

“Economic development concerns are addressed in a piecemeal manner, are often reactive and are administered ineffectually,” begins a report by William R. McCarley, the city’s chief legislative analyst.

In so many words, McCarley’s report says that the city’s $550-million approach to economic development has been in many ways a failure--a sentiment that has been echoing through the boardrooms of businesses big and small for some time and is becoming a major issue in the mayor’s race.

The report, released at a hearing of the City Council’s Community and Economic Development Committee, came in response to motions by several council members over the past few years to review the city’s role in fostering economic development. The committee chairman, Councilman Mark Ridley-Thomas, has also called for a series of hearings around the city to allow the public to make recommendations on economic development policy.

Though the criticisms expressed in McCarley’s report were readily accepted Wednesday by elected officials and business representatives, the analyst’s proposed solution, combining several city agencies into one super-agency, aroused little enthusiasm.

“There is no sense in taking two huge social service agencies and creating one huge social service agency to try and solve the economic development problem,” said Craig Lawson, vice president of C. W. Cook, a land planning and civil engineering firm.

McCarley proposed merging the Community Redevelopment Agency, the Community Development Department and several economic development programs administered by the mayor’s office into a single department of Community and Economic Development.

City Councilman Michael Woo, a candidate for mayor, spoke out against the proposal, even though it was Woo last month who asked the legislative analyst’s office to look into the idea of creating a single new department to spearhead economic development. Woo said Wednesday that combining the CRA and the Community Development Department would run the risk of “bloating” a bureaucracy already under fire for its lack of responsiveness to business needs.

Woo called instead for the creation of an office that would streamline cumbersome permitting and regulatory procedures that often are cited by businesses moving out of the area.

The office, he said, should come up with a marketing strategy to compete with other states.