The Urban Jungle : As Business Bogs Down, Can L.A. City Hall Clear a Path Through the Red Tape?

Say you’re an entrepreneur from out of town and you want to invest in the economic future of the city of Los Angeles. Maybe you’re thinking about relocating your widget business here from Cleveland, or buying into a local textile factory. And you’d like some friendly, official advice on land permits and small-business loans.

Who you gonna call?

Sorry, but there’s no “Ghostbusters” retort for that question.

City government has a vast bureaucracy purportedly dedicated to fostering business growth. But no single telephone on any of the more than 700 desks in the core of the city’s economic development system is ready to take your call. Plenty of lights are on at half a dozen or so concerned agencies, it’s true. Yet no one is home, waiting to guide you safely through the jungle of regulations and red tape that has made Los Angeles notorious as a hostile environment for doing business.

Welcome, instead, to economic development hell--the nation’s second-largest metropolis, where the gap between reality and rhetoric sometimes makes government a laughingstock in business circles.

Now, as the June 8 mayoral election approaches, talk of reforming the bureaucratic morass is reaching a new crescendo. Indeed, finding an effective way to channel scarce resources and rebuild the urban economic base has dominated political debate since last year’s riots.

Against the backdrop of a deep regional recession compounded by defense cutbacks and vanishing aerospace jobs, the task of encouraging business has never been so urgent. Yet the city’s economic development agencies remain impenetrable, convoluted, duplicative, wasteful and gridlocked to the budgetary tune of more than $550 million, critics contend.

“Somebody sooner or later has to say the emperor has no clothes on,” said William R. McCarley, the city’s chief legislative analyst.

In fact, it is McCarley’s office, the policy research arm of the City Council, that has taken up the challenge of spotlighting the threadbare state of the city’s imperial wardrobe.

In a November report, McCarley recommended consolidating three leading agencies--the Community Development Department, the Community Redevelopment Agency and the mayor’s Business and Economic Development Office--to achieve a common focus and impose accountability in the system.

The three agencies were created at different times, driven by the funding imperatives of an array of state and federal sources. And while their functions are far from identical, they overlap in several areas. All three administer small-business loans, for example, but impose different conditions in the process.

The result, McCarley wrote in November, is an uncoordinated, layered haze of bureaucracy that got by all right in an era of prosperity, but has “proven inadequate to meet the many challenges facing the city” during troubled times.

The call for administrative reform is an old idea, McCarley acknowledges, dating back to another of his reports in 1989. That study lamented that “no city agency has focused on the ‘big picture’ of economic development.”

But the charged atmosphere of the mayoral race appears to have enhanced the issue’s political appeal.

Councilman Mark Ridley-Thomas, who chairs the council’s economic development committee, held a series of public hearings at which citizens mostly griped about the nightmare of getting building, zoning, safety and environmental permits.

In late April, council President John Ferraro teamed up with Ridley-Thomas to propose that the city create a “comprehensive business marketing program” incorporating county and regional agencies.

The bureaucrats too are groping for solutions. An interagency task force chaired by the city’s planning director has been meeting regularly since last year and appears poised to propose a plan for restructuring the city’s economic apparatus sometime after the mayor’s race is over.

Just Wednesday, Parker Anderson, general manager of the Community Development Department, brought together officials from local, state, federal and private agencies with the aim of creating a “business assistance network” that would coordinate the disparate efforts at economic development and job growth in the region.

Anderson, however, is not keen on the idea of consolidating his department with other city economic agencies, arguing that each has different functions that “don’t easily line up.” But he agrees that changes need to be made to coordinate activities.

“There is a proliferation of players,” he said. “Everybody has enough resources to get themselves into trouble, but not enough to make an impact.”

McCarley, the chief legislative analyst, said his recommendation--consolidating the management of all economic activities under one agency--was designed to have a “catalytic” effect rather than impose a blueprint for administrative reform.

“We’re not asking for a new committee or another task force,” McCarley said. “We’re trying to get the policy-makers to confront the issues.”

Councilman Michael Woo, one of the two finalists in the mayoral race, not only supports the idea of restructuring the economic agencies, but claims credit for planting it (a contention McCarley dismisses).

Woo says he would appoint an “economic czar . . . or czarina,” possibly a deputy mayor, who would take charge.

“City government is disjointed and too disorganized,” Woo said. “There’s no central vision, no hand that coordinates the various departments. There has to be fundamental reform of the existing layers of bureaucracy.”

A press secretary for Woo’s opponent, businessman Richard Riordan, said the candidate was too busy to be interviewed on the topic. But Riordan has issued a 20-point economic plan that includes such measures as establishing an interdepartmental task force to streamline the permit process, creating an “office of business outreach” to market the city, and developing a municipal industrial policy that would encourage high-technology industries.

Although some of their ideas sound similar, Woo said he and Riordan differ on economic policy at a fundamental level. He lambasted what he termed Riordan’s “trickle-down” philosophy, saying he prefers a “trickle-up” approach.

But never mind which way the economics are supposedly trickling. Forgive and forget the apparent lack of engagement of substantive economic issues in the mayoral campaign. Doing business within city boundaries is still a harrowing experience, as entrepreneur Kevin Berg will attest.

Berg recently moved his small print shop, Minuteman Press, to a location in North Hollywood and found himself caught in a permit quagmire from which he is still struggling to escape.

It started when he made a naive attempt to rearrange some interior walls at his new shop. Berg says he fell prey to a small army of permit inspectors who gave him contradictory and sometimes patently absurd instructions on what he should do to satisfy an endless list of mysterious regulations.

For example, one inspector told Berg he had to enlarge to 36 inches the door of a closet he had filled with a set of shelves; even if no one really could enter the space, as a closet it had to allow wheelchair access.

The Alice-in-Wonderland solution came, after much agony, at the suggestion of another inspector: Build a floor under the shelves to make the space a cabinet, not a closet.

“No one person knows all the regulations, and I have to wrangle with three different departments,” Berg said. “They say I need machinery permits at $85 a pop, and not for my printing machines--they’re literally talking about toasters and microwave ovens.”

Frustrated as the weeks dragged on before he could reopen his business and resume its cash flow, Berg begged the inspectors for some sort of overall guide to the permitting process. They gave him a 300-page loose-leaf notebook with all the latest regulations.

No one told Berg about the one-stop construction permit counter on the fourth floor of City Hall--although it is not clear whether that would have made things any easier.

“This thing is frightening,” Berg said. “It’s an animal that’s growing out of control. And you have to bend the rules to get anything done.”

Berg is hardly the only one who has noticed.

Bob Caudill, a senior vice president for the commercial real estate company Grubb & Ellis, believes that reorganizing city agencies won’t solve anything until the regulatory process itself is streamlined.

“It takes six months to do a project here that would take three months elsewhere,” Caudill said. “It’s not so much the competence of the people involved, it’s the procedures they have to work under. They’re forced to make you take all kinds of unnecessary steps.”

The onerous burden of permitting procedures can make the difference in the decision whether to build a business within city limits or in one of Los Angeles’ more user-friendly suburbs.

“Sure there’s a one-step permit counter, but it doesn’t mean a thing because no one person understands the whole system,” said Daniel P. Garcia, senior vice president for real estate planning at Warner Bros. and chairman of the Los Angeles Chamber of Commerce.

“They’re not there to solve problems,” Garcia said. “They’re there to administer the regulations on their turf. There’s an utter lack of coordination, and you never know when you’re done.”

The same may be said about the idea of reforming the system.

Edward J. Avila, administrator of the Community Redevelopment Agency, said he and his colleagues on the new interagency task force have a plan for addressing the bureaucratic blight. A proposal to install a “central unit” to coordinate the economic development agencies will be placed before the City Council within a month, he said.

Along with Avila’s CRA and Anderson’s CDD, the third major city agency to fall under scrutiny for potential restructuring is the mayor’s Business and Economic Development Office.

Its director, Wilfred Marshall, said he wants to stay out of the fray.

“It’s a political decision, and I’m a political appointee, and I’m not going to be around much longer,” Marshall said. “Personally I think economic development ought to be left to the private sector. But it’s up to Mr. Woo or Mr. Riordan to make decisions on that.”

Adding to the mix, Planning Director Con Howe has expressed his desire to get more directly involved in economic policy-making, transcending his department’s traditional preoccupation with more mundane zoning matters.

“This really is the right time,” said Howe. “The council is ready to re-evaluate both the policy and the structure involved, and the role of the mayor’s office in economic development is truly up for grabs.”

Los Angeles may have made things more difficult for itself than necessary by neglecting the nitty-gritty of economic development strategy during the boom years, when it didn’t need to extend any particular effort to make the city attractive.

Hard times have changed that smug attitude.

“When you talk to business people, there’s an almost blinding rage about the problems with building businesses in the city,” said Jack Kyser, chief economist for the Economic Development Corp., a private agency that assists businesses in the county.

“Economic development is something you have to do in good times as well as in bad times,” Kyser said. “That’s something we forgot. Now it’s a scramble for resources, and we’re paying the price for our neglect.”

A Struggling City The bureaucratic confusion that has stymied Los Angeles’ efforts to develop and retain business has become more evident as deep recession continues to strangle the local economy.

More people are out of work.... Unemployment race, Los Angeles-Long Beach area: 9.4% Source: U.S. Dept. of Labor, Bureau of Labor Statistics

Businesses are selling less goods.... Sales tax collections, city of Los Angeles (in billions of dollars): $5.876 Source: State Board of Equalization

And office space is sitting empty. Office vacancy rate, city of Los Angeles: 19.8% Source: CB Commercial Real Estate Group

A Tangled Web Businesses that want to operate or expand in Los Angeles can end up dealing with almost a dozen city bureaucracies--not to mention county, state and federal agencies or special districts. Here is an overview of the city’s economic development superstructure: Community Development Department (CDD) * Mandate: Identify and eliminate urban blight; provide socio-economic programs for low- to moderate-income residents; rehabilitate community facilities; improve job opportunities for the unskilled and disadvantaged. * Budget: $29 million (fiscal year 1992-93); estimated $162 million in grant programs administered to date, including $50 million for housing. * Staff: 371 * Agency Head: Parker Anderson Community Redevelopment Agency (CRA) * Mandate: Responsible for housing construction, commercial development, job creation and other redevelopment activities in 17 areas of the city designated by the state as “blighted.” * Budget: $33 million (fiscal year 1992-93); revenues of $391 million and expenses of $262 million anticipated for the year. * Staff: 357 * Agency Head: Edward J. Avila Mayor’s Business and Economic Development Office (BEDO) * Mandate: Coordinate city economic development programs; foster private sector employment; administer loan programs for small business and exporters; provide equity stakes for private development projects. * Budget: Not available. Los Angeles Local Development Corp., the nonprofit entity under which BEDO officials say they conduct most of their activities, reported net income of $923,315 for the 12 months ending Sept. 30, listing $4.6 million in net assets and $5.7 million in outstanding loans. * Staff: 25 * Agency Head: Wilfred Marshall

Other city agencies that issue permits: * City Clerk’s Office: Business, fire, police permits * Department of Health Services: Health, drilling permits * Board of Public Works: Permits for work on driveways, curbs, sidewalks; sewer connection permits * Department of Building and Safety: Building, grading, land use permits * Planning Department: Coastal permits, environmental assessment, zoning variances, conditional-use permits * Transportation Services: Sign permits * Mechanical Bureau Services: Utility, elevator permits Note: The Construction Services Center, located on the 4th floor of City Hall, is the city’s “one-stop” permit center. It provides service counters for most of the city agencies listed above. Sources: Office of the Chief Legislative Analyst; Environmental Affairs Department; Construction Services Center; Los Angeles Local Development Corp. tax records