NEWS ANALYSIS : Plan Sends Right Message to Business : Economy: Mayor’s proposal could help city’s image. But some say it overlooks key issues.

It’s billed as a “Blueprint for Economic Vitality.”

But however it improves things, the proposal by Mayor Richard Riordan’s blue-ribbon panel of business experts to revamp the city’s fiscal structure won’t go far in revitalizing the economy of this recession-weary, earthquake-rocked region, economists and executives say.

At best, the program--if adopted--will burnish the image of the city, sending a message that Los Angeles is willing to take steps to lessen crime, repair badly neglected streets and improve the efficiency of the bureaucracy--all issues for businesses that have left town.

What it won’t do is address the primary concerns of businesses that have fled California, as identified by recent surveys: high labor, health care and land costs; onerous regulations, permitting and taxes. Overhauling the city’s permitting and fee structure is the bailiwick of another mayoral task force.

Nor will the proposal reverse the economic forces that have put Los Angeles in the longest recession since the Depression of the 1930s: cuts in federal defense spending, the collapse of the real estate market, and the prolonged drop in construction. Indeed, it’s unreasonable to expect a city government to overcome such forces.

Michael E. Tennenbaum, senior managing director of Bear, Stearns & Co. and chairman of the mayor’s Special Advisory Committee on Fiscal Administration, admits that his committee’s proposals won’t reverse job losses attributable to such big economic concerns.

Nevertheless, he said at a City Hall news conference Thursday: “Dramatic action now is needed to keep our world-class city from becoming second class. . . .

“If we keep postponing . . . expenses, Los Angeles will become very undesirable as a place to live,” he added. “Many many more jobs will be lost. Both private industry and local government will suffer. . . . If services keep dropping and taxes and costs keep going up, we’re going to become another New York City.”

On Thursday, the special committee unveiled its proposals to squeeze more revenue out of the city’s fiscal structure and use it for initiatives to improve public service, hire police and repair infrastructure. The intention is to improve the city’s economic competitiveness relative to other cities.

The committee also recommends the creation of a $5-million annual program of tax abatements and other incentives to retain businesses in Los Angeles and attract new ones, said William Ouchi, a UCLA management professor and Riordan aide.

The task force advises holding the line on city taxes and lowering the Department of Water and Power’s rates for industrial customers.

As far as they go, the initiatives win favorable reviews as economic development aids. “They sound like modest, constructive things to do--but they’re not overwhelming changes,” said David Hensley, a regional economist with Salomon Bros. in New York.

According to surveys of businesses, concern about crime and infrastructure rank down the scale of problems below taxes, labor costs and workers’ compensation insurance premiums. But they are not insignificant concerns to many businesses. In particular, crime--and the fear of it--is emerging as a hot economic issue.

Archie Defterios, co-owner of Delta Floral Distributors in South-Central Los Angeles, says crime is the principal reason he is considering moving his 70-employee business out of the area. Thieves regularly steal wooden pallets from his yard, vandals break the windows of his trucks and job candidates sometimes balk at coming to work for him once they see the neighborhood.

Private security guards and other crime prevention measures add $7,000 to $8,000 a month to his costs of doing business, he says.

Adding more police, as the mayor has promised, would help. Now, Defterios says, “you call the Police Department, they don’t show up. . . . They tell us they’ve got their hands full.”

But a larger police force might not be enough to keep him at his present location, he added: “Maybe it’s not enough to hire more police. But I don’t know what else is required.”

No city action would have been enough to keep Transamerica Life Co.’s 500-employee insurance administrative operations in Downtown Los Angeles, spokeswoman Debra Newton said. The unit is in the process of moving to Kansas City, Mo.

“It was economics,” Newton said. “We can reduce expenses: The cost of living is cheaper in Kansas City, and labor costs are cheaper. . . . We face national competition from life insurers located in smaller cities, where the cost of doing business is lower.”

Because school districts are governed by independent boards and financed primarily through the state, there is also little the city government can do to improve schools--one of the major complaints by businesses, analysts say.

Whatever Los Angeles does, it should not make economic development choices that conflict with those of other cities in the region, cautions Stephen Levy, director and senior economist at the Center for Continuing Study of the California Economy in Palo Alto.

“The most important point is that business people make decisions to locate in the region, not in the city,” he said. “So you want to be careful that what the city does aids in the regional effort and is not just focused on whether they locate in Riverside, Orange County or L.A. If you’re merely shifting people around the region, it’s just a zero-sum game.”