Riordan Threatens to Veto Tax Relief Plan : Finances: City Council unanimously adopts measure to help revitalize businesses in blighted areas, but mayor questions its effectiveness and impact on budget.

The Los Angeles City Council on Wednesday unanimously adopted a tax relief plan to help revitalize businesses in the city’s most blighted neighborhoods, but Mayor Richard Riordan warned that he may veto it.

Riordan said he was reviewing the measure to determine its impact on the city’s looming budget crisis and its effectiveness as an economic development stimulus. “A comprehensive approach (to economic development) is the best course,” Riordan said in a written statement.

Two weeks ago, Riordan criticized the plan as a “giveaway” that would indiscriminately provide relief to existing businesses, not just new or expanding ones, and lobbied against its passage.

In light of such opposition, some minority-group lawmakers have questioned Riordan’s commitment to the economic interests of the inner city. Their concerns have taken on added urgency since the city’s unsuccessful bid to be designated a federal empowerment zone, which would have provided blighted areas with $100 million in social service funds and granted substantial federal business tax credits.

The local tax relief plan approved Wednesday requires businesses in affected areas to pay the first $25 of their city business tax obligations but exempts them from paying their next $500. Any obligation over $525 would be paid as normal. Targeted for the tax break are nearly 12,000 businesses located in a roughly 20-square-mile swath of the city’s most economically troubled areas. Pacoima, Watts and parts of Lincoln Heights are among the affected communities.

According to budget office estimates, the plan will cost the city about $2.6 million in revenues in the coming year.

Councilman Mark Ridley-Thomas, one of its leading champions, hailed adoption of the plan as an important revitalization effort that fulfills the promise of Charter Amendment 1, a voter-approved measure from 1993 that authorized city officials to extend unspecified tax relief to blighted areas.

Ridley-Thomas, who represents a South-Central Los Angeles district that will benefit directly from the tax breaks, said he expects to cite passage of the plan as an example of his accomplishments when he runs for reelection this spring.

“It would be completely nonsensical for the mayor to veto this, in view of the fact that the council’s first vote on this was 13 to 0 and today’s was 12 to 0,” Ridley-Thomas said. “The will of the council is to move this forward, and 70% of the electorate passed this in June, 1993. We should move thoughtfully and quickly to support business, particularly small businesses, with this plan.”

Despite Wednesday’s unanimous vote, several lawmakers said they had reservations about the plan. Councilman Richard Alatorre, chairman of the council’s Budget Committee, said he voted for the measure even though he questions the wisdom of reducing tax receipts when the city expects to face a budget deficit next year variously estimated to run between $250 million and $400 million.

“I support it in concept but I’m not sure now is the proper time to be enacting it because of the budget,” Alatorre said. “But nobody cares about that.”

Councilman Hal Bernson, who also voted for the plan, told his colleagues a better plan that would genuinely focus on stimulating new economic activity would extend tax relief only to companies newly moving into the blighted areas, not to all firms.

Ridley-Thomas replied that it is hard to attract new businesses to an area if its existing businesses are moving out. A program that offers tax relief for businesses to stay put is also necessary, he said.

The plan approved Wednesday is identical to one approved in concept two weeks ago by the council, except that it does not provide as much relief to firms with sizable city business tax liabilities. The original measure permitted businesses in the targeted areas to slash all their business tax obligations over $525 by 25%. (Under the plan approved Wednesday, obligations over $525 are payable in full.) The original plan would have cost the city $3.8 million in revenues, it was estimated.