Plan Should Link Los Angeles to Regional Economic Marketplace

The City of Los Angeles has now completed its long-awaited draft General Framework Plan--what is meant to be a comprehensive long-range growth strategy for the city, including a set of policies for economic development.

The plan proposes two economic development goals. The first is to provide the physical locations and competitive financial environment necessary to attract various types of development; the second goal is to encourage the geographic distribution of this new growth in a manner supportive of the city’s overall planning objectives.

The strategy for achieving these objectives? Increase employment in Los Angeles at higher rates than projected--the not-so-original assumption being that greater local employment opportunities will enhance the city’s fiscal well-being.

To implement this strategy the city will do three things. First, it will attempt to make available new sites and provide infrastructure to accommodate future commercial and industrial growth. Second, it proposes to streamline the permitting and regulatory process. Finally, the city will provide financial incentives to attract development to targeted growth areas.

Because of constrained resources, the plan--which must be adopted by the City Council--suggests it is in Los Angeles’ best interest to focus on a limited number of sites throughout the city, particularly along the Alameda Corridor, where a major upgrading of the region’s rail system is planned.

The value of the plan is that economic development--which in the past has not been a specific emphasis of the city--has become a high priority. The proposed strategy is not overly ambitious and can be implemented.

One wonders, however, if the plan could be a little bolder--if it could truly position Los Angeles to provide greater benefits to a much larger proportion of its residents.

The plan, for instance, treats Los Angeles as if it were a closed system not functioning within a regional economic marketplace. If it succeeds, the city could be successful in creating new jobs. But if non-residents obtain a substantial share of these jobs, the city may have helped itself financially--but the benefits to its residents may only be marginal.

What is not in the plan is a strategy for linking Los Angeles residents to the rapidly growing employment base outside the city.

An example is the plan’s emphasis on “targeted” areas, particularly as it relates to reuse of obsolete industrial and manufacturing sites. The desired outcome is to turn these undesirable locations--many of them in South-Central Los Angeles--into places where firms will relocate or where new businesses will be created.

There is no question that city-sponsored initiatives which are well crafted will result in some success stories at designated sites; the revitalization of Bunker Hill is a classic example. But the number of new jobs created by these isolated successes will pale in the face of the new jobs being created elsewhere in the region.

Why, then, isn’t there a strategy in the city’s plan to provide greater access to these emerging job opportunities for L.A. residents--via reverse commuting on Metrolink, for example? The answer is simple. Such a strategy does little to enhance the fiscal position of the city itself. And here is the dilemma. The few jobs created by the proposed strategy will not substantially improve the city’s fiscal position, either.

Like all cities within the region, Los Angeles relies on property and retail sales taxes as major sources of revenue. And so the plan aims to create the circumstances that will boost those revenue streams, both by generating more retail activity and by creating jobs for people who then will buy houses in Los Angeles.

What the plan fails to recognize, though, is that the restructuring of the economy from an industrial base to a service economy has resulted in a smaller group of middle-income workers. Los Angeles simply cannot count on enhancing its tax revenues by spurring the creation of good-paying jobs.

Rather, in addition to what the plan proposes, the city--in concert with other municipalities--should be examining alternative financing mechanisms tied to the region’s future economic base, not that of the past. Some have suggested, for example, that levying a fee on ATM transactions--or on e-mail, fax and Internet transmissions--would be a much better way of financing the future than relying on increasing home ownership or retail sales.

Limited attempts to stimulate job development as a means of increasing the property tax base or generating more in the way of retail sales tax will lead, inevitably, to greater competition between cities in the region for a shrinking share of resources. Without a more forward-thinking approach, the real losers could be the residents of Los Angeles.