Democratize the Economic Recovery

Chiefly reelected by those areas of Los Angeles that are once again prospering, Richard J. Riordan’s great challenge in the next four years will be to democratize the city’s economic resurgence. If the mayor can bring jobs, retail development and industrial expansion to the poorer parts of the city, including those that voted against him Tuesday, he can move beyond halting L.A.’s decline to fashioning its future.

So far, the expansion has been mostly confined to the affluent Westside and portions of the San Fernando Valley. Propelled by the growth of the entertainment and technology sectors, office and industrial vacancy rates in these communities are heading toward single digits, rents are rising and, on the Westside, housing prices are ticking up.

The outlook for much of the rest of the city is far less sanguine. Large swaths of South Los Angeles, for example, are still pockmarked by deserted and burnt-out buildings, some left over from the 1992 riots. Office areas near or adjacent to the riot zone, from downtown and mid-Wilshire to Hollywood, are plagued by low rents and high vacancy rates.

Politicians serving these communities bear some responsibility for the slow place of recovery in their neighborhoods, because they have relied on government help, not private enterprise, to deal with their economic problems. But Riordan himself has seemed uninterested in efforts, such as those undertaken by RLA, to reignite economic growth south of the Santa Monica Freeway.

It is an absolute civic necessity that Riordan pick up the economic challenge represented by these traditionally neglected areas. If growth is not democratized, the city’s wealthier sections will be forced to absorb an ever-larger fiscal burden and endure a diminishing public infrastructure while facing new pressure from entrepreneurs unwilling to develop elsewhere.

To be successful, economic democratization must entail more than the Bradley-era pattern of support for downtown development and for largely ceremonial projects--the sports arena, Coliseum restoration or the new cathedral. These projects, however laudable, often do little more than create Potemkin cities of fancy arenas, high-rise towers and convention centers surrounded by impoverished neighborhoods.

Any inner-city revitalization program must include not only industrially oriented projects like LAX expansion and the Alameda Corridor, which Riordan strongly supports, but also the fostering of industrial networks now proliferating throughout the city, including South Central, the eastern San Fernando Valley and the Eastside. Toward this end, Riordan will have to persuade the City Council to address the needs of wealth-creating companies--biomedical, textile, food-processing, furniture and entertainment-related--by relaxing regulatory controls, encouraging fusion of properties to accommodate industrial expansions and reducing or even eliminating city taxes in the most blighted neighborhoods.

Luckily, the biggest boost for democratizing the recovery may well come from the economy itself. The L.A. economy, according to the most recent measurements, is growing quite rapidly, particularly for a large urban area. During the past year, the county’s jobless rate fell 15%, among the healthiest of any major city. With job growth now averaging about 2% annually, demand for workers in Los Angeles is now higher, according to a Manpower, Inc. survey, than at any time since 1990.

Much of this growth can be traced to the proliferation of new and small businesses. More businesses started up in L.A. County last year than in any other comparable urban region in the country. On a per-capita basis, the business-incorporation rate was nearly 40% higher than in New York, more than 100% above that in Chicago and Philadelphia.

As has been widely reported, this entrepreneurial explosion has been concentrated in the entertainment, computer software and business-service sectors and primarily located on the Westside and in certain parts of the Valley. Yet, its dynamism could begin reversing the decades-long decline in many older sections of the city.

For one thing, recovery-spawned rent increases on both the Westside and the San Fernando Valley could make parts of central Los Angeles far more attractive as a place to do business. Already, the widening cost differential between downtown and the Westside--now about 50%--has spurred a slow, but steady improvement in occupancies in the long-moribund office towers. Prudential Healthcare, for example, recently announced plans to locate 1,400 jobs, most of them new to the region, in a downtown high-rise.

The expansion of entertainment-related companies creates new opportunities for another of L.A.’s less fortunate neighborhoods, Hollywood. Despite its legendary name, the district has not reaped a significant share of the entertainment-industry growth. Between 1992 and 1996, job growth in Hollywood was only 8%, compared with 40% in other areas of the county.

But entertainment-related growth in Burbank, Glendale and on the Westside may soon be reaching its natural limits, particularly since the resurgence of anti-development sentiment on the Westside, which has delayed, and may halt, the Playa Vista Project and the DreamWorks studio.

Another positive sign has been the relocation of large, entertainment-related companies--Variety, the Hollywood Reporter and E! Entertainment Television--to the western edges of the Miracle Mile. There has also been one bold move into South L.A.: Frederick Smith’s architecturally arresting new building just along the Culver City border, which houses Kodak’s new media division.

But, the best hope for East L.A. and South-Central lies in recovery of the region’s manufacturing industries. The furniture, metals, glass and other construction-related industries lost nearly 100,000 jobs between 1986 and 1994, as the Basin’s share of the nation’s diversified manufacturing dropped from 5.3% to 4.6%. The loss of these jobs took a toll on such neighborhoods as Pico-Union, South-Central and Boyle Heights.

Since then, however, these industries have begun adding jobs, more than 3,000 in the toy sector alone, according to economist Stephen Levy. As a result of the influx of immigrant entrepreneurs and workers, L.A.’s share of U.S. diversified manufacturing has begun to rise again and is now approaching 4.9%. If current trends continue, Levy estimates 50,000 jobs could be created in these industries, an obvious economic boon for inner-city neighborhoods.

Yet, even if the sheer dynamism of L.A.’s current recovery is reason enough to hope that economic growth may be democratized, other obstacles threaten to slow its momentum. Riordan and the City Council do not share an economic philosophy, a significant impediment to compromise on such issues as deregulation and business-related taxes.

Then there is the larger question of Riordan. In several key instances during his first term, he showed himself able to work productively with his erstwhile ideological enemies. He successfully obtained the endorsements of key AFL-CI0 unions by making separate deals with them. He collaborated with Council members Jackie Goldberg on Hollywood revitalization and Mark Ridley-Thomas on renovating the Coliseum and bringing grocery stores to South Central.

Yet, despite these manifestations of pragmatism, Riordan still seems far more comfortable cutting deals with big players like DreamWorks or the arena developers than getting down and dirty with small factory owners in South Central, multimedia firms in North Hollywood or shopkeepers in Highland Park. To be a successful mayor in his second term, Riordan must transform himself from corporate deal maker par excellence to apostle for the kind of radical, grass-roots capitalism that remains the best hope for bringing opportunity to the diverse communities of this vast metropolis.