Empowerment Zone Is Just a Start
Long the target of business raids by other cities and states, Los Angeles has started to fight back. Last week the City Council approved tax breaks intended to lure companies into three federal empowerment zones, including one in Pacoima. Business owners who set up shop in one of the zones will be free from the city’s business license tax for five years. When combined with other state and federal tax breaks, the savings can be considerable. Mayor Richard Riordan and the City Council deserve credit for recognizing that the high cost of doing business in Los Angeles makes the city a prime target for poaching from neighboring communities such as Glendale and Burbank.
As helpful a first step as they may be, tax breaks and empowerment zones by themselves are not enough to turn some of the poorest parts of the city into vibrant commercial areas. As assistant deputy mayor Debbie LaFranchi correctly noted last week, the tax break package is “not a silver bullet, but it’s one very important symbolic tool.” How true. Axing the city tax many business executives find most objectionable sends the message that Los Angeles is serious about revitalizing poor neighborhoods. But once executives looking to move get over the potential bottom line savings, they still are confronted with the same problems that make business in Los Angeles tough--poorly trained workers, complicated city rules and divisive politics.
Over the next several months, city officials and local business leaders must add more tools to their economic toolbox if they want to attract new companies to the San Fernando Valley--and keep existing firms from leaving. Already, several encouraging programs are under way. Witness the speed and resolve with which the city acted in getting the site of the General Motors plant ready for development. Better still are the Economic Alliance of the San Fernando Valley’s efforts to foster cooperation among the five cities that share the floor of the Valley--Los Angeles, Glendale, Burbank, San Fernando and Calabasas.
For instance, the alliance is developing educational programs that coordinate the needs of employers with curricula at local community colleges and Cal State Northridge. That way, companies considering the Valley will know they have a skilled work force at their fingertips. In addition, the alliance is developing marketing programs for the Valley as a whole--a program that has the potential to minimize the kind of economic poaching in which neighboring cities undercut each other to attract new businesses.
These sorts of efforts are necessary complements to initiatives like empowerment zones or tax breaks. The prospect of higher short-term profits will no doubt pique the interest of executives in places like Pacoima. But sustaining that interest and translating it into well-paying jobs requires more. Executives worth their golden parachutes know that intangibles like bad schools and unresponsive governments have costs that can easily obliterate tax savings. Tax breaks and empowerment zones are a good start to repairing neighborhoods devastated by years of neglect. But they are only a start.
