Riordan’s Job Creation Claim Called Exaggerated

The Riordan administration has grossly overstated its accomplishments in creating and retaining jobs in Los Angeles, according to an outside review of its work.

The administration’s business team, begun by Riordan as an arm of the mayor’s office designed to attract, retain and help expand businesses in the city, has told the City Council and the news media that it has had an impact on businesses that represents about 315,000 jobs.

But a review of its own records shows that it has provided aid to companies with only about one-third that many jobs, according to economist David Runsten of the UCLA Center for Labor Research and Education.

Runsten and UCLA graduate students came to that conclusion after obtaining the business team’s database under the California Public Records Act, then interviewing a random sample of spokesmen for firms that were listed.

Runsten’s research found that only 31% of the firms that the business team claimed to have assisted--with subsidies or help negotiating the city’s permitting processes--were actually helped.

Taking into account possible margins of error because of their sampling technique, Runsten and the students said the real percentage could be as high as 45% or as low as 16%. “But . . . beyond a shadow of a doubt, they helped less than half of the firms on the list,” the economist said.

The researchers found that the business team made an even more inflated claim in a 1999 brochure, which stated that the team had played “an integral part in the creation of 700,000 new jobs” since Riordan was elected in 1993.

A recent Times study, based on an analysis of state payroll records, showed that would have been impossible. A little more than 300,000 jobs were created in all of Los Angeles County from 1993 to 1998, the newspaper found.

Runsten attributed the discrepancies to sloppy bookkeeping. “That’s just poor reporting on their part,” he said about the business team. “They’re not very careful. . . . For them to say in a brochure that they had an integral part in the creation of 700,000 new jobs is laughable.”

Riordan has a history of exaggerating his impact on jobs. His first mayoral campaign in 1993 featured a mailer touting his personal record of job creation. It claimed that, as a venture capitalist in private life, he helped create more than 75,000 jobs. To get to that number, Riordan took credit for creating jobs at companies in which he held as little as a 1% interest, including jobs that existed before he invested.

Deputy Mayor Rocky Delgadillo, who oversees Riordan’s economic development efforts, said the latest report concentrates too narrowly on the business team’s contribution to economic recovery and also misstates the claims made by the team.

According to Delgadillo, administration officials have always been cautious not to overstate the business team’s role in saving or attracting jobs. It is impossible, he said, to know for sure what causes companies to relocate to Los Angeles or to decide to stay. But the business team has played a role in helping thousands of firms with many jobs, Delgadillo added.

Just as important, Delgadillo said, the report fails to take into account the Riordan administration’s other economic development initiatives, most notably its minority business program and its international business efforts.

“The mayor’s very proud of his economic development accomplishments,” said Noelia Rodriguez, Riordan’s deputy mayor for communications. “Under this mayor, City Hall is no longer the enemy of job-creating business.”

Participating in the research was the Los Angeles Alliance for a New Economy, a foundation- and organized labor-funded group that studies issues affecting the working poor. The group is best known for its leadership of the living wage movement, whose leaders often have been at odds with Riordan.

The study is one in a series that seeks to assess the impact of public subsidies. It was paid for by the Ford Foundation, the Rosenberg Foundation, the Stern Family Fund and Rhino Records.

Riordan won praise from the researchers for his administration’s efforts to make the city’s permitting processes more efficient for businesses bent on expansion.

But his business team was criticized for taking an ad hoc rather than a strategic approach to helping businesses negotiate the bureaucracy or obtain subsidies. That has resulted, they found, in help for many businesses that do not offer well-paying jobs and some that pay only the minimum wage.

The business team “operates on the assumption that all growth is good growth and that any business is a good business,” the study said.

In the garment and food processing industries, the study found that nearly four out of five production jobs in firms that received aid paid less than the city’s living wage, now pegged at $7.51 per hour plus health benefits.

The study, called “Taking Care of Business? An Evaluation of the Los Angeles Business Team,” is scheduled to be delivered to the City Council today.

“There hasn’t been enough concern targeting assistance to good-paying jobs,” Runsten said in an interview. “They help whomever calls them up. So they end up helping McDonald’s eight times, firms that you wouldn’t think needed that kind of help, or firms that you wouldn’t target if you had [a] strategy.”

The business team, part of the mayor’s Office for Economic Development, adopted a strategy of targeting specific industries in 1997. But the researchers found that, despite the official declaration, the percentage of firms helped in those industries did not rise. It remained at only about 15% of all firms helped. The targeted industries were food processing, apparel, entertainment, multimedia and biotechnology.

Runsten called the targeting “lip service” and asked: “Because there is no strategy, what are we really accomplishing . . . if we run around to whomever cries wolf and says ‘I’m going to move out of town unless you give me some money’?”

The Riordan administration has presented the business team’s main reason for being as attracting businesses to the city and retaining those that are here.

But Runsten said his researchers’ interviews with businesspeople convinced him that that kind of mission is misguided.

“The whole notion that what they’re engaged in is attracting firms to Los Angeles is a myth,” he said. “The number of firms attracted to Los Angeles by actions of city government during the mayor’s term in office could probably be counted on two hands. . . . They have some examples. But in general, what they’re offering firms is not significant enough to make a location decision.”

The same thing is true about decisions to leave the city, he said. Most firms that left said they did so because they could not find land on which to expand. They did not cite the city’s tax burden or incentive offers from other cities.

The report also cited anecdotal evidence that the business team and taxpayers got taken by some owners who falsely threatened to move as a way to boost the amount of subsidies the team would offer.

A representative for one sound equipment manufacturer, which was not identified by name, was quoted in the report as saying that his firm threatened to move “as a negotiating ploy” in successfully pursuing nearly $5 million in government subsidies.

The report praised the mayor for his announcement last March that he plans to focus on helping firms find land on which to locate here or expand by redeveloping 16 specific, large industrial and commercial sites. But the report criticized him for selecting the sites without a comprehensive inventory of available land and without sufficient public consultation.

An earlier study by the same groups concluded that Los Angeles’ approach to granting subsidies to businesses as part of redevelopment efforts also needs improvement.

That study found that Los Angeles made some unwise investments in private commercial real estate projects in the 1990s, partly because officials paid too little attention to whether tens of millions of dollars in tax subsidies would lead to the creation of quality jobs.