Candidates for Mayor Favor Changes in City Business Policy

Kelli Bernard Boles showed up at a South Los Angeles salad dressing manufacturer two days after receiving an SOS call from the company controller. She perused the storage containers choking the company’s parking lot and helped puzzle out plans to create an overflow lot on a bordering railroad right of way.

Poised and proficient, Bernard Boles is no private consultant, but rather a veteran member of Mayor Richard Riordan’s business team--a dozen aides who recruit businesses to Los Angeles and trouble-shoot problems for those already here. By the time Bernard Boles left on a recent Wednesday, she had pledged to coordinate with the MTA and Union Pacific and guide the project around any possible permit problems. She informed the company, GFF, of available federal tax credits and made a note to hunt down the owner of a trash-strewn corner nearby.

“They’ve been very supportive,” said Timothy Schoenbaum, the controller of GFF, which has seen its work force grow by nearly 40% since Riordan took office. “They want to help businesses in Los Angeles.”

Riordan’s business team is the most visible manifestation of the former venture capitalist’s approach to economic development, and it gets high marks from the mayoral candidates hoping to replace him this year. All of the six major mayoral contenders say they would create their own business teams.

But that is where the consensus ends. Some candidates pledge to create a unified economic development department, and others vow to do more for the city’s most disenfranchised entrepreneurs--two areas in which Riordan’s effectiveness has been sharply criticized.

Indeed, Riordan’s record as a leader of Los Angeles’ economic revival--and the challenges faced by those who seek to succeed him--is exemplified by the business team. The group has been lauded for its microcosmic successes, recruiting or helping one company at a time. But it has been faulted for its lack of overarching vision, of a coherent sense of where the region is and where it is headed in terms of jobs, growth and vitality.

‘A Lot of Headaches’

The winning candidate this year--election day is April 10, with a likely runoff on June 5--will probably not have as much to work with as Riordan did. After a few lean years in Riordan’s first term, a booming national economy has helped propel Los Angeles’ economic growth. Now, for the first time in nearly a decade, warning signs suggest that the expansion may be slowing.

“Whoever wins the mayoral race, everyone should send them a bottle of aspirin,” said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp. “There’s going to be a lot of headaches.”

The stakes in the next mayor’s choices are enormous, as they always are when it comes to economic development: The next administration will help determine which industries and jobs are cultivated here, who gets public subsidies and whether community organizations are included. That’s a full plate, even in the best of times, and neither the economy nor the state of Los Angeles business is likely to make the next mayor’s work any easier.

The city’s business community is in the midst of change, shedding the big corporations that once dominated Los Angeles and replacing them with myriad small- and medium-sized companies, none of which carry the political clout of their storied predecessors.

“We are: Headquarters ‘R’ Not Us,” said Larry Kosmont, president of Kosmont Cos., a real estate concern that creates public and private partnerships. “The new mayor has to come in and build coalitions with the City Council and use his pulpit to say these small- and medium-sized businesses need some special help and attention.”

Most of the six major candidates acknowledge the changing face of business in the city and say they are prepared to address it. Mindful of Riordan’s continuing popularity, those vying for his office generally avoid challenging his record directly but hint at their dissatisfaction by promising changes in the way Los Angeles approaches economic development.

Former Assembly Speaker Antonio Villaraigosa, who received the coveted endorsement last week of the county labor federation, said the city needs “a more balanced” approach to economic development, targeting specific, underrepresented areas of the city and seeking higher-paying jobs in growing industries.

“I want to stop the distribution of economic development as if it is political pork and pursue a more balanced growth,” Villaraigosa said. “I think it’s important to cultivate industries and opportunities that maximize career options.”

City Atty. James K. Hahn similarly has challenged the Riordan record without criticizing the mayor himself.

“I don’t understand why San Diego and Santa Clara can be ahead of us in biotech jobs,” Hahn said. “We need to show the business community that this is a government that’s going to be a partner with them to bring jobs and business to the city.”

In addition to sharing implicit criticisms of the incumbent, most of the candidates say the next mayor must pay more attention to providing city services and other aid to small businesses. State Controller Kathleen Connell suggested creating miniature city halls throughout Los Angeles where “small-business ombudsmen” and representatives of city departments could offer services in a more decentralized way.

“If you’re a Korean small-business owner, you don’t have the time to drive downtown, pay for parking and try to deal with the myriad departments,” Connell said. “We have to support them [small-business owners] and help them grow.”

U.S. Rep. Xavier Becerra, tapping into his Washington experience, suggested that the city needs to take advantage of more federal grants and other programs to revitalize neighborhoods to attract more desirable businesses. He also suggested a type of “one-stop shopping” in which city departments work together to provide services for small-business owners.

But Becerra, along with the other mayoral hopefuls, said the city faces a challenge in attracting business to Los Angeles, particularly when neighboring cities offer enticing incentives. Some of those may be intangible: A smaller city may be perceived as safer than Los Angeles, for example. Others are more concrete: Nearby municipalities offer more streamlined permit processes, lower and less complicated taxes, and cheaper housing.

City Councilman Joel Wachs, who is running as a populist committed to running the city more like a business, said the next mayor needs to refocus efforts on attracting companies that will provide quality jobs and not focus solely on large, splashy developments requiring government subsidies.

“We need businesses that have a real economic benefit here and not ones that are just pizazzy, like Staples,” Wachs said, referring to the downtown sports center. “We should be doing this in the context of a thought-out, overall business plan that identifies the kind of incentives and business we want.”

As is often the case, real estate broker Steve Soboroff, who has made a living recruiting companies to Los Angeles, offers economic development proposals that most closely resemble those of the Riordan administration. He has argued that electing “a businessman mayor in 2001” is more important than it was when Riordan was elected.

Riordan’s Record Cited

The Riordan record offers a mixed tally for those seeking to inherit it.

In an interview, Riordan said his advice to the next mayor is simple: “Add strength to strength.”

Riordan has been lauded and criticized for his approach. Under his Office of Economic Development, the business team worked to recruit and retain companies within city borders, offering assistance to mid-size players like GFF and quietly cutting deals with big business and developers on a host of projects.

Rocky Delgadillo, deputy mayor for economic development and a candidate for city attorney, credits the team with assisting 2,445 businesses, representing nearly 300,000 jobs.

Then two years ago, the administration launched Genesis L.A., a campaign to recruit development and channel private financing to 21 critical sites in the city’s poorest pockets. The most novel component of the plan was the creation of a privately managed real estate investment fund. The fund, which closed last year at $85 million, is channeling capital into developments in low- and moderate-income neighborhoods.

Riordan’s Minority Business Opportunity Committeehas helped small enterprises compete for government contracts and has hooked up the potential subcontractors and vendors with dozens of private corporations.

What sets those initiatives apart is what many say Riordan has done best: foster private-sector relationships that helped direct some of the region’s economic activity as it sputtered into high gear.

“Just the fact that he [Riordan] was concerned about business and concerned about it leaving was, frankly, a breath of fresh air,” said Carol Schatz, president of the Central City Assn., a politically powerful downtown business group.

Critics, however, are equally vocal. Riordan’s strategy, they allege, was no strategy at all, offering assistance primarily to those who asked. The result, they say, was the creation of many low-paying jobs.

“It was extremely ad hoc, depending on what developers offered themselves up and what opportunities seemed to be available,” said Madeline Janis-Aparicio of the labor-supported Los Angeles Alliance for a New Economy.

The smallest and least savvy businesses lost out in the Riordan equation, critics say. Moreover, those same critics add that Riordan largely discounted the opinions of dozens of community-based organizations that have been working in the trenches for years to address unemployment, blight and small business needs.

“In terms of support from [Riordan’s] office, it’s been virtually nil,” said Richard Amador, president and chief executive of CHARO Community Development Corp., which serves small businesses and job seekers in East Los Angeles. “They almost saw us as competitors.”

Riordan and Delgadillo dispute the criticisms. They say they reached out to businesses of all sizes, and focused recruitment and retention efforts on mid-sized manufacturers, encouraging them to pay living wages. As it did with businesses, Delgadillo said, the mayor’s office worked with those community groups it viewed as efficient and successful.

The perception of the administration as a lumbering friend to big business is incorrect, he said. It operated, rather, with entrepreneurial dexterity, making some harsh decisions in order to grow. It also leveraged public money to stretch it further.

And yet, the record on the ground reflects both the progress and frustration of recent years. Thousands of new jobs have been created, but the gap in Los Angeles between rich and poor has never been wider.

Backing of Business Sought

As Riordan’s term winds down, the major candidates for his job are seeking business backing for their campaigns, but they also are focused on broader questions that could affect the city’s business climate. These include: an unprecedented housing crunch in the Southland; secession threats; and sprawl and population growth that have heightened pressures within city borders and prompted calls for regional coordination.

“The bottom line for any candidates is: Are they going to kill the golden goose or are they going to fatten it?” said Schatz of the Central City Assn. “Are we going to be slowly bled by fees and extractions and social engineering or are we going to recognize that business in this economy needs to be nurtured and can’t be taken for granted?”

She, and others, called on the next mayor to overhaul the city’s antiquated, complex tax system. Riordan was rebuffed in his efforts by the City Council. Without blaming the council, Riordan said the reform effort got “bogged down” in “arguing the details” between his office and the council. Wherever the fault lies, the result has been to perpetuate a tax code that almost no one likes.

The candidates have heard the calls for a new tax system and all say they will address it. As Becerra said: “You’ve got to create, first and foremost, the climate for business. They have to feel not overburdened by the taxes, the permits, the politics.”

But economic development goes beyond creating a business-friendly atmosphere. It requires an overarching strategy, and that calls for coordinating the tentacles of the city’s bureaucracy, according to admirers and critics of Riordan’s record.

“Maybe Riordan thought it was too hard to reform the bureaucracy and he just tried to . . . do an end-run around [it],” said David Runsten, an academic and a critic of Riordan’s efforts. “I’m sure that’s tempting, but you have a hard time systematically approaching these kinds of efforts when you do that. I think the next mayor needs to try that.”

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Business Plans

What the major mayoral candidates think about economic issues in Los Angeles:

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CANDIDATE: Xavier Becerra

BUSINESS TEAM: Would create a small- business team to better target neighborhood needs.

SUPPORT FOR SMALL BUSINESS: Would revitalize neighborhoods with a “Main Street” concept, bringing a downtown feel to local communities.

OTHER CONCERNS: Wants the city to be more concerned about retaining and recruiting companies in health care, high-tech, tourism, entertainment and trade.

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CANDIDATE: Kathleen Connell

BUSINESS TEAM: Would enhance the mayor’s business team.

SUPPORT FOR SMALL BUSINESS: Would first restructure the business tax code and create a tax appeals process for small business.

OTHER CONCERNS: Wants the city to take advantage of Community Development Block Grants to improve neighborhoods for business.

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CANDIDATE: James K. Hahn

BUSINESS TEAM: Would expand the team and provide additional resources to help more medium- and small-size businesses.

SUPPORT FOR SMALL BUSINESS: Would streamline city permits and other requirements for small business; would allow start-up companies a tax amnesty for two years.

OTHER CONCERNS: Wants the city to do more to train workers for better, higher-paying jobs.

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CANDIDATE: Steve Soboroff

BUSINESS TEAM: Would double the size of the team.

SUPPORT FOR SMALL BUSINESS: Would work to support more entitlements and ease the tax structure.

OTHER CONCERNS: Wants to encourage companies to train employ-ees and become partners in educating workers.

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CANDIDATE: Antonio Villaraigosa

BUSINESS TEAM: Would fine-tune the team and focus it more on specific jobs that provide career paths for employees.

SUPPORT FOR SMALL BUSINESS: Would establish small- business development centers aimed at cutting government red tape; would help small businesses gain access to capital.

OTHER CONCERNS: Wants a coordinated city plan with clear benchmarks for economic development.

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CANDIDATE: Joel Wachs

BUSINESS TEAM: Would focus his team on whole communities rather than individual projects or businesses.

SUPPORT FOR SMALL BUSINESS: Would provide businesses better sources of capital and more job training for employees.

OTHER CONCERNS: Says the next mayor needs to look at economic development as part of the entire city, and bring housing closer to jobs.

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