New Power for New Mayor in a Globalized Economy

The mayor of Los Angeles, who is elected tomorrow, will be political leader of a city and region transformed in the last decade. The next mayor will have new challenges but also more power to deal with them than previous mayors have had.

Los Angeles, like all of Southern California, has become an international economy. A decade ago, the aerospace-defense industry was this region’s largest employer. Today international trade, through the ports of Los Angeles, Long Beach and Port Hueneme and Los Angeles and Ontario International airports, is largest, accounting for 420,000 jobs ranging from dock work to banking to warehousing to global Internet communications.

The city’s best-known industry, entertainment, has become more international. Movie industry revenues in international markets are now equal to receipts in domestic markets, where a decade ago the international box office was half as large as the domestic one.

International exposure imposes a responsibility on Los Angeles’ political leaders. “The mayor must promote international trade through contacts with other countries,” says Miguel Contreras, head of the Los Angeles County Federation of Labor.

Global trade generates a multitude of jobs, although some are relatively low-paid. Nonetheless, Contreras, a constant advocate of living wages for all workers, suggests, “We must work with business to bring in jobs” and work out problems once the jobs are here. (Contreras has just helped demonstrate such a marriage of union wages and development in the accord reached over a hotel and entertainment center to be built near Staples Center.)

In another major transformation, the Los Angeles economy has shifted to small business. A decade ago, the economy was still dominated by large banks and companies. Corporate leaders still set the agenda for city and region.

But today “Los Angeles has gone from a corporate town to a town of small to medium-sized business,” says Larry Kosmont, head of Kosmont & Associates, a consulting firm specializing in urban economies.

Today 95% of the firms in Los Angeles County employ fewer than 50 people. The second-largest employment category, business services, accounts for almost 500,000 jobs in occupations ranging from law to engineering, accounting to management to software development and other services.

Even in entertainment, potentially the most important developments are not taking place in major film studios but in hundreds of young companies creating software for digital games and movies. Los Angeles is a beehive of innovation.

And it remains the nation’s largest urban center of manufacturing, with nearly 640,000 of its 4 million workers employed in small firms manufacturing parts for everything from space satellites to furniture.

Such dispersal of activity is a healthy trend, a protection against the devastation that occurs when a single large industry goes into a downturn, as aerospace did in the early ‘90s.

But dispersal doesn’t often give rise to prominent business leaders to make bold decisions on the region’s economy. That places important new responsibility in the mayor’s office, which wields a budget of more than $4 billion.

First, City Hall must reach out to small firms. “The new mayor needs to appoint an ombudsman for small business,” Kosmont says. Many small-business people echo the complaint of Steven Koltai, head of Event 411, a conference-organizing firm. “I’ve never heard from anyone at City Hall,” Koltai says.

Both candidates for mayor pledge to do more. “I will coordinate city and county economic development efforts on small to medium-sized companies,” James Hahn says.

“I will appoint a council of economic advisors with special attention to small to medium-sized businesses,” Antonio Villaraigosa says.

But the new mayor will have even broader political and economic power in the business community. “Before businesspeople do anything these days, they wait to know where the political leaders are going,” says Mark Pisano, head of the Southern California Assn. of Governments, a six-county planning agency.

So City Hall must take the lead in meeting massive infrastructure needs critical to the future economy of Los Angeles and Southern California.

Airport capacity must be developed somehow. Traffic at LAX has reached 67 million passengers and 3.2 million tons of cargo annually, up dramatically from a decade ago thanks largely to international passengers and shipping.

But LAX’s master plan for expansion to as many as 98 million annual passengers has aroused opposition from a broad coalition of neighboring cities and other groups. LAX’s growth could well be limited to no more than 80 million passengers, a level it could reach in three years at present growth rates.

So both mayoral candidates and local experts are calling for a regional solution, involving expansion of Los Angeles-owned airports at Ontario and Palmdale plus construction of the proposed El Toro airport in Orange County.

But many Orange County residents fiercely oppose El Toro. So how much power and influence can a Los Angeles mayor have on such a regional question?

A lot of power, says David Abel, publisher of the Metro Investment Report and Planning Report, newsletters on Southern California’s economy. Thanks to a new city charter, approved by voters in 1999, the next mayor will have powers over city agencies that formerly resided in the City Council.

Also, “the mayor has power to appoint board members to important regional agencies such as the Metropolitan Water District and Metropolitan Transportation Authority,” Abel says.

Politically, that means “the mayor can spread benefits around in making coalitions with neighboring communities. That’s how successful mayors in Pittsburgh and Chicago have brought about regional developments,” Abel says.

The challenges facing the next mayor are enormous. Housing is in short supply in Los Angeles and throughout the region because of a distortion of state government finance. In the early-’90s recession, the administration of Gov. Pete Wilson, to balance the state budget, took property tax revenues away from the cities.

That forced local governments to focus on sales taxes as a means of financing their responsibilities for police, fire and other community services. And that led to cities competing in a zero-sum game for major retailers and auto dealerships, while discouraging development of housing because new residents add to costs of city services.

Untangling such a knotty issue challenges the next Los Angeles mayor to negotiate with Sacramento for tax equity and with Washington for affordable-housing funds.

Despite these challenges, the next mayor will clearly inherit economic advantages. Los Angeles is one of the world’s great centers of high technology, with its still vibrant aerospace industry making and operating communications satellites and pioneering technologies of space communications and surveillance for military and commercial use.

With Caltech, UCLA, USC and other great universities, the Los Angeles area looms large as a center of biotech and biomedical research.

“We have high-wage high-tech employment needs,” says Rep. Jane Harman (D-Redondo Beach).

And that means a need for training and educating Los Angeles’ work force, says Linda Griego, entrepreneur and the public official who headed Rebuild Los Angeles in the mid-’90s.

But even advantages challenge the next mayor to make Los Angeles more visible as a business powerhouse. National business magazines, such as Fortune and Forbes, regularly print surveys of “Best Places to Do Business” that regularly get it wrong by ignoring Los Angeles. The new mayor must use the bully pulpit to correct that, businesspeople say.

“He must create an attitude about Los Angeles, as [Mayor Richard] Daley is doing in Chicago,” says Dick Poladian, Los Angeles-based managing partner of the Arthur Andersen accounting firm.

“He must let it be known that this is a business-friendly city,” says Danny Villanueva, head of Bastion Capital, a venture company that invests in many Southern California firms.

“The mayor sets the tone; he’s the city’s advocate at the federal government,” says Charlie Woo, the head of downtown’s Megatoys Inc., who in the last decade has helped make Los Angeles a center of global toy distribution.

Fortunately, both mayoral candidates understand their responsibilities toward the economy. Of the six mayoral hopefuls who competed in the April 10 primary election, only two--Villaraigosa and Hahn--asked economist Jack Kyser of the Los Angeles County Economic Development Corp. for a tutorial. “Both asked very thoughtful questions,” Kyser reports.

As it prepares to elect its next mayor, Los Angeles has completed a transition. In the last decade, after recession, riots, earthquakes and fires, Los Angeles’ task was to prove to itself and others that it could recover and prosper in the new age and “new economy.” Under Mayor Richard Riordan it made that transition.

Now a city and region that has always defied the efforts of scholars and artists to define it must project a new vision to the world. Old visions no longer apply.

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James Flanigan can be reached at jim.flanigan@latimes.com.

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What Can L.A.’s Next Mayor Do?

The next mayor of Los Angeles can play a major role in the economic development of the region--an area where the dominant industry is now trade, and one in which small and mid-sized businesses play a larger role than Fortune 500 corporations. A regional focus will also be needed to address problems like traffic.