Our Sunny Business Climate Needs Legislators' Help

Steven B. Frates is a fellow at the Rose Institute of State and Local Government at Claremont McKenna College.

The state budget crisis is in full bloom. Almost everyone understands that the state legislature and the governor have spent California's money with abandon over the last three years, and now the bills are coming due. The question now is how the crisis will affect Orange County.

As I've noted in previous columns, Orange County cities and school districts, as well as the county government itself, receive relatively little funding from the state compared with other counties. Despite this raw deal from Sacramento, local government and services in Orange County are excellent in comparison with other counties'.

Orange County citizens benefit from the fact that local governments are, by and large, competently run. Much of the credit for this happy state of affairs goes to the city managers and school superintendents who have so ably served their residents over the years.

As good as these city managers and school superintendents are, however, their skills are going to be sorely tested over the next several years. It is unlikely that the county, local cities and the school districts are going to get anything approaching a fair deal from Sacramento.

At this point, all indications are that Gov. Gray Davis and the state legislature are going to gouge local governments yet again, much like the legislature and then-Gov. Pete Wilson did in the early 1990s. The county and cities are probably going to get less from Sacramento, and even the politically more popular school districts are going to suffer at the hands of legislators.

Some measure of the efficiency of local government in Orange County is reflected in the results of the most recent Kosmont/Rose Institute Cost of Doing Business Survey. The Kosmont Companies started surveying the cost of doing business in California cities about nine years ago and this year selected the Rose Institute to be its ongoing partner in this annual survey.

The Kosmont/Rose Institute Cost of Doing Business Survey considers such factors as property taxes, business taxes, utility taxes and other business-related fees and charges. More than 200 California cities and 35 major cities around the nation are included in this year's survey.

The results show conclusively that cities in Orange County are business-friendly and very efficiently run. In fact, the four least-expensive major cities in California are Costa Mesa, Orange, Fullerton and Anaheim.

Other cities in Orange County with similar characteristics are Brea, Buena Park, Cypress, Fountain Valley, Garden Grove, Irvine, Mission Viejo, Newport Beach, Tustin and Yorba Linda.

Indeed, only three cities in Orange County -- Huntington Beach, Santa Ana and Westminster -- did not earn the best rating on the Kosmont/Rose Institute Survey. But even these three scored well compared with other cities around the state.

By way of comparison, many cities in Los Angeles County scored at the bottom of the Kosmont/Rose Institute Survey. These high-cost cities, which include Los Angeles, Inglewood, Compton, Culver City and Santa Monica, impose steep taxes on businesses.

As the state cuts back or eliminates funding to cities, local governments that have a healthy local business climate will be in much better shape than cities driving businesses away by high-tax regimes. Cities that already tax businesses at a high rate will not be able to increase those taxes very much, if at all, to make up for the likely loss in state revenue.

The more efficiently run cities in Orange County will have greater financial flexibility and should continue to be more attractive magnets for tax-generating businesses and better-paying jobs.

In sum, the skill and expertise of the local government managers in Orange County have resulted in more efficient local government.

Local government managers have, generally, provided a higher level of service at a lower cost than almost anywhere else in California.

Unfortunately, the skill and expertise of local government management have not been matched by Orange County's state legislative delegation. The result has been that Orange County has paid more in taxes to Sacramento and received less from the state coffers than any other county. The clear challenge for Orange County's state legislative delegation is to protect the interests of Orange County citizens during the current budget battles in Sacramento.

Orange County has a healthy business climate, which has helped provide a high level of local government services to Orange County citizens and also provided huge sums of tax money to citizens in the state's other 57 counties.

If the Orange County state legislative delegation continues to do a poor job of protecting Orange County citizens' interests, local government officials may be forced to raise business taxes, which would only hurt the vibrant local economy they have so carefully nurtured over the years.

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World