Category Archives: Business

A New House Is Coming to Hollywood

Recently I attended a gala press announcement hosted by the Japanese Consulate and Consul General Harry H. Horinouchi. I was particularly interested to learn about a cutting-edge initiative that is going to be very beneficial to Hollywood, and which is bound to become a new attraction for both locals and tourists.

Known as Japan House, the program is a new public diplomacy initiative from Japan’s Ministry of Foreign Affairs to showcase the best of Japanese arts, culture, innovative technology, food, and more. The Ministry has selected three locations around the world to showcase the initiative – London, Sao Paulo and Los Angeles. Of particular interest to us is that Hollywood & Highland has been selected as the Los Angeles location.

The Los Angeles Japan House will bring the most authentic aspects of Japan to the world and will promote understanding and appreciation of Japan in the hopes of strengthening U.S.-Japanese relations. The concept is still being refined, but you can expect Japan House to open within 2017. You should also know that our own Beth Marlis, Chamber Chair of the Board, is on the advisory board to the Japanese consulate, working to make this a reality.

There are a few things that we already know about Japan House. It will consist of two separate locations at Hollywood & Highland. On the second floor, the facility will take up over 6,000-sq.ft., with a shop, café, multi-media room (and special presentations about Japanese culture), and a seminar room. On the fifth floor, there will be a Japanese restaurant featuring top Japanese chefs and an event space (in over 8,000-sq.ft.) which can accommodate 200 people.

This is exactly the type of attraction that Hollywood needs and can host better than any place else in Southern California. We already know that Hollywood is a magnet for people from the entire region. Enterprises such as the El Capitan Theatre, the Pantages Theatre, the Hollywood Bowl and Amoeba Records have proven that this is the place for entertainment. We are the top tourist destination in Los Angeles County as well – and with the pending opening of Universal Studio’s Wizarding World of Harry Potter – we expect that our desirability will continue to grow.

I believe that unique attractions such as Japan House have their greatest chance at success here. And they help our “brand” as well. For Hollywood to succeed, we must be able to continue to add new attractions that will draw people. We cannot sit back while other areas of Southern California open popular new venues.

Tourism, along with Entertainment and Health Care, are our three major employment sectors in this community. Thousands of jobs rest on our ability to continue to improve the Hollywood brand. The Hollywood Walk of Fame is one way that we constantly reinforce the brand, but we cannot rely just on the tried-and-true attractions.

We welcome Japan House to Hollywood and look forward to having their involvement in this community. As we learn more details about their plans, I am sure that the level of excitement will grow even more!

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Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 24 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood

Closure of Cashmere Sends Proper Message

Two weeks ago, the Los Angeles City Council took action affirming the Department of City Planning’s decision to revoke a Conditional Use Permit (CUP) for the Cashmere nightclub in Hollywood for multiple land use violations. The Hollywood Chamber of Commerce applauds the action by the Council and the efforts of Councilmember Mitch O’Farrell.

Let me explain why the Chamber supports this action.

When an applicant seeks a CUP to open a club, the City establishes rules under which that club must operate. Those rules are set to protect the public – those who would visit the club as well as nearby residents and businesses. The types of rules that are set may include hours of operation, age restrictions, alcohol and food sales, capacity, and security requirements, among other things.

Over the years, there has been lax enforcement of CUPs. The Hollywood Chamber has been concerned for years about this and has urged proper enforcement. We were encouraged when the Planning Department set up its Conditional Compliance Unit a couple of years ago. We believed it was a step in the right direction. But progress has seemed to be painstakingly slow.

In the particular case of Cashmere, it had been the focus of numerous investigations by the LAPD over an extended period of time. Last August, a 20-year old male DJ died while employed at the nightclub. In another incident in 2014, investigators say a female college student was sexually assaulted at the club. Such incidents and investigations should have sent a message to the operator that steps needed to be taken to address the issues.

However, adequate measures were not taken. If an operator does not think there will be adequate enforcement, it can encourage some to flaunt the rules, which may have been the case here. The fact that the City has stepped in and taken the serious step to revoke the CUP sends a very strong message to those who don’t want to follow the rules. Without a CUP, the business is unable to continue operating.

Hollywood’s nightclubs are an essential component of our revitalization program. In the 1990s when things looked bleak as far as redevelopment, the clubs brought hope to the community. Early pioneers such as The Garden of Eden, Beauty Bar, Sunset Room and Deep helped to bring patrons to Hollywood. The clubs liked the edginess of Hollywood. Their success brought additional venues and Hollywood established a reputation as a nighttime hotspot.

A lot has transpired since those days as we have seen the revitalization of Hollywood take hold. Today, we see new retail, mixed-use residential projects, office space and hotels under construction.

While the clubs are no longer the backbone of the revitalization effort, they are still important. We have some great venues, which help us to provide nighttime entertainment. Most operators are outstanding, doing their best to adhere to their CUPs.

When the City clamps down on those who continually break the rules, it helps to establish the parameters for operating in Hollywood and it supports those clubs that do follow the rules.

Councilmember O’Farrell and the City took the right action in the case of Cashmere. While we hate to see any business close, we believe the message that was sent is good for Hollywood, good for our residents and visitors, and good for business.

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Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 24 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood

Why it is thumbs down on Neighborhood Initiative

By now, you may have heard of a new anti-growth effort, the Neighborhood Integrity Initiative, being promoted by a group called the Coalition to Preserve L.A. The initiative would impose harsh restrictions on projects that require major changes to city planning rules – including putting a moratorium of up to 24 months on development projects that cannot be built without votes from elected officials to increase density. It would make it difficult to change the L.A. General Plan for individual real estate projects. It would place City employees directly in charge of preparation of environmental review of major projects. It would require the City Planning Commission to update the City’s community plans to be consistent with the City’s General Plan – even though these initiative supporters often fight any effort to update the community plans.

Let me say the obvious – that the goal of the initiative proponents is to stop any significant development within the City of Los Angeles. They claim that their initiative “will preserve the character of neighborhoods throughout the City of Los Angeles and improve the overall quality of life for city residents.” In actuality, it will worsen the quality of life for city residents – as there will be fewer jobs, higher housing prices, and more congestion.

In order to justify radical initiatives like this one, the proponents always paint City officials as inept and developers as villains out to make a buck and destroy the character of neighborhoods. They never want to discuss the reasons behind the City’s actions or where growth should occur. They have no solutions. They merely want to turn the clock back fifty years to the Los Angeles of another time.

The problem is that you cannot go back. Los Angeles is the least affordable place to lease or buy a home in the nation and has had the biggest housing price increase over the past 15 years in the U.S., primarily because it is so difficult to build anything here. One of the reasons why we have so much gridlock is because of people who over the years have refused to consider smart growth solutions that have been implemented in cities around the globe.

The Los Angeles metropolitan area has reached its physical limits. We cannot keep growing outward and forcing people to commute vast distances. We should not allow the interior areas of the City to deteriorate in order to “preserve” neighborhoods. We should not prevent affordable housing from being built in our city.

Smart growth advocates and planners will tell you that the successful planning model is to direct growth to occur along transit corridors. As our mass transit system is built-out, it will eventually enable people to travel where they need to go without using their vehicles. We are then able to preserve those single-family neighborhoods that are so valued by the initiative proponents. (This used to be referred to as the two-percent solution – to direct development onto two-percent of the land in order to preserve 98 percent of the land.)

Opponents argue that the mass transit system is not yet built-out and that we should wait until that occurs before we build around mass transit stations. However, if we wait, traffic will continue to worsen for everyone because housing and jobs will be built in places that only add to congestion.

They also argue that it is impossible to build new projects without creating more traffic. They are correct that there will be some additional traffic. However, by matters of degrees, the increase in traffic will be substantially less due to the nearby transit, and because jobs will also locate close to these stations. There are currently five mass transit lines under construction by Metro in greater Los Angeles – that is more than any place else in the nation. As these lines come into operation, it will be easier to see the wisdom of guiding development to transit corridors.

Hollywood is the poster child for those opposing development. They point to the 70 or so projects in the pipeline and argue that development will destroy the quality of life and the character of Hollywood. In my view, exactly the opposite is occurring. We are creating a great example of how urban development should happen – with walkable neighborhoods and jobs, shopping, and entertainment close by. Opponents seem to forget how bad things were in Hollywood 20 years ago. What has turned central Hollywood around is the new development. And this development is occurring in the center of Hollywood, close to mass transit. Parking lots are being replaced by exciting new development that make it an attractive neighborhood.

New development has made it possible to preserve historic structures. About 15 years ago, I was visited by representatives of the Los Angeles Conservancy who were concerned about the possible loss of two very historic properties – Columbia Square and the Palladium. Today, because of new development, both of those historic venues are saved and will again be show places.

I was recently told the story of a local resident whose children have moved to the East Coast with no intention of moving back to L.A. Why? Because they are tired of living in an urban area where it is impossible to get by unless you use a car and are stuck in traffic gridlock. Passage of this initiative will only perpetuate that ineffective and outdated model.

So I ask the proponents of this initiative to tell us exactly where they think development should occur. They have no answer to that question. And until they can answer it, then this initiative should be given no credence. If you like the current gridlock in L.A., it will never change with their plan. Their solution to go backwards is no solution at all. They would merely be preserving a model that we already know no longer works.

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Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 23 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood

City Sets Priority to Create Jobs

Last week, the first meeting was held of the L.A. City Council’s new Ad Hoc On Comprehensive Job Creation Plan Committee. I attended and offered our Chamber’s strong support for their efforts. It is extremely critical to the future of our City that the City Council act to jumpstart the creation of jobs.

Committee Chair Paul Krekorian said “This is going to be a committee that takes action and makes recommendations to the Council. This is the biggest priority we have as a city. It will impact our ability to maintain a high quality of life for our residents.”

Dr. Christine Cooper from the L.A. Economic Development Corporation presented an overview of the opportunities and challenges that we face. She noted that L.A. unemployment has consistently been higher than at the county, state and national levels.

She wasn’t exaggerating. Since 1990, jobs in the U.S. have increased by 29 percent and by 28 percent in California. In Los Angeles, by contrast, the number of payroll jobs has increased only by 2 percent during the same period, according to the UCLA Anderson Forecast.

So the Ad Hoc Committee has a challenging assignment. We hope they will move quickly. Already, they have passed a motion directing various City agencies to report back with recommendations on a comprehensive job creation plan.

I’m sure there will be ample opportunity for input from the public as well. Let me offer a few suggestions. First, the City cannot create a jobs strategy without addressing the biggest drag on jobs creation in the City – the job-killing Los Angeles Gross Receipts tax. This is the highest business tax in the county by a factor of 9.5 times the average of the other 87 Los Angeles County cities.

The City has made small efforts to trim back the tax, but much more is needed. Over the next three years, the tax will be reduced by 5 percent a year. Assuming the City Council approves continuing reductions at that rate, it would take 20 years to do away with that tax – not enough to jumpstart jobs creation.

It is a challenge for the City Council to eliminate this tax, because it generates some 10 percent of City receipts. Facing an ongoing structural deficit, it takes a leap of faith to do away with it altogether and the City Council has been reluctant to do so. But maybe there are other alternatives that could be considered – such as reducing it initially to the countywide average for all cities so that we are not placed at a competitive disadvantage? Perhaps, the City could study alternative taxes that wouldn’t have the same negative impact on jobs creation? If the City wishes to be a competitive player in jobs creation, then it has to be a competitive player when it comes to the cost of doing business – and taxes are a big consideration for many firms.

The City should also look at where jobs are being created and see how they could facilitate that growth. Currently, Hollywood and Playa Vista are the biggest job creation engines within the City. With more than one-million sq.ft. of office construction underway, Hollywood has the potential to create thousands of new jobs. Already, Viacom, Netflix, Neuehouse, SIM Digital and others have announced they are coming to Hollywood. Other projects are in the pipeline and could be expedited if the City put the Hollywood Community Plan on the fast track to being reconsidered and implemented.

There are many other things that could be done, such as structuring an incentive package to encourage hotels to be built in all areas of the city – not just downtown by the Convention Center (which is the practical result of a plan that was presented earlier this year). The City could streamline the process that business owners and start-ups have to go through to get permits to expand or to open a business.

If you have ideas on what the City could do, send them my way and we will pass them on to the City. Better yet, plan to attend the ad hoc committee’s hearings! We will post them on our website as soon as we are aware that they have been scheduled. This may be a unique opportunity to move our city forward. Let’s all work to help the City craft a package that will really make a difference.

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Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 23 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood.

Leadership Needed to Resolve a Real Crisis

This past week, the Hollywood Chamber had meetings with two of our L.A. City Councilmembers – first with Curren Price who chairs the City’s Economic Development Committee, and then our board met with newly-elected 4th District Councilmember David Ryu.

In both meetings, the issue which quickly rose to the top was the rapidly escalating number of homeless encampments throughout Hollywood. I can tell you that people are alarmed at what is happening on public sidewalks, along the freeway and even on private property. Your Chamber has been active in lobbying for action, through meetings as well as letters to our public officials.

A recent count by Los Angeles Homeless Services Authority (LAHSA) found that the number of encampments on Hollywood streets has jumped by 54 percent to 184 since the last count in 2013. Countywide, LAHSA found that there was an 84 percent increase.

Who are these newly homeless in Hollywood? The Hollywood Entertainment District Security Patrols has surveyed many of the newly-arrived homeless and found that most of them are not from the Los Angeles area. A large number are from out of state and drawn to Hollywood. The majority are young.  Even if the City offered them housing, they would decline. They just want to hang out. For further information on this, read a column by Hollywood Property Owners Executive Director Kerry Morrison:http://onlyinhollywood.org/new-faces-contributing-to-increase-in-homelessness-in-hollywood/

Many of them are also on drugs and alcohol and there is an increasing incidence of mental illness and violent behavior. When I was walking to a meeting last week, one of them appealed to me for a contribution so he could do “alcohol research”. At least he was honest!

Hollywood has done a lot to assist our homeless population. There is a consensus here that we need to treat legitimately homeless individuals humanely. Since 2010, the Hollywood 4WRD Coalition has found housing for 440 of those on our streets. The goal has been to find permanent supportive housing for all of our local homeless. That goal has been blown out of the water with the current situation. I have been in Hollywood for 23 years, and have never seen it so bad.

What does the current crisis mean for Hollywood?  It means that residents do not feel safe in their own neighborhoods. It means that employees are afraid to walk to their cars after work. Developers of multi-million dollar office buildings are concerned that businesses won’t want to locate in Hollywood when they see the encampments outside their doors. This is a quality of life issue that impacts everyone.

Do we see these same problems in nearby cities such as West Hollywood, Burbank, Pasadena or Glendale? The answer is “no”. The usual explanation that we receive is that Los Angeles is so large that it is the prime target of lawsuits challenging homeless enforcement, and so the City’s hands are tied.

I recognize that is indeed a problem, but we are looking to our elected officials for leadership, not explanations. This week the Los Angeles City Council is poised to declare a “State of Emergency” and to earmark $100-million for solutions. This is a good first step.

However, beyond that, a plan of action is needed. First, the City needs to differentiate between those who are truly homeless and in need of humane treatment, and those who want to “hang out” and choose a lifestyle of living on the sidewalks and moving from city to city. Separate approaches need to be crafted for both populations. The County and State need to be brought into the dialogue. If legislation is needed in Sacramento to address the challenges imposed by the courts, then now is the time to be speaking to our legislators – when they are beginning to put together their legislative priorities for 2016. The City should be researching what other cities faced with similar issues have done.

The time for inaction is over. We don’t want to accept this increase in people living on our streets as a new normal. We will be watching how our elected officials lead on this issue!

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Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 23 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood.

Millennials Setting the Pace for Hollywood’s Future

At our recent Hollywood Economic Development Summit, keynote speaker Victor Coleman of Hudson Pacific Properties, shared some fascinating statistics.

He said that 35 percent of Hollywood’s population (zip codes 90028 and 90038) is made up of Millennials (those in the 18 to 35 years old bracket). That is the largest concentration of Millennials of any community within Los Angeles County. It is greater than West L.A., which contains 29 percent Millennials and Santa Monica, which comes in with 24 percent Millennials.

When you look at a three-mile radius of Hollywood, the percentages remain strong, with 29 percent of the population composed of Millennials, greater than any other comparable zone except Downtown.

Why is this important to the future of Hollywood? Because this is a key reason why creative companies are interested in locating in Hollywood. We have the right demographic they are seeking. We want to attract firms that will employ these young people so that they do not need to travel elsewhere to work.

Hollywood is at the forefront of developing a new paradigm in Southern California – a place where people really can live and work in close proximity without the need for a car. We have got to stop pushing development to the periphery of the metropolitan area, requiring people to drive wherever they need to go and in turn clog our freeways and streets.

Over the past couple of years, new development in Hollywood has faced opposition from residents, primarily in the Hollywood Hills, who have objected to the growth in central Hollywood. As is usually the case in Southern California, those concerns are primarily focused on traffic and congestion. People just don’t believe that it is possible to change commuters’ habits.

With the Millennials, we finally have a chance to change that mindset. Studies have shown that they are urban centric. They like to walk, bike and take public transit. They are fascinated with Uber or Lyft and other alternatives to having their own vehicles. And they crave 24/7 walkable, mixed-use neighborhoods with a cool, hip factor.

Let me share with you a few statistics that bear this out. One study by Atlantic Cities revealed that up to 86 percent of Millennials said it was important for their city to offer opportunities to live and work without relying on a car. Nearly half of those who owned a car said they would consider giving it up if they could count on public transportation options.

A study by U.S. PIRG showed that Millennials drove on average 23 percent fewer miles in 2009 than they did in 2001 – a greater decline in driving than any other age group. During the same time period, Millennials who lived in households with annual incomes of over $70,000 increased their use of public transit by 100 percent, biking by 122 percent and walking by 37 percent.

These statistics bear out why central Hollywood is so attractive to Millennials. It is a very compact community. You really can walk almost everywhere you need to. There are plenty of entertainment options – and more are coming. As the area fills in with more desirable retail stores, it is easy to see this area becoming one of the most walkable communities within Southern California. We are on the Redline Subway route, the backbone of the Metro transit system. As more lines are added, it will become even easier for residents of Hollywood to get where they want to without a vehicle.

So Hollywood is a prototype of what we need to encourage in Southern California. I would invite the skeptics who believe that this can’t work here to watch what is happening in Hollywood. We must accommodate growth within the Metro area, but we must do it with more forethought. This is the smart way to grow.

Obviously, there are other steps that can also be taken to improve traffic circulation – such as seeing that mitigation funds from new projects are invested wisely in street improvements and taking advantage of programs such as the Mayor’s Great Streets initiative. However, our new millennial generation presents a unique opportunity for Hollywood.

As a business community, we need to foster and welcome these young professionals to Hollywood. The Chamber has already created our Hollywood Young Professionals and Entrepreneurs program (HYPE). It is amazing to see the energy within this group.

I am sure that there is a lot more that we can do. We should all be having conversations with these new Hollywood residents and ask what their needs are and what would make Hollywood a better neighborhood for them. I suspect making it cleaner and safer would be at the top of their list. We have a lot of work to do, but having this key demographic in our community gives us an amazing opportunity to continue the revitalization of Hollywood.

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Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 23 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood.

A Jobs Strategy for L.A.?

With all of the recent attention by the City on raising the minimum wage, very little of the rhetoric was devoted to the real need in Los Angeles … to increase the number of middle-class jobs. People need to have an opportunity to move up the jobs ladder in order to truly improve their quality of life. A minimum wage increase does not accomplish that.

So how is Los Angeles doing on the jobs front? The UCLA Anderson Forecast released their latest report in early June. The report revealed that the L.A. metro area has seen brisk growth of 2.5 percent in each of the past two years, which finally allowed L.A.’s employment to surpass its pre-Great Recession level of more than seven years ago.

However, William Yu, an economist with the Anderson Forecast, pointed out that even with that growth, L.A. only increased its payroll jobs by 2 percent between 1990 and 2015. By contrast, the U.S. increased payroll jobs by 29 percent during that period and California created 28 percent more jobs. And other areas of Los Angeles County also increased their employment at a substantially higher rate than L.A. City. Yu called L.A. an “economic basket case”, lagging far behind the national norm. He noted that the only other major cities in the nation with similar weak job-creation records are Detroit and Cleveland.

The California Center for Jobs & the Economy, in May issued a report entitled “Economic Tale of Two Regions: Los Angeles vs. Bay Area”, where they stated, “Los Angeles presents a trend largely of jobs stagnation under which middle class wage jobs have been steadily replaced by lower wage service jobs.”

So, I would ask the question, “Besides raising the minimum wage, what exactly is the jobs strategy for Los Angeles?”

The Hollywood Chamber of Commerce Board of Directors met in June with Deputy Mayor for Economic Development Kelli Bernard, who detailed some of the Mayor’s jobs-related achievements. To be sure, Mayor Garcetti deserves credit for some of the growth of the past two years. He fought hard to get AB1839 adopted, which ramps up film tax credits to bring production jobs back to California and Los Angeles. We expect to see a positive jobs impact from that. He was also successful in luring Yahoo from Santa Monica to Playa Vista. And the Mayor has identified some sectors with job creation potential and set some goals such as creating 20,000 green jobs by mid-2017.

These are all great steps, but they do not answer the question of why there is no overall jobs strategy to put Los Angeles on a long-term road to matching the growth of other major metropolitan regions, the State and nation. If the City really wants to get serious about our poor jobs record, then there needs to be a comprehensive plan.

This week, in what is a step in the right direction, Council President Herb Wesson announced that he is creating an ad hoc committee on a comprehensive jobs plan. I applaud the Council President on taking this action. Let’s hope the committee takes a serious look at exactly why jobs are not being created in this City at the same pace as elsewhere. There is a lot of information for them to review.

Mr. Yu gave his assessment of what is holding Los Angeles back – a less friendly environment for business, low human capital (meaning a poorly educated workforce) and the high cost of living.

In reviewing his findings, I would point out that San Francisco has a much higher cost of living and is still creating jobs. We do indeed need to improve our educational system, but there are other cities with similar challenges that are creating jobs. I believe that the major factor holding L.A. back is its reputation as a less than friendly place in which to operate a business.

There is a feeling in the business community that we are constantly “under siege” in this City. Last year, it was the huge jump in the minimum wage for hotels with over 150 rooms. This year, the City approved an across-the-board minimum wage hike over the next five years to $15 an hour. We had to fight to get concessions for small businesses faced with a 67 percent increase in minimum wages. After our lobbying, the City Council offered a “token” concession of one extra year for only the smallest businesses with under 25 employees. Now the City Council is considering an ordinance to allow street vendors to compete with brick-and-mortar businesses and to require businesses to offer more sick leave. Where does it end?

Perhaps the elephant in the room when it comes to L.A.’s lack of job competitiveness is the onerous Gross Receipts Tax. Los Angeles has the highest business tax by a factor of 9.5 times the average for the other 87 cities in the County. The only way we can compete is when the City does a “carve-out” for certain sectors that the Council wants to attract here, such as they did last year for internet businesses.

Stories are numerous of businesses that have fled Los Angeles to escape from this job-killing tax. Here in Hollywood, we are still hurting from the loss of Legal Zoom, which moved to nearby Glendale with more than 300 middle-class jobs, when the City’s Finance Department decided to raise them to the highest tax rate imposed by the Gross Receipts tax.

There have been numerous calls to do away with this tax, including by Mayor Garcetti. Last year, the City Council did make a small concession by voting to reduce the tax by 5 percent in each of the next three years. To be perfectly honest, from a job-creation standpoint, that was not enough to move the needle one iota.

If the City Council is serious about creating jobs, they need to at least reduce this tax to the countywide average. Imagine what would happen if L.A.’s business tax were not 9.5 times higher than the County average? We might then be able to compete for new jobs. Give businesses some hope and they just might decide to expand here and hire more employees.

That would be the foundation of a jobs creation strategy. L.A. is the second largest city in the nation. We have numerous natural advantages. The business sector knows that we can compete if we have a level playing field. We can provide the middle-class jobs that this economy needs if the City acts decisively. We should not be in the cellar with Detroit and Cleveland. Hopefully, the ad hoc committee will come up with some realistic recommendations that the City Council will adopt.

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Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 23 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood.

What California Can Do to Improve Its Business Climate

You may have missed this in the news: For the 11th year in a row, California ranked dead last in the annual survey by Chief Executive Magazine of the “Best and Worst States for Business”. This is a survey that is conducted with CEOs, the people who make the decisions on where jobs locate. The survey revealed that the states with the lowest ratings were scored low because of their high tax rates and regulatory environments.

One of the greatest contributors to California’s image as a bad state for business is the lack of progress in reforming the California Environmental Quality Act (CEQA), the landmark legislation passed 45 years ago. No one claims that CEQA has not been valuable in protecting the environment. The problem is that it often has been manipulated to delay or stop legitimate projects for reasons other than the environment.

Case in point: Last year, the firm that had been commissioned to assemble 175 new rail cars in Palmdale for METRO announced that it was moving out of state because of a threat by a union to sue under CEQA. Only after Mayor Garcetti intervened, were things worked out and the cloud of a lawsuit lifted. Interesting that the deal he brokered with the union had nothing to do with the environment. The word on the street was that the union wanted the manufacturer to agree to a “card check” system to enroll its employees in the union.

You may have read recently that high rents are driving more Californians into poverty and forcing hundreds of thousands of low and middle income workers to move to other states. Did you know that more than half of the nation’s most expensive residential real estate markets are in California? Did you ever wonder whether our own children will be able to afford to live in this state?

The fact is that it is so difficult to build new projects in California that it has artificially raised the cost of living here and exacerbated a shortage of housing opportunities. The many CEQA lawsuits in Hollywood to stop additional infill projects are only emblematic of what is happening statewide.

Several years ago, the Sacramento Bee said that “CEQA has become not a protector of the environment but a promoter of sprawl, pushing the housing market away from existing neighborhoods and onto farmland, where the cows don’t sue.” Pretty ironic I would say for a law that is supposed to protect the environment.

Something must definitely be wrong when the California legislature itself takes the action of exempting its own pet projects such as stadiums, arenas and high speed rail from CEQA challenges. Even Governor Brown, two years ago, referred to the need for CEQA reform as “the Lord’s work” … and yet today, there is not a single bill going forward in Sacramento to reform CEQA. There are powerful interests lined up to prevent any changes. Everyone is afraid to touch it!

We visited Sacramento last month and discussed the need for CEQA reform. We were given a sympathetic ear by the legislators with whom we spoke, but they pointed out that there is no legislation this year for them to consider.

The fact is that you do not need to gut CEQA in order to achieve reforms that would make a difference. There are numerous steps that could be taken to level the playing field, such as increasing transparency, limiting the legal maneuvers that delay court action such as last minute “document dumping” by project opponents, expedited dispute resolution, etc. All it requires is a legislature with the courage to do what is right and to rein in the many frivolous claims that stop needed projects from going forward.

The Hollywood Chamber of Commerce will continue to call for reform of CEQA, and we will urge our own representatives to lead the way. What a shame that there is no hope of progress this year. Let’s hope that next year true change will occur. Maybe then, California will get out of the basement as a place in which to do business.

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Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 23 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood.

City Approved Wage Hike is Bad News for Small Businesses

The Los Angeles City Council has voted to move forward on drafting a minimum wage ordinance that will raise wages by 67 percent over the next five years.

The Hollywood Chamber of Commerce participated through the entire process of debate on the issue and said that we could support a hike in the minimum wage – provided steps were taken to protect small businesses and to make the City more competitive in job creation.

Unfortunately, the carve-out approved by the City Council was so woefully small that only the smallest of businesses will receive any help – and only for one additional year.

The City set the threshold for a small business as one with 25 or fewer employees. By comparison, Seattle, in crafting their own minimum wage hike, used the same definition of a small business as the federal guidelines – 500 or fewer employees. And they gave small businesses an extra four years to meet the same requirement as large businesses.

The Los Angeles Times quotes Councilman Gil Cedillo as saying of the City Council action, “This is the greatest shift of wealth in the history of this city.”

At least he admitted what we have known all along. This is not new money flowing into the City. The “wealth being shifted” will be taken from the pockets of businesses. The justification cited by supporters was the City-commissioned Berkeley study that promised minimal impacts on businesses. We will now have the opportunity to find out if the Berkeley study is right when it said, “For retail trade and the local economy as a whole, price increases would be negligible.” Personally, I have my doubts.

Firms will adjust their business model according to how much additional money they will have to put into payroll. Small businesses will spend less on upgrades, equipment and other investments in their operations. They will either reduce the number of employees or cut back their hours. They will be reluctant to add new employees. Businesses operating on the margin will either close or move out of the City.

What the Council did not consider is that businesses cannot operate at a loss. According to the financial research firm Sageworks, net profit margins for restaurants for example averaged about 3 percent in 2013. In many of these restaurants, payroll accounts for 50 to 60 percent of their expenses. How does the City expect these restaurants to cope with a 67 percent increase in the minimum wage?

Job growth in L.A. will suffer. Beacon Economics has projected that the wage increase “will reduce job growth from an expected 1.8 percent per year for the next five years to less than half that and potentially eliminate growth altogether. In other words, expected job growth would go from 30,000 jobs per year to somewhere between 2,000 to 15,000 jobs.” Los Angeles has one of the worst job creation records of any major city in the nation, according to a study released last year by the UCLA Anderson School of Management. The City Council seems to have ignored this fact in making their decision.

There has never been an increase in wages of this magnitude over this short period of time in Los Angeles. Even the consultants that did the peer review study for the City advised that they not go beyond the $13.25 per hour wage base recommended by the Mayor, and to evaluate implementation impacts before increasing it further. They said that at the higher rate (of up to $15), the metrics used to assess minimum wage increases are above historic standards. They continued that the uncertainty as to the effects is largest over the longer term, when workers and firms have fully adjusted to the wage and capital-labor and labor-labor substitutions have been made. The reviewers urged the City to provide delayed phase-in that may mitigate against the most serious potential impacts for ‘high sensitivity’ businesses such as small firms and nonprofits.

The City Council ignored that wise counsel and has approved this experiment. While we can certainly voice our concerns one final time when the ordinance comes back to Council for final approval, the decision for all practical purposes has been made.

The State minimum wage will rise another dollar to $10 an hour next January. The new City hike will go into effect six months later, in July of 2016 – starting at $10.50 an hour and rising to $15 an hour in 2020. Thereafter, it will automatically increase annually based on the Consumer Price Index. Your Chamber will be monitoring and reporting impacts of the City action. We would invite all Hollywood businesses to share with us how the minimum wage hike impacts your business and steps that you will take as a result. We’re going to keep tally and share the results with the City Council.

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Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 23 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood.

How the Community Loses When Developments Are Stopped

With all of the attention devoted last week to another case where attorney Robert Silverstein has scored a “victory” with a judgment against a Hollywood project, I thought it was time to focus on what the community is losing by these interminable lawsuits.

There are a lot of things that are lost – including jobs, new shopping areas for the community, projects that would improve neighborhoods and address serious problems. Each new development, with modern lighting and in many cases security, helps to clean up the area. Each project draws people who patronize and make neighborhoods safer.

Those who condemn new developments should recall how bad things were in Hollywood 20 years ago. It has only been through new development that we have been able to turn things around. Developers have invested millions of dollars of their own money in improving our community. This is money that the City certainly did not have to invest, and which our own residents/businesses were not prepared to invest to clean up Hollywood.

Some may have forgotten that the Sunset-Gordon project was originally planned to be L.A.’s first workforce housing development for middle-income residents. Even though Mr. Silverstein lost that lawsuit, the two years of delays because of the lawsuit forced the original developer out of the picture and the workforce housing went down the drain. The delays resulted in the deterioration of the historic building. Had there been no lawsuit in the first place, the façade might have been preserved as originally intended.

Hollywood’s half-built Target is another case in point. Had it not been stopped, it would have opened by now, creating 200 permanent jobs for our community. In addition, it would have provided nearby shopping for many of our local residents. Hollywood has not had a full-service department store since Sears closed in 2008, only a short distance away. This is especially a loss for low-income residents without transportation, many of whom would be within walking distance of the new Target.

In the case of the Millennium Hollywood project, opponents are so preoccupied with the height issue that they forget about the down-on-the-ground benefits that will accrue to Hollywood. Most of two blocks in central Hollywood will be activated by this project. Currently, they are parking lots. In the evening, the area is dark and uninviting and not an area where people feel safe walking. The project would activate the neighborhood and bring life to the area. The original architect of the Capitol Records building has stated that it was never intended to be an isolated structure surrounded by parking lots. Finally, after more than 50 years, it would be complemented by uses that will allow people to enjoy this world-famous building. The developers of this project have a reputation for doing very high-quality developments. Most communities would be thrilled to secure developers of this caliber, knowing the type of projects they build.

The graffiti-covered site where 80 Cool Rooms would have been built.
The graffiti-covered site where 80 Cool Rooms would have been built.

Sometimes, even small projects become the victims of these lawsuits … or the threat of lawsuits. A case in point is the proposal for 80 Cool Rooms, a European-style hotel proposed only one block from a subway station at the corner of Hollywood Blvd. and St. Andrews Place. This proposed project would have taken what is currently a small corner lot covered with graffiti, trash and weeds and transformed it into something of which the neighborhood could be proud and also utilize, with its cafe. In this particular case, there was overwhelming support from area residents. However, one person testified that he would sue if the City approved the project, primarily because the City would be granting an exception to the City parking requirements. Never mind that the primary clientele for the hotel would be foreign visitors, many of whom would utilize the subway. There are 3-million international visitors annually who come to Hollywood, according to the convention bureau. This group uses mass transit at home and they use it now when they visit L.A. Chances are very good that this hotel concept would have worked and the parking would have been adequate. If he could, the developer would have added parking, but because of the narrowness of the lot, it was impossible to add parking in a cost-effective way.

Small developers do not have deep pockets and cannot afford to hang on indefinitely. In this particular case, the architect who was proposing the hotel dropped his plans and sold the property. This is what he said in a letter to me:

“It is unfortunate, but this proved to us that at least in Hollywood, the small high density infill/transit-oriented development has no real chance and a small group of individuals with threat of a lawsuit can derail an otherwise lovely and much-needed addition to the urban fabric of the City! My wife and I always thought that our project would be welcomed by the community, and it was, but never imagined that an overwhelming majority can be taken hostage by a few individuals. … We just don’t have the financial resources to deal with lawsuits and frankly cannot live with the stress. Hence our decision to sell.”

Which brings me to the point I would like to make: when we are so rigid in our thinking that we cannot think out of the box, then opportunities are lost. Can opponents truly say that Hollywood is better off because workforce housing was never built at the Sunset-Gordon project, or because the Target is sitting there half-built, or because Capitol Records is surrounded by acres of parking lots or because 80 Cool Rooms will never be built?

Of course, we can all agree that a better job needs to be done addressing traffic issues in Hollywood. And one can understand the need to strike a balance between height and preserving views. However, is it wise to send a message that the community is opposed to all development? We have seen how quickly real estate cycles turn. While there is a lot of interest in Hollywood today, it may not necessarily be the case tomorrow. If the development community opts to go elsewhere, we will all be the worse off. The revitalization of Hollywood remains a work in progress. We cannot complete it without investment in new projects.

No one wants to see Hollywood slip back into what it was like in the 80’s. Perhaps, as a community we need to try and find common ground?

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Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 23 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood.