Category Archives: Jobs

A Post Mortem on Measure S

In the aftermath of Measure S, it seems everyone is offering their post mortem observations about this giant struggle over land-use and development in Los Angeles. I’d like to add my “two cents”.

First, the voters made the right choice in sinking Measure S.  We can breathe a sigh of relief that a blanket moratorium did not go into effect that would have vaporized thousands of construction jobs and wreaked havoc on our economy. Now we can continue to address the serious shortfall in housing in our region.

Second, although the voters rejected Measure S, it was not a vote of support for the status quo. Far from it. Both residents and businesses made it clear that the current system is broken and needs to be fixed.

Third, the Mayor and City Council need to follow through on the reforms that were promised, among which were to update community plans in a timely fashion and to have the Planning Department select the consultants performing environmental impact reports.

Fourth, once community plans are updated, “spot zoning” (changing land-use rules to accommodate specific projects) should become the exception rather than the rule in approving projects. It would be helpful if criteria could be drawn up that explains when it is appropriate to grant an exception.

Fifth, greater transparency should occur throughout the entire process, so that trust can be established with the public. One particular area that needs improvement is with community benefits packages. The Planning Department and councilmembers now negotiate these packages, sometimes extracting millions of dollars from developers for projects that will benefit L.A. This process needs to be revised so that the public has more of an opportunity to provide suggestions on things that would benefit the impacted neighborhoods. And once a package is finalized and the developer hands over to the City mitigation funds, there needs to be accountability so that the public knows to which department the funds went and that they were spent according to the plan.

An example may help. When the Hollywood & Highland complex was built back in 1988, the City negotiated a contribution from the developer for more than $9-million to be spent on traffic improvements, etc. Years afterward, when I tried to find out if the money had been spent, I could get no answer. Yet, more than 10 years after the project was completed, I saw a motion before the City Council approving the expenditure of some of the mitigation money from that project. I am not implying that anything was done incorrectly. What I am saying is that the system was not set up for transparency with the public.

With today’s technology, there is no reason that a tracking system cannot be set up on a City website that easily allows the public to see what the community benefits packages are for each project and to track the expenditures of those funds as they occur. This is an issue of trust. If the public can see that these funds are truly going to benefit them and are actually being spent on the purposes intended, it will help to instill trust in the system.

Finally, in my conversations with neighborhood councils, one of their largest concerns is with evictions that are taking place to make way for some new projects. Most of these evictions are occurring with rent-controlled buildings and by-right projects. With the affordable housing crisis, some tenants are losing their homes with no place to go. The city needs to review its current policy to strike a balance between property rights and fairness for those being evicted. It is a complicated issue with no easy answers because of conflicting state and local laws, but the conversation needs to occur.

The voters have indicated by large margins in the last two elections that they understand the need to “densify” our City rather than to continue expanding outward. That is the proper course of action, but it is not easy to achieve. The Hollywood Community Plan update will be coming back later this year for reconsideration. Stakeholders will have ample opportunity for public input into the process. With all of the development and changes occurring in Hollywood, we really need to have an updated plan rather than operating under one that dates back to 1988. Let’s have the discussion necessary to adopt a plan that will move this community forward and which will help to reestablish trust in our land-use process.

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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.

 

Keep the Momentum Going in 2017

As we begin 2017, I am optimistic about our future prospects in Los Angeles and Hollywood. When it comes to jobs, Los Angeles County has been moving in the right direction. In 2016, employment grew by 65,300 jobs and the unemployment rate declined to 5.1 percent.

Here in Hollywood, the news on the jobs front is also positive. Viacom has begun moving into its new home in Columbia Square and Netflix will be moving into the new Icon tower at Sunset-Bronson Studios within the next month. Netflix announced a week ago that they will take an additional 92,000-sq.ft. of office space at their new Hollywood home, bringing their total to more than 400,000-sq.ft. on that campus. Between these two companies, another 1,500 jobs will be added to the Hollywood market. These are good jobs that will provide opportunities for Hollywood residents and ancillary businesses.

Other positive prospects in Hollywood at the beginning of the year include the opening soon of two hotels – the Dream Hotel (which includes several restaurants) on Selma Avenue, and the Hampton Inn on Vine Street. Between them, about 300 hotel rooms will be added to the market and they will provide hundreds of jobs.

Later this year, we should see the completion of J.H. Snyder’s 1601 Vine Street office building and the Kimpton Hotel. There may also be a few additional ground breakings this year – provided Angelinos do not approve the ill-advised Measure S.

For the past year, we have debated this initiative that would place a two-year moratorium on significant building within Los Angeles – singlehandedly killing jobs, housing and reasonable growth in our city. The vote on this measure is coming up on March 7th.

Proponents say their measure will force the City to update community plans and to outlaw “spot zoning” and that it should only last two years. In actuality, it is much more complicated than that. Among the proponents are some of the people who sued to invalidate the Hollywood Community Plan Update in 2012.  Thanks to their efforts, the community is forced to operate under an antiquated plan that was adopted in 1988. What are the chances that any new community plan approved by the city will go into effect without a lawsuit challenging it?  In reality, the moratorium called for by Measure S could last for years under such a scenario.

L.A. city and county residents this past November overwhelmingly voted for reasonable growth. They passed Measure M, which will generate $860-million a year to accelerate the construction of a working mass transit system for this region. L.A. city voters also passed Measure HHH, a $1.2-billion bond to build housing for the homeless.

The passage of Measure S could put the brakes on plans to add density around mass transit stations and it could also make it very difficult to build housing not only for the homeless, but housing for anyone in Los Angeles. It would also apply to needed public improvements such as expansion of hospitals, etc.

I am indeed an optimist, and believe that voters will reject a measure that makes it difficult to implement the objectives that they just approved in November. However, it behooves all of us to do our part in educating our friends and neighbors about the negative ramifications of Measure S and to get out the vote!

L.A. is moving in the right direction on jobs. We need to continue that momentum. With the defeat of Measure S, I am convinced this will be another positive year for L.A. on the jobs front. Let’s make it happen.

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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.

What is the Value of a Job – Close to Home?

The California Legislative Analyst’s Office (LAO) released a study in September (California’s First Film Tax Credit Program) that for the first time, offers an assessment of the economic and fiscal impact of the filming incentives that the State of California approved for our entertainment industry. This is particularly interesting because the LAO is the nonpartisan fiscal and policy advisor to the state legislature, which means we should be able to rely on the veracity of their report.

The study zeroes in on the tax incentives that were first adopted in 2009 which provided a total of $800-million in incentives spread over eight years at $100-million per year. The LAO did not evaluate the more recent incentives (AB1839) that were passed in 2014 and raised the subsidy to $330-million a year. That report will come in a couple of years. Why should we care about what the LOA says? Because when it comes time to renew the film incentives, the LOA’s report will likely carry a lot of weight with legislators!

Unless you are a policy wonk, you are unlikely to wade through this report, so let me share with you some of the most interesting data in the report.

The LOA estimated that the $800-million in tax credits went to productions that will spend an estimated $6.1-billion in California over the life of the first film tax program. They estimate that the “economic output of California was increased by between $6-billion and $10-billion on net over a period of more than a decade.” I wonder how many other investments by the state of California have resulted in numbers like this? That is money that went to buying goods and services and payroll for thousands of Californians.

What is particularly interesting is how much this new spending generated in tax dollars for state and local jurisdictions that would otherwise not have happened. The LAO estimates that the increase to State General Fund revenues amounted to between $300 and $500-million (not adjusted for inflation) and that the bulk of this increased revenue came in the form of state personal income taxes. Not only that, but they estimate that local tax revenues increased by roughly $200-million over the life of the program.

So, to summarize, the LAO is saying that on the low end State and local jurisdictions received $500-million in new taxes and on the high-end as much as $700-million in new revenues on an investment by the State of $800-million. This means that the net cost to the State was between $100 and $300-million. We haven’t yet seen any studies that estimate how many jobs have been saved, but conservatively it numbers in the thousands. These are the jobs of Californians, who previously were forced to leave the State to find work.

Paul Audley, the President of FilmL.A., Inc., tells me that prior to the passage of the 2009 tax credit, the L.A. region was losing key productions at an alarming rate. The worst quarter on record occurred immediately prior to the implementation of the tax credit. He added that with the enactment of AB1839 in 2014, California has regained ground and stabilized the vendor and crew base, and that currently, 25 percent of TV production and 10-percent of feature film production in L.A. is due to the tax credit program.

The LAO generally advises policy makers against tax expenditure programs, but in this case said that it was “understandable to defend a flagship industry targeted by other states” and that the credits “can be viewed as ways to ‘level the playing field’ to counter financial incentives to locate productions outside of California.”

If the State had not offered the incentives, it was on the way to losing its signature industry. Was this a good investment by the State? I think most Californians would say “absolutely.” Where else could the legislature have invested $800-million in economic development and seen income tax revenues coming back to the State of as much as $500-million with an economic stimulus as high as $10-billion?

But behind the numbers is a more important fact. California families were being separated for long periods of time since so many were forced to follow productions out of state if they wanted to work. We have heard from hundreds of people who are grateful to our public officials for enacting this program that has allowed them to return home to work. And that is a number to which you cannot attach a price tag.

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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.

Master Plan Is Of Paramount Importance

Last week, the City held a public hearing on the proposed 25-year Master Plan for Paramount Pictures. This storied studio, which dates back to 1912, is the last remaining major studio located in Hollywood proper. Warner Bros., Columbia, Fox and Disney got their start here, but all moved out many decades ago. As hearings go, this one was cordial. Even those who had issues were on their best behavior. Everyone understands how important Paramount is to our community.

As Chamber President & CEO, I pointed out how critical Paramount is from a jobs standpoint. With 5,000 people employed on the lot on an average day, Paramount is our jobs anchor in South Hollywood. That is important to our economy because there are numerous ancillary jobs nearby that depend on Paramount – whether a restaurant or prop house or catering truck.

These are by and large middle income jobs. And that is important in Los Angeles – which is the most expensive city in the nation on an income to housing costs basis. It costs a lot to live here. With sharp declines in the aerospace and manufacturing sectors since the 1990s, it is vital that we grow our homegrown entertainment industry.

When you consider that there are only about 200 acres in all of Hollywood that are industrially zoned, it means that we must maximize the jobs on the industrial land that we do have. And Paramount occupies 56 acres, plus an adjacent six acres used primarily for parking. That is more than a quarter of our entire industrially-zoned land.

In order for Paramount to survive in the very competitive entertainment sector, it must be able to expand to take advantage of opportunities as they arise. It was pointed out at the hearing that Paramount is the last of the major studios to update its master plan. That provides them with the perspective to see what their competitors are doing.

It also clearly delineates why they need to plan for technologically advanced sound stages with adjacent production offices, new climate control and lighting systems. It explains why they will need high-tech post production facilities, and adequate parking. It demonstrates why upgraded employee amenities are planned. It is all about competition.

Over the next 25 years, under the proposed plan, Paramount will invest $700-million with a $1.1-billion economic output during construction, which will generate 7,300 construction jobs. However, for me the more important figure is the number of permanent jobs that will be accommodated on the lot once the plan is fully implemented – 12,600 jobs with $3.1-billion in annual economic output. Those are jobs that will enable employees to truly have a “living wage”. Those are jobs that many of our children will occupy.

A year ago, the State of California approved AB1839, which vastly increased funding to compete for entertainment jobs, and to bring them back from other states, due to their film tax credit program. In the subsequent year, we have seen just how successful the program has been. We now have a chance to grow this industry once more – and we must, if we are to demonstrate to the State that their investment was worthwhile.

What I heard at the hearing were typical concerns – traffic, the height of some buildings, making parking structures attractive, the preservation of historic resources, signage. These are issues that I’m sure will be addressed by Paramount as it moves forward with its plan. I did not hear any issues that were insurmountable. We encourage the City to approve a reasonable plan for Paramount and for our community. We all have a stake in Paramount’s future.

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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

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 in the summer of 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

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.

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.

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.