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.

Wage Mandate Puts Jobs on the Line

For months now, the writers of the UC Berkeley policy briefs on the potential impact of a minimum wage hike in Los Angeles have been saying that a proposed 66 percent increase in the minimum wage will have a negligible impact on jobs.

Data now beginning to trickle out from our neighbors to the north – San Francisco and Oakland – should be raising alarm bells here in Los Angeles. Those cities approved wage mandates of $15 an hour and $12.25 an hour just last fall.

A commentary that appeared in the Wall Street Journal last week entitled “The Unappetizing Effect of Minimum-Wage Hikes” reported that in San Francisco and Oakland, restaurants are closing. The Abbot’s Cellar, rated as one of San Francisco’s top 100 restaurants, closed with the owners saying that they had no way to absorb the added costs. A popular vegetarian restaurant, named The Source, closed citing the higher minimum wage. Borderlands Books, a renowned bookstore, was only able to remain open, when customers put on a fundraiser to counter its added costs. In nearby Oakland, 10 restaurants and grocery stores decided to permanently close as a partial consequence of the wage hike.

The commentary reported that Ken Jacobs, one of the authors of the UC Berkeley study, responded to the negative reports by explaining that they were just labor-market “churn”.

I wrote last week that this same Berkeley study has predicted that there will be a net gain of 3,666 jobs by 2017 and 5,262 jobs by 2019 because of the “multiplier” effect of minimum wage workers having more money to spend.

However, Beacon Economics has predicted that the minimum wage increase would have a chilling impact on the creation of jobs by businesses. The Beacon report says that if the plan is put into place “it will reduce job growth in the City 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.”

Michael Saltsman, the author of the Wall Street Journal story, concluded by saying “It’s probably too late to save other Oakland and San Francisco businesses. But it’s not too late for cities like New York and Los Angeles to heed the evidence before following their footsteps.”

The final hearing being conducted by the City’s Economic Development Committee on the proposed wage hikes will take place tomorrow evening (Thursday) at the Museum of Tolerance, 9786 Pico Avenue, at 6 p.m. We urge our members to show up and express your concerns about the current proposal.

The Hollywood Chamber has called on the City to take steps to protect our small businesses and nonprofit agencies. At a minimum, any increases for these businesses/agencies must be spread over a longer period of time in smaller increments. Let them know that you agree with our recommendation and that the future of your businesses is on the line.

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Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 22 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood.

Putting the Spin on the Minimum Wage Increase

Let’s assume you were trying to secure passage of a major tax increase.  You would want to verbally minimize the effect of the increase in order to head off opposition.

That is exactly what proponents of the proposed minimum wage increase in Los Angeles are doing.  Two hearings have already occurred where they have turned out large numbers and offered information that paints an incomplete picture. (We have a chance to correct that at the remaining two hearings detailed at the bottom of this blog!)

Proponents have ignored the wage increase that has already occurred, which conveniently makes the impact of the current proposal seem less.  As you may recall, the State of California raised the minimum wage from $8 to $9, just last year.  Although proponents may accurately say that they weren’t responsible for that increase, it still needs to be taken into consideration when you discuss what the current proposal would do to businesses.

The fact is that over a four-year period, businesses will be asked to absorb a whopping 66 percent increase in the minimum wage.  And that doesn’t even consider the ancillary costs tied to the wage rate that will be triggered by an increase, including additional Social Security, Workers Comp insurance rates, unemployment insurance fees, etc.

The City hired a consultant who has put a positive “spin” on the impacts.  That is what we have seen in the two studies performed by the Center on Wage and Employment Dynamics from UC Berkeley.  In their most recent report, just released last week, they “estimate that firms’ operating costs will increase by only 0.5 percent by 2017 and 0.9 percent by 2019 as a result of the proposed law.”  They go on to say that these are cumulative estimates and will be spread out over several years, thereby implying that this increase can be implemented virtually pain free.

But think about it for a moment … how can the minimum wage rise by 66 percent with only a .5 percent increase in operating costs?  That just begs believability. The only way such a conclusion can be drawn is to throw into the calculations all of the businesses in Los Angeles and all of the jobs that are already paying above the minimum wage.

The 0.5 percent figure is therefore virtually meaningless, because it is not measuring the effect on the businesses with large numbers of minimum wage workers.

The Hollywood Chamber of Commerce has just completed a study of our members, asking how the proposed increase will impact their individual businesses.  The majority of our members are small businesses, and I believe the results of our study are a much more accurate measure of the effect of the proposed increases.

A total of 35 percent of our members, mostly small businesses, believe that the proposed increase will affect their operations negatively.  These are businesses that actually employ minimum wage workers.  They estimate that their total operating costs will increase by 21 percent and that their profit margins will decline by about 9 percent.

That 9 percent decline in profits is significant because for many businesses that may be the margin between profitability and operating in the red.  Fifty-five percent of our impacted members tell us that they anticipate having to either reduce employee hours or lay off employees to compensate for the increase. Another 25 percent believe the proposed wage increase may force them to close their businesses.

However, the Berkeley study estimates that we will actually see an increase in jobs, because minimum wage workers are expected to spend most of their increased earnings.  Due to the multiplier effect, they are projecting a net gain of 3,666 jobs by 2017 and 5,262 by 2019, thereby countering any losses at existing businesses.

Is this a realistic scenario?  I don’t think so.  Data is beginning to emerge in cities that have already adopted increased minimum wages that would cast doubt on that assessment.  In my next blog, I will share with you some of that information.

In the meantime, let me encourage you to attend the last two community hearings that the City is conducting next week.  If you believe your business will be negatively impacted, you must attend and share your experiences if we are to have any chance of getting some sort of relief for small businesses and non-profit organizations incorporated in the final version that is passed.   The two hearings will both be at 6 p.m. They are at:

Van Nuys City Hall, 14410 Sylvan Street, Tuesday, March 31
Museum of Tolerance, 9786 W. Pico Blvd., Thursday, April 2

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Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 22 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood.

The City Needs to Listen to Small Businesses

Over the past month, members of the Hollywood Chamber of Commerce have been pounding the pavement at City Hall, making our case as to why the City needs to give a break to small businesses with the proposed minimum wage increase.

The current proposal would raise the minimum wage from the current $9 to $13.25 an hour by 2017.  This would be achieved through $1.25 increases per year. Some councilmembers have even suggested an additional increase to $15.25 by 2019.

What has impressed me as we have made the rounds at City Hall is the compelling information that our small businesses have shared with City officials.  Let me share some of the insights that I have gained.

When a City raises the costs of doing business, it forces the business to compensate by reducing costs elsewhere.  That means businesses will not expand, fewer jobs will be available, employees’ hours will be cut, summer jobs for students will decrease, and businesses will make do with fewer employees.  That is hardly a recipe for job creation in the nation’s second largest city – which still has fewer jobs today than it did 25 years ago.

One of the industries that will be hardest hit by the minimum wage hike is restaurants.  The L.A. Times recently quoted data that the net profit margin for restaurants averages 3 percent, compared with a nearly 6.3 percent profit margin for all private industries across the country.  … which means that restaurants have a lesser ability to absorb these mandated increases.

Our restaurateurs say that payroll represents between 40 and 60 percent of their overall costs.  They scoff at the City-commissioned Berkeley study’s claim that they will only have to raise their prices by a cumulative 4.1 percent by 2017 in order to cover the minimum wage hike.

One restaurateur said that ancillary costs tied to wages such as Social Security, unemployment insurance and workers’ compensation premiums would add roughly 30 percent to the cost of the 47 percent increase proposed by the City. In addition, they would have to pay increased costs for their restaurant supplies as other vendors within the City raise their prices to also compensate for the wage increase.  He estimated that prices would need to be raised by up to 35 percent to fully recover the added payroll costs.  However, restaurants’ customers are highly price sensitive, which would limit a restaurant’s ability to raise prices significantly.

One retailer explained that the added payroll costs may push them over the brink. They are unable to hike their prices to compensate for the increased costs of the wage mandate, because of internet competition.  If they raise prices, they will lose customers.

A nonprofit organization detailed how they compete for statewide grants.  As they factor in the costs of the hike in the minimum wage, it will place them at a competitive disadvantage with nonprofits from other areas of the state and likely cause them to lose grants and jobs.  They anticipate having to cut their student jobs and hours by 40 percent.

The Hollywood Chamber of Commerce recognizes the need for an increase in the minimum wage and we have offered qualified support if the City takes steps to protect its small businesses.  Of course, the best solution would be for the City to offer an exemption for small businesses below an established threshold of employees. This would be the right step to preserve jobs and small businesses.

If that is not achievable, then the City of Seattle offers a model where they increased the minimum wage for small businesses at the reduced level of 50 cents annually.  An increase of that order, as compared to the $1.25 a year increase now proposed, would be easier for small businesses to absorb.

The City’s justification for raising the wage is to get people out of poverty.  What they have missed in all of this is that the businesses they would hurt the most are the ones that create the most new jobs.  These small businesses hire unskilled and untrained workers.  They train these employees and give them an opportunity to join the workforce and to move up the ladder as they acquire skills.  The proposed wage increase could hurt the very people the City wishes to assist.

Our message to the City Council is not to “kill the goose that lays the golden egg.”  Do the right thing and take steps to protect the small businesses that do so much for our economy.

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Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 22 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood.

This Would be a Good Year for City Business Tax Reform

Last week, Mayor Eric Garcetti announced that Yahoo was moving into the City of Los Angeles.  The firm will be relocating from Santa Monica to Playa Vista and will bring 400 jobs.  This is of course very good news for the City.

Of particular interest to me is what enticed Yahoo to make the move to the City of Angels.  The Mayor listed the City’s special incentives, including a three-year business tax waiver for businesses relocating from outside the city as well as L.A.’s special tax incentives for Internet companies.

The fact is taxes are a huge issue when it comes to enticing businesses to locate within a city. Taxes are also a significant issue when it comes to retaining businesses.  Only four years ago, Hollywood lost Legal Zoom and 300 high-paying jobs to Glendale when the City insisted on more than quadrupling that firm’s business taxes.

Years ago, when I worked in San Pedro, we fought a similar battle to retain Logicon, which was being enticed by Long Beach because of the differential in taxes.  It was only when the City found a way to reduce the gross receipts tax, that we were able to retain what was then an important aerospace company.

Last year, UCLA reported that L.A. had one of the worst job creation records of any major city in the nation.  I am convinced that the gross receipts tax is the reason why we lag so far behind.

And yet, it is very difficult to get meaningful action to alter this job-killing tax – primarily because the City garners 10 percent of its budget, about $440-million annually from this tax.  The City Council, facing difficult budget forecasts, is understandably reluctant to give up this source of revenue.

While we appreciate the fact that they did approve a small decrease in the tax last year, it was so small as to be almost meaningless if they really wanted to change the paradigm (16 percent decrease in the highest rate spread over three years).

This city really needs jobs.  Its resident need jobs.  And the city needs all that new companies bring to a city by way of civic engagement and the other contributions that they make.  Recruiting new businesses to relocate to Los Angeles and actively retaining our diverse and vibrant business community will require a new approach to our antiquated business tax structure.

The Hollywood Chamber of Commerce believes that the best tactic to bring jobs to Los Angeles would be to completely do away with the Gross Receipts Tax.  Numerous suggestions have been made on how to phase out the gross receipts tax.  Some have suggested that we replace it with something else – such as a net receipts tax.  One thing is for sure … if you really want to attract jobs, the city cannot replace an onerous tax with another onerous tax.  A great deal of thought needs to be put into whatever is done, so that we are competitive with our neighboring cities.

Wouldn’t it be nice if 2015 were the year when the City Council and Mayor finally tackle this problem and find a real solution?  What a gift that would be to our citizens, to take meaningful action which will help to generate countless new jobs within our city.

Then perhaps there would be even more stories about firms like Yahoo moving to Los Angeles.

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Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 22 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood.

It Was A Good Year For Hollywood

As the year 2014 draws to a close, I thought I would write one final column to end the year. Based on the scorecard that I keep, it was a very good year for Hollywood on the jobs front. The momentum for Hollywood continues to build.

Over the past several years, we have averaged three or four significant projects breaking ground on an annual basis. In 2014, by comparison, we had eight. They included: JH Snyder’s Hollywood 959 project with 244,000-sq.ft. of office space in the Media District, Kilroy Realty’s 700,000-sq.ft. Columbia Square project, Lennar’s 1411 N. Highland project with 76 rental units, Hollywood International Regional Center’s 182-room Dream Hotel, Hudson Pacific’s 315,000-sq.ft. Icon at Sunset-Bronson Studios, the 112-room Hampton Inn on Vine by Holivine Investments, Wood Partner’s Alta 5550 with 280-apartments, and finally JH Snyder’s 1601 Vine Street with 100,000-sq.ft. of office space.

This investment is breathing new life into Hollywood. Currently, we have about $1-billion under construction. Almost all of these projects are replacing parking lots or old dilapidated commercial buildings – not residential properties. Each of these projects will add vitality to the street and add to the safety of the neighborhood.

We also had two great leases announced in 2014 – both for Columbia Square. Neuehouse, out of New York, will occupy 93,000-sq.ft., while Viacom has leased 180,000-sq.ft. to house its cable networks, including MTV, Comedy Central, BET, and Spike TV.

With a million square feet of office space under construction and the Westside filling up, Hollywood is well positioned to benefit. We anticipate that Neuehouse and Viacom are the vanguard of new firms who will be coming to Hollywood in the future, bringing jobs that will benefit our community and Los Angeles.

Of course, there were also a few setbacks in 2014. In September, construction ceased on a 160,000-sq.ft. Target that is under construction at the corner of Sunset and Western. A judge ruled that the City should not have granted a variance for a height of 75 feet. Now the City must modify the ordinance to allow this usage. More than 200 permanent jobs are now on hold, construction workers were pulled off the job, and Hollywood residents will lose by having to leave the community to do the shopping they might have done here.

On the legislative front, we had one huge victory in the passage of AB1839 – the film tax credits bill that raises the annual credits available in California from $100-million to $330-million. This was the culmination of years of lobbying the State to take decisive action to save our signature industry. This won’t bring back all of the lost business, but it will mean that thousands of local jobs are saved and that more families will not have to be separated due to jobs outside of California. Kudos to our legislators for making this happen.

As we approach the year 2015, I am optimistic about Hollywood’s future. The investment in this historic neighborhood by responsible developers is something for which we can all be grateful. We are indeed making a difference, and showing that Hollywood can be an example for the rest of the region of how to successfully revitalize a community.

Our very best wishes to you for the holidays and New Year!

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Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 22 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood.

Viacom Announcement is Huge for Hollywood

For those of us who have been working to revitalize Hollywood for many years, the news last week that Viacom has agreed to rent 180,000-sq.ft. of space at Kilroy Realty’s Columbia Square development is welcome news indeed. The media titan has agreed to move its cable television networks MTV, Comedy Central, BET and Spike TV to the complex now under construction on Sunset Blvd. at Gower. How big is this for Hollywood and Los Angeles? Well, let’s just say it is H-U-G-E!

For the City of Los Angeles, the announcement makes a statement that Los Angeles can indeed attract major entertainment firms. Some of the jobs are being relocated from other sites in L.A., but a significant portion are coming here from Santa Monica and Burbank. And these are prestige companies, the type that any city would do almost anything to attract. Not only will these businesses strengthen the tax base of the City, but they will also bring jobs here by the hundreds – to the tune of more than 600.

For Hollywood, the announcement is proof that the Hollywood comeback is for real. For most of the past three decades, companies were leaving Hollywood. We can point to this as evidence that the jobs outflow has now reversed. Furthermore, these employees will spend dollars in Hollywood, at restaurants and retailers, which will strengthen our economy. Finally, it substantiates the fact that Hollywood will remain an important commercial district within the metropolitan region.

For the developers, the announcement will create momentum as far as attracting other companies to Hollywood. Kilroy Realty, Hudson Pacific and J.H. Snyder have made a significant bet on the future of Hollywood by investing here. Hollywood currently has one-million-sq.ft. of office space under construction, more than any place else in Los Angeles. Trophy deals such as this confirm that they made the right decision.

For the Community, the arrival of Viacom is also a huge victory. We have touted the goal of creating a truly great live-work community, where people can reside with only an occasional need for a car. That means putting jobs and residences in close proximity to each other and to transit options. And these are companies that give back to the community. Viacom, through its Paramount arm, has for years organized their annual Viacommunity Days of service, and I imagine we will now see more of that from the new Viacom divisions. Furthermore, we can anticipate that these and other new firms moving here will become part of the community by supporting local arts, education and social service programs.

So, this is indeed a big win for Hollywood. And I can’t think of a better way to bring in the holiday season and to end the year than this. May the momentum continue in 2015!

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Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 22 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood.