Category Archives: California

California, City of Los Angeles, Community, Homeless

Finally, A Step in the Right Direction to Help Mentally-Ill Homeless

164 Comments

Recently, I have observed an upswing in the number of residents, businesses and tourists asking why the City and State allow obviously-mentally ill people to wander our streets, endangering both themselves and the public. It is a fair question, but there has been no acceptable answer to this question.

Finally, we are beginning to see some of our public officials address what is a deplorable situation. Plaudits go to our L.A. County Board of Supervisors for approving a motion last week asking the California State legislature to change how they define the words “grave disability”, which might have a positive impact on the current situation.

Under the Lanterman-Petris-Short Act of 1967, a person is gravely disabled – and can be taken into custody and forcibly medicated – only if they are unable to meet basic needs for food, clothing or shelter. The county is requesting that the definition be expanded to include those who are unable to seek needed medical care, which would allow custody and compelled treatment of people who, in a court’s view, need medication but aren’t seeking it on their own.

Supervisors Kathryn Barger and Mark Ridley-Thomas co-sponsored the motion, and Barger noted that the county has to do better at getting people the healthcare they need. She’s right!

Only a year ago this week, a mentally-deranged homeless person entered the Jack-in-the Box restaurant on Sunset Blvd. at Cahuenga and stabbed three customers with a large knife before the LAPD shot him dead. Just this past Thanksgiving weekend, another mentally-ill person threatened people on Hollywood Blvd. with a screwdriver before grabbing a knife from a restaurant and stabbing a tourist.

These are not isolated cases. I hear frequently of other incidents involving homeless individuals who are mentally unstable. In my 25 years at the Chamber, I have never seen it as bad as it is today. The situation with the mentally ill has definitely deteriorated over that time period, which calls for a review of how they should be treated and a review of the civil rights argument.

We want to make this a walkable urban community, but that cannot happen if people are worried they will be attacked by the mentally ill. At some point, we will see an impact on jobs and our economy if these issues aren’t addressed. People will not visit or work in a community if they don’t feel safe.

I am encouraged that at the State level, Assemblymembers Laura Friedman and Miguel Santiago have just introduced AB1971, which would expand the definition of “gravely disabled”. As this measure is debated by the legislature, there will likely be a blistering attack from civil rights activists who believe that forcibly treating anyone will infringe on their civil rights.

It is time for the pendulum to swing back to the center. It is time for our representatives to recognize that the homeless man who was shot at the Jack-in the Box would have been better served if he had been forced into a treatment program. It is time for our representatives to recognize that the public also has a basic right to be able to walk in their community without fear that they will be attacked by someone who should be in treatment.

Voters approved Measures H and HHH to provide the funds to address our homeless crisis. If voters’ expectations are not met, then undoubtedly there will be political consequences. Providing housing and more funds for counseling and outreach will not do the job, unless the city and county also address getting the mentally-ill homeless into treatment. Congratulations to our Board of Supervisors for recognizing the problem and proposing a reasonable step, and thanks to Assemblymembers Friedman and Santiago for moving this forward.

Let’s hope the State legislature has the courage to adopt AB1971 and change the way the State defines “grave disabilities” to protect both the public and our homeless population. Solving a crisis today should not require relying on an outdated definition written over 50 years ago!

___________________________

Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 25 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood.

California, City of Los Angeles, Community, Economic Development, Hollywood, Hollywood Chamber, Revitalization

The Elephant in the Room

417 Comments

The legislative season is over, and we finally have begun to see our California legislature act on the housing crisis in this state. The Governor signed 15 bills that were intended to smooth the way to more housing being built.

Over the past year, you have heard me discuss the importance of addressing California’s housing crisis. So, I think it is appropriate to commend the legislature and the Governor for taking steps to start addressing what is an enormous problem.

Among the bills that were passed was a $4-billion bond measure to provide new affordable-housing units, a provision to streamline housing requirements in cities that aren’t building to state-mandated goals, incentives for cities to plan new neighborhoods, and prod local governments to get shovels into the ground, and giving the State the ability to review any action or failure to act by a city or county that it deems out of compliance with its housing element.

According to the California Department of Housing and Community Development, the State is currently falling about 100,000 units short each year in what it should be building to meet the demand. Under the best-case forecasts, the 15 new measures will only make a dent in the shortfall.

Our representatives admitted this is only a down payment on what is needed to really have an impact on the housing crisis. The fact is, the one way to resolve the housing shortfall in a big way is to spur the private sector to build more units. The only way to do that is to address the “elephant in the room” which is to reform the California Environmental Quality Act – more commonly referred to as CEQA.

Achieving CEQA reform is a monumental task because of the many special interest groups that have grown a cottage industry of using CEQA to squeeze developers for money, concessions, or to outright stop needed projects. The Hollywood Chamber was a part of a broad-based statewide coalition that worked for years to reform CEQA. A couple of years ago, we thought reform was finally doable. However, amendments were tacked on to the reform bills that would have ended up making CEQA compliance even worse, so the reform effort was dropped at that time.

Before that, in 2011, our Chamber convinced then-State Senator Curren Price to introduce SB735 for us. We thought we had the perfect solution – a measure that would strengthen the timelines for judicial consideration of CEQA cases. The idea was to require the courts to meet stricter administrative deadlines, enabling judges to decide cases as was originally the intent of the CEQA law.

However, our effort died when the State Judicial Council opposed our efforts, saying they did not have the wherewithal to speed up the process. Because we were just coming out of the Great Recession, there was no chance of providing the funding that they needed to expedite the process at that time.

So, when the Legislature takes this issue up again next year, I have a few suggestions. Why not provide more funding for judges to review CEQA cases and also to provide an expedited litigation schedule for resolution of an action and stricter timelines for appeal of a judgment for all projects? While we appreciate that the State extended an expedited schedule for court review of large Environmental Leadership Development Projects, this should apply to all projects – especially housing. Providing more funding for the courts review process might be the best investment the State could make in speeding up the construction of new housing.

This wouldn’t solve all CEQA-related problems, but it would be a start. While it wouldn’t please those whose goal is to delay and delay and delay, I believe the majority of Californians would support common-sense action that would still allow CEQA challenges but speed up the litigation.

And here is another suggestion. Rather than just encourage cities to meet their housing goals, why not add some teeth to hold cities accountable to meet the mandate of their housing goals? Just last month, the news media reported that the city of Redondo Beach approved a moratorium on new multifamily units even though they had only achieved 41 percent of their housing goals. If there are no penalties, cities will continue to consider meeting housing goals as a suggestion rather than a mandate.

There will be other suggestions made, but I thought I’d get a head-start out of the gate. Let’s encourage our legislature to take the hard steps to resolve the housing crisis.

___________________________

Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 25 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood.

 

California, City of Los Angeles, Jobs

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

7 Comments

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.

_____________________________
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.

Business, California, City of Los Angeles, Hollywood, Minimum Wage

Case Study Reveals Downside of Minimum Wage Hikes

17 Comments

Los Angeles and California embarked on an unprecedented experiment this past year, when both voted to phase in a $15-minimum wage over a period of years. In L.A., the rate will reach $15 in 2020 for businesses with 26 employees or more and in 2021 for smaller businesses. In California, the $15 rate will be achieved in 2021, making it the highest state minimum wage in the nation.

Business concerns were minimized by both the City Council and the State legislature, who believed that adverse impacts would be minimal. There will be a lot of interest over the next few years to see whether businesses were playing “chicken little” in complaining about the anticipated impact to their businesses and if the economy can absorb these increases with minimal disruption.

While it may take a while to measure the impact of the general $15 minimum wage, there is a more immediate gauge that might indicate whether we need to worry. In 2014, a year prior to the wage vote that was applied to all businesses, the City Council approved a dramatic increase in the minimum wage for nonunion hotels with 300 rooms or more – raising the wage from $9 an hour to $15.37 an hour beginning in July 2015. For hotels with between 150 and 299 rooms, the increase was delayed a year to July 1, 2016. It was a jump of 70.7-percent all at once. This unprecedented increase affected only certain hotels and included all tipped and non-tipped employees.

In Hollywood, only the Hollywood Roosevelt Hotel was impacted by the increase in 2015. So I thought it might be interesting to ask the hotel how it is coping with the minimum wage increase. I spoke with Brett Blass, the Chief Operating Officer (COO) for Journal Hotels, the hotel’s management company. Let me share with you what I learned.

Blass told me that the minimum wage increase has cost the hotel almost $3-million annually – a significant bite to its bottom line. Unlike some government entities, businesses must operate in the black if they are to survive, and so the hotel was forced to take action to cut costs.

Especially of concern to Blass is that the ordinance did not include hotels with which the Roosevelt competes for customers, eliminating a ‘fair and level playing field’ amongst the hotel competitive landscape. “It is impossible to fairly compete when operating a hotel bar, restaurant or the hotel itself when singled out by government wage mandates such as this,” he emphasized. “A hotel can’t just raise all prices, as pricing is marketplace driven.”

The hotel chose to close one of its three restaurants for lunch, Public Kitchen & Bar, resulting in the loss of 10 jobs. “Restaurant margins are not high to begin with,” Blass pointed out. “By increasing tipped wages so much, we found margins at an all-time low or in the red completely.”

Over time, between 30 and 40 full-time positions were eliminated, about 8- percent of the hotel’s total staff. (This job loss is in line with the experience of hotels in proximity to Los Angeles International Airport that were impacted by a similar City-imposed increase a few years before.) In addition, several planned new jobs were put on hold.

Besides this, numerous employees had their hours more closely scrutinized or cut – especially tipped workers in the restaurants. When the increase is applied to tipped workers, the overtime pay becomes astronomical for a business to pay. Overtime is calculated not just on the $15.37 an hour wage, but also on the tipped wages. With the new minimum wage and tips, waiters are earning between $60 and $70 an hour at the Roosevelt, according to Blass. Add in overtime at time-and-a half, and you get the picture. A business cannot afford to have an employee work more than eight hours and so time is reduced to ensure that an employee does not exceed that amount.

The minimum wage hike caused “bleed-up” to happen as well, according to Blass. The hotel had to raise their managers’ pay to keep them above the minimum wage employees.

“We had planned greater annual raises for many of the non-tipped work force,” reflected Blass, “but had to stick to the minimum wage increase only because of the massive and immediate increase to the tipped wage. About 35-percent of the total hotel staff are tipped, so those folks taking home tips every day got the biggest minimum wage lift.”

He also noted that the hotel just completed $22-million in guest room renovations, which would probably have been considered differently had the annual wage increase been known at the time of construction planning.

So, there you have it – a case study showing the actual impact of a minimum wage hike. Now, I’m sure the hotel employees who received increases were very happy, but I wonder what happened to the 8-percent who lost their jobs? Perhaps they found employment at other hotels covered by the wage hike, but if the cutbacks experienced at the Roosevelt are an indication, I doubt it.

I realize that there is a difference between a one-time wage-jump of 70.7-percent versus a phased-in increase, but there is still a lot of good information we can glean from this case study. There are important questions that experts should analyze, such as how many new jobs will not be created by businesses coping with their increased overhead costs, and how much investment in their businesses will not occur since the money is not there. Such investment would create other jobs within the economy that now might not happen.

I wonder how much prices are going to rise over the next few years as the wage hikes work their way through the economy, and how much this is going to cost all of us. I wonder how many employees are going to lose their jobs and what efficiencies businesses will implement to reduce their overhead.

As we stated at the hearings, no one was arguing that an increase in the minimum wage was not warranted. However, based on the Roosevelt experience, I believe more caution and restraint would have been the wiser course. Now we wait to see how this plays out, and hope for the best.

_____________________________
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

Business, California, City of Los Angeles, Community, Economic Development, Hollywood Chamber

Why it is thumbs down on Neighborhood Initiative

10 Comments

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

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

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

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

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

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

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

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

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

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

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

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

_____________________________
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

Business, California, Economic Development, Employment, Hollywood Chamber

What California Can Do to Improve Its Business Climate

9 Comments

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.

_____________________________

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.

Business, California, City of Los Angeles, Economic Development, Employment, Hollywood, Hollywood Chamber, Jobs, Minimum Wage

Wage Mandate Puts Jobs on the Line

10 Comments

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.

_____________________________

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.

Business, California, City of Los Angeles, Community, Economic Development, Employment, Hollywood, Hollywood Chamber, Jobs, Minimum Wage

The City Needs to Listen to Small Businesses

17 Comments

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.

_____________________________

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.

Business, California, City of Los Angeles, Employment, Hollywood, Hollywood Chamber

Labor Day Should be About Creating Jobs

20 Comments

In my view, when we celebrate Labor Day it should be about creating jobs to provide opportunity for our citizens. When an economy is strong and when there are jobs, then there is plenty of room for upward mobility.

This past Labor Day, Mayor Eric Garcetti unveiled a proposal to hike the minimum wage in three increments to $13.25 an hour by 2017 and to index it to inflation thereafter. That would be a $10.25 minimum wage in 2015, $11.75 in 2016 and $13.25 in 2017. As this proposal moves forward, it may provide an opportunity to have a healthy discussion not only about the minimum wage but jobs as well.

I think most people would agree that there is a need to adjust the minimum wage. However, the State of California just raised the minimum from $8 to $9 an hour on July 1st. So the question we need to discuss is how much of an additional increase is warranted? When you add the City’s proposed increases to the State’s, it adds up to a whopping 66 percent increase in only three years. That is a substantial amount for many small businesses to absorb.

The City commissioned a study of the proposed hike from the Institute for Research on Labor and Employment at UC Berkeley. They estimate that in the first full year of implementation, workers will earn an additional $1.8-billion. What they fail to say is that this $1.8-billion is coming from the pockets of small businesses.

The study says that about half of all affected workers will be in four industries: restaurants (17.4%), retail trade (13.9%), health services (11.7%), and administrative and waste management services (9.5%). Restaurants, the most-impacted industry, are expected to see total payroll costs rise by 14 percent, but when you add in all operating costs, the study claims it is “only” a 4.7-percent increase in operating costs. They expect restaurants will raise their prices by only about 4.1-percent to recover the additional cost. They note that they “cannot rule out the possibility that the restaurant industry might experience small reductions in growth.”

It seems to me that these consultants are spinning this as a “no pain” wage hike that is going to add money to the pockets of those most in need, and have virtually no impact on businesses. In fact, they say businesses are going to benefit because they are going to see “improved worker performance and reduced turnover.”

If only things were so simple. What the researchers fail to consider is the narrow profit margin within which many businesses operate.

The Daily News ran an editorial yesterday calling for a “full, public debate” not just about the proposed minimum wage, but also “a wide-ranging discussion of what the city can do to lift both workers and employers.” Certainly, if the City took action to do away with the Gross Receipts Tax, then the business community would be more open to the idea of a hike in the minimum wage. Also, the separate proposal to raise the hotel minimum wage to $15.37 should be dropped, with the hotels treated the same as other businesses.

The Chamber’s Legislative Action Committee is scheduled to be briefed by the Mayor’s Office on Thursday, September 11, at 4:30 p.m. at the Chamber. We invite any members with interest to attend. We expect the committee to make a recommendation to the Chamber board for a position.

In the end, it should be all about creating jobs to help those on the lowest rungs to advance. Simply taking $1.8-billion from the pockets of small businesses does not help them to create more jobs! Let’s work together to not only improve workers’ lives but also to improve the business climate.

_____________________________

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.

Business, California, City of Los Angeles, Community, Economic Development, Employment, Hollywood

NeueHouse Brings Jobs to Hollywood

10 Comments

It was very good news for Hollywood on a number of fronts when we heard a week ago that Kilroy Realty had signed NeueHouse to a 93,000-sq.ft., 15-year lease at Columbia Square, now under construction.

It was a demonstration that there is indeed strong interest in the Hollywood office market. This bears out the faith that Kilroy Realty, Hudson Pacific, and J.H. Snyder have shown by making significant investments in Hollywood’s office sector. There hasn’t been a speculative office building erected in Hollywood in 30 years, so with more than 700,000-sq.ft. of spec space under construction, these firms are helping to shape the future of Hollywood.

NeueHouse is a New York operator of avant garde communal office space. They intend to take the incubator-office concept a step further by designing an environment where strangers can work independently or come together serendipitously. They will cater to people in the creative arts such as film, design, publishing, the performing arts and technology. They arrive on the heels of WeWork, another communal office space provider, which successfully launched in Hollywood a couple of years ago. Although WeWork has a slightly different niche than NeueHouse, it has demonstrated the potential that Hollywood has to serve this young, creative market.

I am sure that one of the things that NeueHouse found attractive was the thousands of young Millennials who have moved to Hollywood in the last 10 years. Over the past decade, 2,800 housing units have been built in central Hollywood. With another 1,600 under construction today, we are adding a solid base of young, educated and talented residents who will help to fill the new office buildings in Hollywood. Unlike previous generations, a significant portion of Millennials do not wish to commute from the suburbs and would rather locate in a central, high energy urban environment. Hollywood fits the bill. John Kilroy, Jr., the chairman of the board of Kilroy Realty, told us at our recent annual Economic Development Summit that 77-percent of Millennials plan to live in urban centers, which is why his firm has invested in Hollywood.

This synergy between a talented pool of young workers and quality office space built specifically to meet the needs of the Millennial generation should work well for Hollywood’s future.

NeueHouse is the first of many new firms that we anticipate will set up shop in Hollywood. We look forward to welcoming them to Hollywood, because, when it comes to building a strong community, it is all about jobs.

_____________________________

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.