Category Archives: Economic Development

City of Los Angeles, Economic Development, Entertainment, Hollywood, Jobs

Master Plan Is Of Paramount Importance

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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

Economic Development, Hollywood Chamber

Columbia Square Shows How Development Helps the Community

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With all of the recent attacks on developers by NIMBYs (Not-in-my-backyard) who don’t want to see growth, I thought I would provide a case study on the positive aspects of new development.

Columbia Square is a perfect example. This $450-million, 700,000-sq.ft., mixed-use project by Kilroy Realty will have an “outsized” positive impact on Hollywood.

One of the most historic buildings on Sunset Blvd., Columbia Square was the West Coast home of CBS for many years. Built in 1938, it originated such shows as Jack Benny’s Lucky Strike Program, the Adventures of Ozzie & Harriet, and The Swan Show starring George Burns and Gracie Allen. When CBS moved their studios out of Hollywood in 2007, its future was in question.

Now, thanks to the work and investment of Kilroy Realty Corp., Columbia Square is shining once more. The historic buildings have been restored and renovated as the L.A. hub for Neuehouse, a New York-based creative workspace collaborative. Acclaimed New York architect David Rockwell, who also designed the interior of the Dolby Theatre, designed the space. Architectural Digest gave the facility glowing reviews in January.

Writer Mayer Rus said of the space “If you’d like a window into the leading edge of creative work (and play) spaces in 2016, you need look no further than the recently completed NeueHouse Hollywood, the West Coast counterpart to the original Manhattan office hub for the so-called creative class. …the L.A. complex boasts a few attributes its Gotham forebear cannot claim: a building with an impeccable modernist pedigree; a site with a long and compelling history in the production of popular American culture; and the kinds of amenities one can enjoy only in a heavenly Mediterranean climate.”

Rus continued in the Architectural Digest article that “there are a number of restaurant and lounge experiences, including alfresco dining on the roof terraces – in facilitating discourse and comfort in the workplace.”

Not only has the historic building been preserved, which benefits the community enormously, but it is a place that visitors and residents can patronize and enjoy. Several restaurants have or are in the process of opening, including Rubies + Diamonds, Sugarfish, Sweetgreen and Paley.

Also preparing to move into Columbia Square is Viacom. CEO Philippe Dauman recently discussed the pending move into 180,000-sq.ft. of space with the L.A. Times. He noted that this will become the headquarters for their West Coast media networks and home base for about 700 employees from MTV, Comedy Central, VH1, BET, Spike, TV Land and Logo. It will provide them with new production stages, a lot of shooting space and a rooftop area for shoots with views of the Hollywood Sign. He noted that the Hollywood facility will be the largest mobile content studio in the industry.

Besides Viacom, Kilroy has announced that Fender Guitar has leased 40,000-sq.ft. and will be moving their headquarters from Scottdale, Arizona, to Hollywood. These will be new, high quality jobs for Southern California and Hollywood.

After the loss of dozens of entertainment firms over the past 20 years, the announcements by Viacom and Fender Guitar send a great message that Hollywood is back. However, of even greater import is bringing more than 700 quality jobs to the community. Hollywood has an opportunity to show that with smart growth, it is possible to grow a community with balanced jobs and housing. We are building both. We currently have 1,800 housing units under construction and more in the pipeline. In addition, there are several hundred thousand square feet of office space in development as well as several hotels.

This balance of different uses is what makes the revitalization of Hollywood so exciting. Locating jobs and housing in close proximity with nearby entertainment options and shopping are especially attractive to the Millennials who are locating here. When you consider the compact nature of Hollywood which makes it walkable, as well as its transit connectivity, one begins to see how growth can and should occur to make a community livable.

Due to this single project, we will see the preservation of a historic landmark, hundreds of construction jobs, hundreds more permanent jobs, new opportunities for dining as well as outstanding architecture. It is a win-win for the community. And it would not have been possible without the vision and investment of a developer.

Let’s keep this in mind when next you hear the negative attacks against development.

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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

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

Why it is thumbs down on Neighborhood Initiative

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

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

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

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

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

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

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

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

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

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

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

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

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

Economic Development, Hollywood Chamber

Target Should Not Be A Target Any Longer

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For more than a year now, construction has been at a standstill on Hollywood’s new Target store at the corner of Sunset and Western Avenue.  This would be Hollywood’s first “department” store since Sears closed their nearby store in 2008.  This store will allow Hollywood residents to shop locally without having to leave the community for many necessities, and it will provide 250 critically-needed jobs for the neighborhood – if it is allowed to open.

Construction ceased because a neighborhood group sued, complaining that the City should not have granted an exception to what is known as the Station Neighborhood Area Plan (SNAP) that governs construction in the area.  A judge agreed and said the City should have changed the zoning on the property rather than granting an exception.

The City has now come back with a recommendation to meet the judge’s order by proposing a new Subarea F specific plan amendment to apply to large scale highway-oriented commercial projects.  This is a reasonable addition to the SNAP ordinance that addresses how superstores can properly fit into the urban context.

However from the tone of the first hearing last month, some residents are still not satisfied.  A few even called for the half-built Target to be torn down and rebuilt to the 35-ft. height allowed by the SNAP ordinance, with underground parking.

It may help to provide a little more background.  The SNAP ordinance allows mixed-use projects (retail and residential together) to be built to a height of up to 75-feet.  If a project is not mixed-use, it is only allowed to build as high as 35-feet. The City had felt the benefits of the Target project to the community merited an exception to SNAP to allow for the project to be built to the higher height.

Why are these residents so insistent on the 35-ft. height?  Some said that their desire is to have more mixed-use projects to meet the need for housing in the area.  Others pointed out that the Target in West Hollywood has underground parking and so this one should as well.

Now, by my latest calculations, there are 320 housing units under construction at the moment within the SNAP area and another 762 units in the pipeline.  That is nearly 1,100 housing units.  Exactly, how many housing units do they want to see?  Is it their object that every project that is built within SNAP be a mixed-use project?

As far as the desire to have underground parking, I would again ask why the parking must be underground.  The design of this project is such that the parking would be shielded and there would be other retail on the ground floor.  It is not going to be unsightly.  What is unsightly is this half-finished building.

Within the last month, two new mixed-use projects have been announced across the street on two sides of the Target.  Each of these will be six or seven stories and up to the 75-foot height limit.  So what would we be achieving by forcing the Target to be reduced to 35-feet?  Certainly not any view protection.  There is no reasonable rationale as to why a strictly-retail center should be limited to 35-feet when its neighboring buildings are at 75-feet.

The proposed new Subarea F designation for retail makes sense and should be approved.by the Planning Commission when it meets this coming Thursday, November 12th, at 8:30 a.m. at City Hall.  If you agree with me, I would urge you to attend the hearing and let the commissioners know that Hollywood needs this project and its 250 jobs.  It is time to move forward with a project that will benefit this community.

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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

Economic Development, Hollywood Chamber

Hollywood Is On Top With Office Development

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Last month, the Los Angeles Business Journal published its “Real Estate Quarterly” report. One statistic caught my eye in particular – the amount of office space under construction in Hollywood.

They reported the total was 1,123,407-sq.ft. Now that is significant in and of itself, but when you look at the total amount of space under construction in L.A. County, it becomes even more impressive. The total space being built in the county at this time amounts to 1,951,171-sq.ft. So the amount of office space underway in Hollywood is 58 percent of everything currently being built in this county! Amazing!!

It wasn’t that many years ago that we were begging people to build a new office building in this community. There hadn’t been a spec office building built here in 30 years. Because of the City’s adaptive re-use ordinance that allowed old buildings to be converted to other uses, we had lost more than 200,000-sq.ft. of office space previously used for commercial purposes.

There was a real question as to whether Hollywood would remain a viable business district. Over the past 20 years, there had been an exodus of media firms moving to the Westside or San Fernando Valley. Every television station except KTLA abandoned Hollywood. At one time we had numerous radio stations broadcasting from Hollywood, and they all moved out, including KNX and KFWB. Many ancillary firms also moved.

As the revitalization gathered steam over the past decade, we have been hopeful that office development would come and that some of these entertainment firms would return. However, the challenge was always that it is very difficult to get an office project financed unless you have a minimum of 30 to 40 percent preleased. That seemed to be a very challenging proposition – to find a major company willing to sign a lease in Hollywood two years before they could occupy the space.

So we are very appreciative to three firms that have seen the potential in Hollywood – Hudson Pacific, JH Snyder, and Kilroy Realty. These firms were willing to take the gamble on Hollywood and to finance their own projects, betting that there would be tenants willing to come here. Some would assume this was a pretty big bet on an unproven market.

Yet that is what they have done, and we are pleased to be seeing that their investments in Hollywood are paying off. Already, leases have been signed at Columbia Square by Neuehouse for 93,000-sq.ft. and by Viacom for 180,000-sq.ft. Broad Green Pictures has signed a lease for 36,000-sq.ft. of space at the Hollywood 959 project. We understand there are several other significant deals very close to signing that may be announced shortly.

What does this mean for Hollywood? A great deal. It means there are going to be hundreds, if not thousands of new jobs created here that may provide employment for our local residents. All of these employees will be needing places to dine and shop and so our retailers and restaurants will benefit. The firms will need supplies and so vendors will benefit. Many of them will have clients visiting, and so our hotels will benefit. As stakeholders, these firms will want to be involved in the community, and so our many local causes and nonprofits will benefit.

We realize that it is unlikely Hollywood can maintain its place as the number one place for office construction in the county indefinitely … but for the moment we are “king of the hill.” So let’s celebrate, and thank these major developers for their investment in Hollywood’s future. I have said many times that it is impossible to revitalize a community without private sector investment. We are glad that there are firms willing to invest their money in Hollywood. It is a challenge to build a major development when it may take five or six years of working through the system before a shovel can be turned on a project. Fortunately, these companies have been willing to take on the challenge, and the results have been nothing short of spectacular!

Hooray for Hollywood, and hooray for the companies investing in 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.

Business, Community, Economic Development, Employment, Hollywood, Hollywood Chamber, Jobs

Millennials Setting the Pace for Hollywood’s Future

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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.

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

A Jobs Strategy for L.A.?

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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.

Business, California, Economic Development, Employment, Hollywood Chamber

What California Can Do to Improve Its Business Climate

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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.

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

City Approved Wage Hike is Bad News for Small Businesses

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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.

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

How the Community Loses When Developments Are Stopped

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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.