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

City Sets Priority to Create Jobs

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

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

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

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

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

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

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

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

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

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

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

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

Business, City of Los Angeles, Community, Employment, Hollywood Chamber, Homeless

Leadership Needed to Resolve a Real Crisis

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

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

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

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

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

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

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

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

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

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

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

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

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.

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

Wage Mandate Puts Jobs on the Line

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

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

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

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

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

However, Beacon Economics has predicted that the minimum wage increase would have a chilling impact on the creation of jobs by businesses. The Beacon report says that if the plan is put into place “it will reduce job growth in the City from an expected 1.8 percent per year for the next five years to less than half that and potentially eliminate growth altogether. In other words, expected job growth would go from 30,000 jobs per year to somewhere between 2,000 to 15,000 jobs.”

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

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

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

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

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

Putting the Spin on the Minimum Wage Increase

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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