October 24, 2002
Would a Split Spell Business Relief?
Carol Silver supports secession. The owner of PIP Printing in Sun Valley for 21 years, Silver is running for a Valley City Council seat in the 7th District, in part because of her strong feelings about Los Angeles' failure to attract and retain companies.
"When I opened my company, I did work for Lockheed and for ZERO Halliburton, and now these businesses are gone," Silver said. "They were enticed to move somewhere else and they did. There are a number of high-tech firms that would like to be here [in the Valley] that would in no way, shape or form consider Los Angeles as it is currently set up."
As the vote on secession comes to a head in the Nov. 5 election, business groups find themselves playing a major role in swaying voters to their side. At stake, they say, are millions in future revenues, the economic livelihood of a region that is home to an estimated 250,000 Jews.
Not surprisingly, many of the most vocal pro- and anti-secessionist business voices are Jewish.
Many local business people claim that Los Angeles is scaring away business in the San Fernando Valley. Secession opponents said the breakaway would only increase the costs of doing business in the region and create more business-deterring bureaucracy.
Three of the most powerful business organizations in the Valley stepped out front of this debate, all in favor of secession.
Members of both the San Fernando Valley Board of Realtors and the United Chambers of Commerce of the San Fernando Valley decided earlier this year to support the movement. Then, after a slow summer, during which the breakaway effort appeared to be rolling rapidly downhill, members of the Valley Industry and Commerce Association voted last month to support secession, with 57 percent of its members who voted favoring the split.
The Industry and Commerce Association lists among its membership such prominent Valley businesses as Galpin Motors, Amgen and Boeing-Rocketdyne, as well as schools and hospitals, including Encino-Tarzana Medical Center and California State University Northridge (CSUN). Fred Gaines, association chairman, said the organization has an enormous amount of clout in the Valley business sector, so the decision was made to put the secession issue to a vote of all the members, instead of just the board of directors, as is usually done.
"The primary reason people voted 'yes' to support secession is that Los Angeles is the most expensive and most difficult city in the region to do business in," Gaines said. "The gross receipts tax is the highest in Southern California, and the city bureaucracy has become increasingly difficult to deal with, especially in the San Fernando Valley, where you are physically far away from City Hall."
Gaines said surrounding cities, such as Burbank, Glendale and Calabasas, have been much more effective at convincing businesses to move to their areas.
"Even in the city of San Fernando, which people think of as a less affluent area, they collect from their sales tax two times per capita the revenue of surrounding areas, like Sun Valley and Pacoima," Gaines said. "Why? Because they put an attractive package together and did redevelopment projects. To the extent the city of Los Angeles does a redevelopment project, it does it almost entirely downtown. The Valley doesn't get that kind of help."
However, Larry Levine, co-founder of One Los Angeles, an organization opposed to breaking away from the city, said secession would only make the situation more difficult for the Valley. Levine said the possible negative effects of secession really hit home for him after a taxi ride from the airport. When the taxi arrived as his home, the driver noticed Levine's "No on Measure F" lawn signs, and voiced his agreement.
"You want to talk about unintended consequences," Levine said. "This taxi driver said he was against secession. I asked him why, and he said if the Valley seceded, he would have to get a license and spend another $400 a year. Currently, he has to have a license in Burbank, Beverly Hills, Los Angeles -- any city where he drives," Levine said.
Most candidates for the Valley City Council have pledged to reduce the gross receipts tax, a city tax levied on businesses that last year provided $360 million in revenue to L.A. coffers, according to city finance specialist Rex Olliff.
However, Levine contends that it will not be possible to reduce the gross receipts tax without a concurrent reduction in public services.
"It's common sense that if you are going to cut somewhere, you have to replace it somewhere, either with reduced services or with other taxes and fees," Levine said.
It is difficult to predict what effect secession would actually have on businesses, but economists at both CSUN and UCLA have stated that a split between the Valley and the city will not cause the Armageddon hinted at by the Levine and Mayor James Hahn, among others.
A group of CSUN economists grew so frustrated with the anti-secessionists declarations, that they released a statement Oct. 11 stating there is no reason to expect that the cities would face higher government operating costs.
"The mayor said breaking up Los Angeles would slam the brakes on the economy, and this is just not true," said Shirley Svorny, a CSUN professor and founder of the university's San Fernando Valley Economic Research Center.
She said, "It's hard to see where that would hurt the economy. The question is, where do you want your local government to be, the city or the Valley? That's what people should vote on."
Christopher Thornberg of the UCLA Anderson Forecast agreed, saying, "Economically speaking, there are already 88 separate cities in Los Angeles County, and that's not even including about 20 percent of the county that is unincorporated, So we would be going from 88 to 89, or 90 if Hollywood also secedes. It really wouldn't make that much difference."
Thornberg, author of the Los Angeles portion of the most recently released forecast, said, "The way I put it is, what do you care about, more highways or sidewalks? Sidewalks are local, highways regional."
"You need to ask yourself if you want a local government that is able to respond to local problems, or a regional government that responds to regional problems but is not so good on the local ones," he said.
Either way the vote goes, both economists and Valley business people agree some change will have to be made.
"We're hopeful that, regardless of the outcome of the election, we can continue to work on the issue of reducing the burden of doing business in Los Angeles," Gaines said.