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Los Angeles City Officials Continue to Promote Enterprise Zone

In the Los Angeles Daily News Austin Beutner, first deputy mayor and CEO of the city’s Office of Economic and Business Policy, and general manager of the Department of Water and Power, writes about what L.A. is doing to improve its business climate, including the recent success in retaining Baxter Biosciences with the expansion of the Enterprise Zone:

Try this, for adding insult to injury. Not only did Chief Executive magazine recently rank California as America’s worst state for business, but the publication called us “the Venezuela of North America.”

In other words, the Golden State, with its world-class economy, is no better than a dictatorship that can’t keep its lights on.

Fighting words? You bet. But sometimes a slap across the face can also serve as a wake-up call. After losing more than 111,000 jobs in the Southland this past year and seeing marquee corporate names head elsewhere, we have to develop smarter ways to retain businesses and attract new investment.

That’s the thinking behind our recent decision to create a “business tax holiday” – an exemption from paying gross receipts taxes to the city of Los Angeles for three years – for businesses that set up shop here.

According to a University of Southern California study, this particular incentive will create up to 55,000 jobs and additional revenue for the city. Frank Gilliam, dean of the University of California, Los Angeles, Public Policy School, says the new policy “is a sound and very effective way for Los Angeles to demonstrate it wants to support business.”

In addition, new businesses that open in Los Angeles will also be given discounts of up to 25 percent from the Department of Water and Power; and DWP “SWAT” teams will fast-track their power and water service connections. Ultimately, this will create savings for all DWP users as we build a bigger customer base to share in fixed costs.

And, earlier this year, we led the city to lower taxes for local Internet businesses, not only saving L.A. millions in otherwise-lost tax revenue but maintaining our standing in that futuristic industry.

Indeed, proof of sincerity on the part of City Hall once was a hurdle in bringing Los Angeles’ economy back to life. But no more. Ronald Reagan used to joke that the scariest words in the English language are: “I’m from the government, and I’m here to help.” Well, the lesson of this “L.A. Story” is that the city government can and will continue to help businesses, including those already here, that want to be a part of our comeback.

I’ll give you an example of this new approach, which occurred recently: Baxter Biosciences, and the expansion of the East Los Angeles State Enterprise Zone.

Baxter, an Illinois-based biotech firm with more than 1,100 employees here in Los Angeles, was hedging on its Southland future despite having opened its doors here nearly 60 years ago. The city’s Office of Economic and Business Policy met repeatedly with company officials since the beginning of this year. We worked with the state to create an expanded enterprise zone that would allow Baxter not only to remain here, but to grow – in this case, by taking advantage of lower operating costs and newfound tax credits.

The result: Baxter stayed put in Los Angeles.

Will there be future Baxter success stories in L.A.’s future? We certainly hope so. It won’t be for lack of effort or for failure to think outside the box.

Los Angeles is long past overdue for a comprehensive overhaul of a business tax code most likely designed for businesses that shod horses and sold blocks of ice for a living. It’s that outdated.

We must better understand what businesses – trade, transportation and clean technology, to name but three – will define 21st century California. Yes, we must offer encouragement and incentives. But we also have to do this in a sensible way. These necessary changes to the city’s tax code must take into account the full impact on revenue and city expenses.

It is not going to be easy, but it’s something we must do if the city is to have a bright economic future.

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