Who Needs LA?

Posted: May 21, 2014 12:01 AM
Who Needs LA?

When I was growing up everyone one used to know who the mayors of major cities were. In Chicago, it was a Daley, always a Daley. In New York, it was it was Ed Koch. In Los Angeles, it was Tom Bradley.

But few can name the mayor of LA today. It’s so much the better for LA’s current mayor Eric Garcetti, who, by all accounts outside of Los Angeles, is doing a lousy job.

And while sheer size ensures that the metro area of Los Angeles counts for something economically, LA is no longer the cultural and business leader it once was. High taxes have driven companies out of LA proper and out of California all together. The city’s newspaper of record the LA Times no longer holds the sway it once did- its parent company just put it up for sale. And “things” Los Angeles no longer bulk large in the nation’s discourse, unless it’s Hollywood trivia or gang culture.

As Joel Kotkin wrote in the New York Times in July of 2009: “Los Angeles today is a city in secular decline. Its current political leadership seems determined to turn the sprawling capitalist dynamo into a faux New York. But they are more likely to leave behind a dense, government-dominated, bankrupt, dysfunctional, Athens by the Pacific.”

Today the largest employers in the city are governments or government-sponsored enterprises. According to the city’s financial report from 2010, the city of Los Angeles and the county of Los Angeles account for 25 percent of all jobs. (http://ens.lacity.org/ctr/financial/ctrfinancial18265184_02262010.pdf page 332)

Employer No. Jobs Percent

City of Los Angeles 52,721 13.46%

County of Los Angeles 46,83011.95%

University of California Los Angeles 14,0503.59%

University of Southern California 13,0443.33%

Cedars-Sinai Medical Center 11,000 2.81%

Kaiser Foundation Hospitals 9,7002.48%

If you add in state schools UCLA and USC, 32 percent of all employees work for organizations funded by the government. And if you consider hospitals state sponsored, as I do- since they derive much of their revenue from the federal government- you can add another 5 percent for a grand total of 37 percent of people employed by federal, state or local taxes.

That’s 147,345 jobs. The next largest private sector employer, Fox Entertainment, employs 7,310 people.

For at least the last seven years the National Football League has tried to return to Los Angeles without much luck. Even though LA, which once billed itself as the entertainment capital of the world, is the second largest television market in the US and would represent a significant new source of revenue for a business that has saturated its markets.

Dysfunctional politics is partly to blame. While there is ample evidence that hosting an NFL franchise helps increase the value of local real estate, hence tax revenues, the mayor and the city council have been foot-draggers when it comes to an NFL franchise.

"Football doesn’t really generate the kind of revenues for a city that we need,” former LA Mayor Villaraigosa told the Huffington Post, “Let me tell you why football's important. How many Super Bowls have you seen in the snow?"

Economics is obviously not a strong suit in LA. Or apparently reading.

In 2004, Federal Reserve economists Gerald Carlino and Edward Coulson authored a study which concluded that hosting an NFL team increased property values sufficient to deliver additional “property tax revenue of just under $173 per year per household,” versus cities without NFL franchises. (http://www.phil.frb.org/research-and-data/publications/business-review/2004/q2/brq204jc.pdf page 13)

With 1,312, 983 households in the city of Los Angeles, that’s about $227 million dollars in additional revenue to the city each year. It could also offer the opportunity to afford Southern California’s poorest residents some tax relief. Although Los Angeles suffers from some of the lowest median incomes in LA County, the city has one of the highest property tax rates in the county. Higher property values means that tax rates can be lowered, higher homestead exemptions offered and still generate higher tax revenues.

The trick for Los Angeles is the same problem that they have generally. The NFL is a franchise business. In order for a team to make LA its home, the city has to convince an owner of a franchise that the city is worth the risk.

The LA Rams left for St Louis, and Raiders beat a hasty retreat back to Oakland after relocating to LA for a few seasons.

And despite the lure of being the second largest media market in the US, so far the NFL has found no takers for LA. Anschutz Entertainment has even agreed to build a stadium downtown Los Angeles as a part of its LA Live entertainment complex, and already sold the naming rights to Farmers Insurance- which has 6,867 employees in the city.

“Tim Leiweke, president of Anschutz Entertainment Group,” reported the Huffington Post in January, “said he has not heard from any team that wants to apply in 2013 for a move to Los Angeles. Last year, the National Football League asked teams seeking to apply to move to Los Angeles to submit applications between Jan. 1 and Feb. 15, 2013.”

Or 2014.

Hey, who needs LA?

Not the NFL apparently.