May the Upcoming General Election Produce Some Real Ideas for LA's Economy
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Big Picture
Tomorrow night Angelenos will vote to elect, or most likely advance to the general election, a candidate to be the City of Los Angeles’ next mayor, city attorney, city controller and several City Council members.
The importance of this election cannot be overstated because City Hall plays a significant role in fostering or hindering economic growth in the region. Especially the mayor who alone controls multiple appointments to commissions, departments, and agencies, that include some of the region’s most significant economic assets and job generators.
Following the election it is imperative that voters keep reminding all the remaining candidates that in order to foster a more equitable economy in LA it is critical, that once elected, LA's new leaders maintain a healthy respect for entrepreneurialism and business and the desire to build partnerships that link the public sector and the marketplace.
City Hall has had success with this formula by unlocking private sector dollars to modernize some of its economic assets - $15 billion for LAX and $1.2 billion for the Port of LA, while securing taxpayer dollars to invest in public transportation, power, and water systems. These initiatives are creating good paying jobs and helping to stimulate growth in LA’s key industries - trade, tourism, entertainment, technology, healthcare, to name a few.
But the City’s $11.5 billion budget, which funds a multitude of programs and services, including police and fire, while shaping local tax, regulatory and land-use policies, is continually underfunded and mismanaged to the point that LA’s residents are not getting the government they should demand and deserve. Angelenos need 3x the amount of housing now being approved by City Hall and better economic and workforce development programs that lift them out of low paying jobs.
Without this Angelenos will continue to vote with their feet. Census data shows that about 160,000 Angelenos — more than any other county in the nation, left the region last year.
The LA Coalition has identified six opportunities that would help start to turn these negative trends around:
Foster the creation of good paying jobs. Businesses and entrepreneurs should not have to hire a lobbyist to secure basic city services and figure out its cumbersome permitting, licensing, zoning, and regulatory structures. The Cato Institute recently found that a “small construction company needs 14 procedures, 105 days, and $85,841 to obtain construction permits in LA and in some cases, it takes more than two years to open a restaurant. City leaders must do more to empower staff to streamline city permitting, operations, regulations to encourage and promote business equally across the city.
Support programs that develop skilled workers. LA’s workforce development system is not really a system, but an annual $50 million dollar spending program supporting a series of separate policy programs, each designed to serve a specific need or target group, with its own rules and its own outcome measures, political constituency, and advocacy groups. City leaders must direct more workforce investment dollars toward programs that provide Angelenos the skills needed to secure work in LA’s fastest growing industries including Healthcare, Biosciences and Biotechnology, Green Technology, Information Technology (IT), and City Hall.
Encourage more workforce housing. The city is required to support the development of 486,379 housing units by 2029 and 40% of those units must accommodate low-income residents. The problem is this equation overlooks LA’s middle-class who are priced out of market-rate units, and don’t qualify for affordable housing programs. City leaders should create new density bonus programs specific to workforce housing; revise zoning requirements to rethink open space, height limits, setbacks, parking, and design review. This can be done without public subsidies and should be aligned with the current strategy that encourages housing development within steps of Metro’s $120 billion public transit build outs.
Better leverage transportation dollars. The City’s public works system is siloed, hampering its bureaus’ ability to best leverage its inter-bureau, intra-bureau, and intra-department communication and coordination. This results in a $1 billion annual spend that is unable to address LA’s growing issues with pot-holed streets, cracked sidewalks, and lack of viable, reliable, and safe getting around options other than driving. The mayor appoints 14 people who will have direct oversight and authority of these funds - 5 Public Works Commissioners, 4 Metro Board seats, 5 public works department heads - and it is critical that these leaders are empowered to develop a more strategic plan that inventories the City’s 9,000-11,000 miles of sidewalks and better prioritizes key projects on a citywide basis, not district by district.
Develop more public private partnerships (P3): Los Angeles World Airport’s use of the P3 model to develop the people mover and the consolidated rental car facility has proven highly successful in leveraging both private and public resources. But City Hall has not done enough to expand its use beyond LAX. The challenge for now is all capital investment and programming for the public realm comes from public sources and is managed by the Recreation and Parks Department, which doesn’t have the fundraising or programming capacity that could be achieved with more private-public collaboration. City leaders should bring together a group of public and private leaders to develop and advance plan of action moving forward.
Make public safety a top priority. City leaders must continue to direct resources toward the recruitment and retention of LAPD officers to help return the city to the safety gains of the 1990s and early aughts. While continuing to advocate for more state and federal funding to provide more public health services, affordable housing, and workforce development program opportunities for LA’s most underserved communities. Addressing all these issues will go a long way in addressing the root causes of crime.
Let’s use this election to make a difference and secure a better economic future for the city and all who live in it.
CA's Sees Some Employment Gains
The CA Center for Jobs & the Economy reports that the numbers for April show continued strong employment gains, further increasing the offset to the anemic results for the last quarter of 2021.
Yet, CA's recovery remains slow compared to the other states. With these latest postings, CA employment was still 385,800 short of rebuilding to the pre-pandemic level, while 28 other states have already surpassed this milestone.
Jobs: The higher wage industries finally moved into positive territory, while the medium wage industries continued to track the overall jobs total. Lower wage industries while improving with seasonal hiring underway, still lagged the most.
Ranking the World's Ports
The supply-chain crisis that has clogged the US logistics network has made the country’s two largest ports of Los Angeles and Long Beach the least efficient trade hubs for handling containers worldwide.
LA and LB ports are responsible for about 42% of all US containerized trade with East Asia, and the twin hubs ranked in the final two positions of the World Bank and S&P Global Market Intelligence’s 370-member Container Port Performance Index for 2021.
A majority of the busiest US sea gateways -- including Georgia’s Savannah, New York and New Jersey and California’s Oakland -- ranked in the bottom half of the list.
Who is doing well in US? Smaller US ports made it to the top 50 of the ranking for the first time this year, driven in part by the enhanced performance of East Coast gateways. Some of these hubs have invested billions of dollars in infrastructure as the 2016 expansion of the Panama Canal allowed the world’s largest ships to reach the Atlantic Coast more easily.
Global top performers: Asia and parts of Europe tend to be more modern and have the capacity to handle more cargo, which gives them an edge to operate more efficiently around the clock. That also means that when ships reach the other side of the Pacific Ocean, US gateways can’t keep up with the that level of efficiency, he added.
Learn more: The Industrial, Economic and Administrative Survey (IEA) of the Los Angeles Harbor Department last report provides very thorough insights on what improvements will strengthen LA position in the marketplace.
Some good news: The line of 25 cargo ships headed to Southern California’s two big ports is less than a quarter of the record backup in January, and spot container rates have dropped almost 20% this year. Flexport Inc.’s average transpacific shipping journey of 102 days is the quickest since November. Delays moving containers out of rail depots in Detroit and Memphis are shorter than they were in September, according to Hapag-Lloyd AG.
What to watch:
A new supply chain risk with 22,000 Dockworkers Who May Soon Strike. With the contract of union workers at West Coast ports nearing expiration, the prospect of a labor impasse threatens another shock to the global economy.
The potential conflict centers on negotiations over a new contract for more than 22,000 union workers employed at 29 ports along the West Coast of the United States. Nearly three-fourths work at the twin ports of Long Beach and Los Angeles, the primary gateway for goods shipped to the United States from Asia, and a locus of problems afflicting the global supply chain.
The ports of Los Angeles and Long Beach could get an influx of cash this fiscal year, with Gov. Gavin Newsom’s budget proposal setting aside $2.3 billion for the state’s ports that would both help train workers, reduce air pollution and fund infrastructure projects. $100 million would go to train workers and we are looking forward to seeing more specifics on this piece soon.
Birth Rate Up in US, But Slows in CA
The increase in births offers good news from a long-term economic perspective, as population gains are a key component to long-term growth.
Yet, US births remain well below historic highs, and, crucially, remain well below the replacement rate -- meaning the nation’s population can only grow through net immigration.
By race, births among White women rose 2%, while other racial groups saw declines last year. Black women saw a 2% drop in births compared with 2020, with 3% falls for Asians and for American Indian or Alaska Native people. Hispanics, of any race, also saw a 2% rise.
Women in their late 30s saw the biggest jump in birth rates last year, with that group seeing a 5% increase from 2020.
Chart: Fewer births were also reported in Alaska, California, Hawaii, Louisiana, Maryland, Mississippi, New Mexico, and West Virginia.
Three states -- California, Texas and Florida -- accounted for almost 28% of births across the nation last year.
CA's Achilles Heel - State & Local Taxes
The latest Internal Revenue Service data (2020) showing a huge wealth exodus from high- to low-tax states.
The biggest winners: Florida ($23.7 billion), Texas ($6.3 billion), Arizona ($4.8 billion), North Carolina ($3.8 billion), South Carolina ($3.6 billion), Tennessee ($2.6 billion), Nevada ($2.6 billion), Colorado ($2.3 billion), Idaho ($2.1 billion) and Utah ($1.3 billion). Idaho, Wyoming, Montana, Florida and South Carolina gained the most as a share of their 2019 income.
The biggest losers: New York (-$19.5 billion), California (-$17.8 billion), Illinois (-$8.5 billion), Massachusetts (-$2.6 billion), New Jersey (-$2.3 billion), Maryland (-$1.9 billion), Ohio (-$1.4 billion), Minnesota (-$1.2 billion), Pennsylvania (-$1.2 billion) and Virginia (-$1.1 billion). New York, Illinois, Alaska, California and North Dakota lost the most as a share of 2019 income.
CA's - WDC's ATM: California lost $8 billion in 2018, $8.8 billion in 2019 and $17.8 billion in 2020.
Bad reality for CA: Although the 2017 law cut taxes for most Americans, the cap transfers money from residents of higher-taxed Democratic states to lower-taxed Republican states like Texas and Florida, and it increases the advantages of living in a state without an income tax.
Consolation prize: Many high-tax states—including California, New York, New Jersey, Massachusetts and Illinois—have enacted work-arounds to help pass-through business owners (who file using the individual tax code) dodge the SALT limit. But these don’t help wage earners with hefty capital-gains and property tax payments.
California: Gov. Gavin Newsom pushed the workaround and a subsequent expansion, the change brought in $14.9 billion in gross collections, about 50% more than state officials expected. That is saving Californians billions in federal taxes.
California's Drought
The drought will have major ramifications for the cost and reliability of electricity this summer.
What to watch: The drought's depletion of CA's large reservoirs is likely to strain hydroelectric plants to the point where some may have to be shut down.
A recent report from the North American Electric Reliability Corporation, which monitors the grid and reduces reliability risks, found an "elevated" danger of power disruptions in the West this summer due to the combined impacts of heat and drought.
Solar: Wildfires will cause additional challenges from threatening interstate transmission lines to sending so much smoke into the sky that it reduces the output from solar installations.
CA Housing Bill to Watch
Senate Bill 897 (Wieckowski) – Accessory Dwelling Units – SUPPORT
The LA Coalition is working with the CA Home Building Alliance (HBA), which includes trade associations representing small and large businesses, for-profit and not-for-profit home builders, realtors, developers, employers, affordable housing infill builders, and non-profit research, education and advocacy organizations.
The group os focused on increasing the supply of new housing and improving the quality and affordability of housing in CA.
This coalition is committed to supporting legislation that will rapidly and predictably increase housing production in our state, and gathered support for SB 897 for the following reasons:
In 2015 there were just a few hundred ADUs permitted in the whole of California, this year we may see as many as 20,000, over 15% of total new home permits.
ADUs rent for much less than a standard rental home, averaging $2000 per month and are generally available to people at 80% area median income.
ADUs cost about 75% less to build than a standard comparable residence. 37% cost less than $100K and 71% less than $200K to build.
ADUs provide homeowners with the ability to generate income from their property while providing much needed housing for a family member or a local teacher.
ADUs epitomize local control, giving homeowners more control, within reason, to build on their own property.
SB 897 will clarify existing requirements, remove remaining impediments, and provide a financing mechanism for lower income owners to build an ADU as well.
Leadership in the Community
The Los Angeles Coalition for the Economy & Jobs | www.thelacoalition.com