Drive to alter business tax comes as L.A. lures tenant.

The Los Angeles City Council could consider a sweeping change to the city's gross receipts tax that would give it a potent weapon in luring businesses.

The city currently offers a two-year abatement on the tax on gross receipts to companies with less than $500,000 in revenues that relocate to L.A. On Sept. 10, a council committee will take up Councilwoman Jan Perry's proposal to remove the revenue cap and extend the abatement to five years.

Perry's proposal comes as the city is locked in a tug-of-war with Burbank and Monrovia to house the new headquarters of search engine firm Overture Services Inc., a Pasadena-based unit of Yahoo Inc. Overture has spent the last two years scouting the region for as much as 300,000 square feet of office space to house its roughly 1,000 employees.

Neither Burbank nor Monrovia has a gross receipts tax. If the extension of the Los Angeles abatement is passed, it could amount to savings of as much as $15 million over five years for the company.

Perry, whose 9th District covers downtown, said her motion was not directly tied to helping lure Overture. But she did say her office had been coordinating efforts with the Los Angeles Community Redevelopment Agency, the mayor's office and Thomas Properties Group, owner of Arco Plaza, to court the company.

Renata Simril, L.A.'s deputy mayor for economic development, said her office had been working with Overture for about 18 months scouting new locations for its headquarters.

She said Perry's motion is part of a package that also includes homebuyer incentives such as down-payment and financing assistance for all Overture employees who relocate to L.A.

"We've put together as competitive a package as we can," she said, "trying to do all we can as a city to attract that company (Overture) and others like it here."

Overture has narrowed its choices to the Burbank Media Studios North, the Monrovia Technology Campus and Arco Plaza.

"We're in negotiations with three locations very hard," said Josef Farrar, the senior managing director at Studley representing Overture. "We're taking Arco Plaza very seriously and we've traded several proposals with them."

Gaude Paez, an Overture's communications manager, confirmed the company has narrowed its choices and would make a decision before the end of the year, but otherwise declined comment.

Blaine Fetter, a partner in Samuelson and Fetter LLC, developer of the Monrovia Technology Campus, said he believed Overture would move downtown if Los Angeles can lower the company's business tax liability.

"If the city would forgo the gross receipts tax, I think they would consider going downtown for the image it would create for the company," he said.

The city's gross receipts tax of $5.96 on every $1,000 of revenue is the highest in the state, according to Kosmont Partners Inc.'s annual Cost of Doing Business Survey. Special provisions are made for multimedia companies, which are taxed at a rate of $1.18 per $1,000 in revenues.

For the last decade, Kosmont has ranked 300 California cities by the cost of doing business and L.A. has consistently ranked as the first or second most expensive.

"L.A. is an expensive city and it's a complicated city to do business," said Larry Kosmont, chief executive of the real estate consulting firm. "Jan's proposal would tilt the balance toward L.A. becoming recognized as a more business-friendly city."

Besides the tax concerns, Overture officials have also balked at the high cost of parking and building improvements, said Farrar, who is handling the search with colleague David Kluth. "If we can get over that financial delta, there is a lot of interest in downtown," he said.

But Farrar added that, "as the financial gap gets bigger the arguments for downtown get lost as the financial impact becomes greater."

Perry said bringing Overture downtown could be the spark that draws other headquarters downtown after a series of large companies fled the city in the early- to mid-1990s.

"Now that this tower (Arco) is being revamped and updated, maybe it's an opportunity for us to get some headquarter entities back downtown like it was before," she said.

Farrar was mindful of that in trying to shape the offers made to his client.

"Obviously, the (L.A.) city folks and businesspeople downtown are focused on landing a name like Yahoo and Overture," he said. "It would mean a lot for downtown to land a company that isn't an accounting or law firm. It would change downtown, having the kind of employees that would really fuel the nightlife L.A. is looking for, instead of suits coming from law firms, they would have a much younger crowd that would likely hang around after work."

Kent Handleman, managing director at Thomas Properties Group, declined to comment. The south tower of Arco Plaza, a 2 million-square-foot property, has more than 500,000 square feet available.

Farrar said incentives from the developers and the cities would play a major role where Overture finally decides to go. "(Los Angeles) needs to get its act together quickly because this train is leaving the station quickly," he said.

Beyond the gross receipts tax, downtown L.A. faces several other hurdles as it competes with other locations. Burbank and Monrovia both offer ample space for expansion and the company would get a building fitted for its specific needs. And Arco Plaza runs into an obstacle if the company holds firm to its insistence on building-top signage.

Thomas Properties already has signage agreements with law firm Paul Hastings Janofsky & Walker and City National Bank and may not be able to work out a deal for naming rights. "Having naming rights is important to us," Farrar said. "It could make or break a deal."

Besides Arco Plaza, Overture has narrowed its search to M. David Paul Enterprises' 1.2 million-square-foot Burbank Media Studios North, near Bob Hope Airport. Only half of that project has been built, and the Internet company could be housed in a build-to-suit project.

Samuelson and Fetter has 35 acres remaining in the second and third phases of its Monrovia Technology Campus on the northwest corner of Mountain Avenue and Huntington Drive, another build-to-suit opportunity for Overture.

However, Tri-Cities brokers said rents on a build-to-suit headquarters in Burbank and Monrovia would cost as much, if not more, than in Arco Plaza. Building a new headquarters would take several years and would require Overture extend its stay at its cramped offices, they said.