L.A. TAX REFORM FIZZLES REDUCTIONS IN COST TO AID BUSINESS ARE ONLY `COSMETIC,' REPORT FINDS.

Byline: GREGORY J. WILCOX Staff Writer

Los Angeles' highly touted tax reform enacted more than a year ago is not much more than a layer of political makeup, leaving the city's anti-business reputation intact, according to a study released today.

The Kosmont-Rose Institute Cost of Doing Business survey found while California cities have a sound financial foundation, business costs in the state remain high, and Los Angeles remains exceptionally tough for businesses.

``California cities are in better fiscal shape for the short term, but costs for businesses remain high,'' according to the study. ``Los Angeles business tax reduction is cosmetic, leaving the city as a high-cost community for corporate America.''

The 12th annual survey examined businesses' taxes, fees and incentives in 398 cities in 49 states. Los Angeles is the nation's 16th most expensive city. Philadelphia is the most expensive and Cheyenne, Wyo., the least expensive.

The business tax reform, championed by council members Wendy Greuel and Eric Garcetti, was signed by former Mayor James Hahn and took effect last year.

The survey by the Kosmont Companies and Rose Institute of Local Government at Claremont McKenna College found that Los Angeles' business license taxes are 7.4 times higher than the survey's national average of the 302 communities that have a business license tax.

Jennifer Ambrose, assistant survey manager at the Rose Institute, said cost factors include taxes on business licenses, utilities, properties and sales.

The way to reduce business costs is to reduce the tax on one or more of those things, she said.

``I know that they've been trying some new plans,'' she said. ``Obviously they are aware that the city is high cost and are trying to do something about it.''

City officials don't agree that the business tax reduction is a cosmetic fix.

``For me the business tax reform was a major first step in making Los Angeles more business-friendly,'' Greuel said. ``What we heard from the business community was (that the system) was too complex and onerous.''

She noted that by next year, 60 percent of all the businesses in the city won't pay the gross receipts tax. And the number of categories is being trimmed from about 75 to seven.

And this year, all businesses in the city are receiving a 3 percent reduction in taxes and 4 percent next year, she said.

``We will continue to reduce taxes based on each year's revenue,'' she said. ``There is a fundamental change in the way Los Angeles is doing business.''

Garcetti's press deputy, Josh Kamensky, criticized the survey, saying it had a narrow field of view.

``It's sort of absurd ... that the business tax is cosmetic,'' he said. ``I defy you to tell me how eliminating a tax for 60 percent of the businesses is cosmetic.''

Bud Ovrum, Los Angeles deputy mayor for economic development, said the city has always had lower electricity costs than private utility companies, and the municipal system was more reliable. That has helped offset some other costs like taxes.

And the city has programs like those that give substantial tax breaks to entertainment companies that locate in Hollywood or North Hollywood, he said.

``A lot of what we're going to be doing is being more business-friendly and making sure that (businesses) understand the benefits of doing business in Los Angeles and understand the full picture,'' Ovrum said.

The survey also found that:

San Francisco is the only California city with higher business license taxes than Los Angeles.

In the past three years, impact fees have been on the rise in California cities and are expected to stay on that trajectory.

Businesses are leaving the state because costs are high and there is little tax incentive to stay.

There were only three very low-cost areas in California -- Banning, unincorporated Lake County in Northern California and unincorporated Merced County.

In the report Kosmont writes that ``now more than ever -- without any state assistance -- cities are left on their own to induce economic development. We need to see a reduction in red tape if California wants to stop spouting pro-business slogans and start offering actual investment incentives.''

greg.wilcox(at)dailynews.com

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