Business Update with Mark Lacter

NFL Stadium Jobs; Tax Breaks

KPCC's business analyst Mark Lacter talks about what the proposed NFL stadium in downtown Los Angeles mean for local jobs; he also talks about business tax breaks.

Steve Julian: On Tuesdays we talk about the latest business stories with Mark Lacter. Mark, does the future of a downtown Los Angeles stadium come down to jobs?

Mark Lacter: That’s what supporters are really pushing Steve, and it would seem to fit with the times. All anybody has to do these days is promise lots of jobs and elected officials are all over it. Employment has become kind of a new political currency, and it can be powerful. But it also can be misleading, and we’re seeing a good example of that with the numbers being thrown around for that downtown football stadium and convention center upgrade.

Julian: The number earlier this year was about 30,000 wasn’t it?

Lacter: Well, that’s what the stadium developer Anschutz Entertainment Group was promising. Then came the city’s own consulting firm, which estimated just 9,000 jobs, about a third of them involving temporary construction work. And now comes the state’s Legislative Analyst Office, which found flaws in how both the AEG and city estimates were arrived at. Their conclusion is that the overall economic benefits of the stadium project would be limited. And don’t forget hiring won’t begin to happen until later next year, which won’t do much for folks who have bills to pay between now and then. Of course, elected officials believe what they want to believe, which seems to be that the downtown stadium would be a good thing for the economy.

Julian: Guess that’s why there’s support for a bill that would exempt AEG from frivolous lawsuits?

Lacter: That’s a big reason. AEG wants to have all disputes resolved through binding arbitration – and it wants the exemption passed by Sept. 9, a little over a week from now, which is when the current legislative session is completed. Otherwise, it’s threatening not to move the stadium project forward.

Julian: Does AEG have a point?

Lacter: Well, there’s no doubt that big projects can get tied up in the courts on very shaky grounds (they can sometimes delaying construction by months or years). There’s also no doubt that frivolous lawsuits are a real problem for California businesses of all kinds. The question is whether a politically powerful company like AEG should be allowed to bypass a process that everybody else is stuck dealing with? Perhaps the best answer is to move away from the promises and examine the numbers to see what’s real about the economic benefits as opposed to what’s political hype.

Julian: What about the hype that state lawmakers are giving away the store?

Lacter: It’s true, Steve. Through the first seven months of the year the state has been left with $700 million less in corporate tax revenues than what state officials had been expecting. It’s kind of ironic because the numbers coming in from both personal income tax and sales tax have actually been higher than expected – not to mention the fact that corporate profits are actually up this year.

Julian: They are?

Lacter: You may be a little confused Steve because California is supposed to be so unfriendly to business. But just look at some of these breaks. There are tax incentives for research and development, for movie producers willing to film in California, for businesses that use off-shore tax havens. There are tax breaks for specific industries – linen rentals, computer program sales, aircraft component manufacturing, it’s a really long list. There are so many tax breaks that no one knows exactly how much they all add up to.

Julian: Aren’t some of them helpful for the economy?

Lacter: Absolutely. Sometimes, they provide an incentive that benefits the state economy by keeping business in California that otherwise would have moved elsewhere – or wouldn’t have gotten done at all. The problem is that there are so many tax breaks that it’s become almost impossible to differentiate between the good ones and the pure giveaways. The result is that the state’s fiscal problems are considerably worse than they otherwise would have been.

Julian: Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.


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