Business Update with Mark Lacter

The business climate in Los Angeles

We've been reporting on the city of Los Angeles approving major developments without seismic studies attached.

Steve Julian: Business analyst Mark Lacter, why is this?

Mark Lacter: Steve, this is a real gotcha moment for the L.A. Planning Department, the City Council, and everyone else at City Hall who signed off on these projects.  The latest revelation, which was reported by the L.A. Times, shows that a planned 39-story residential tower in Century City is just 300 feet from the active Santa Monica fault.  And, we're only learning about this because the Metropolitan Transportation Authority did its own seismic testing near the site when it was looking for potential subway stops, and officials decided that it was too close to the fault.  This also comes after three large-scale projects in Hollywood were found to be located quite close to the active Hollywood fault.

Julian: The concern is that if any faults were to rupture, the foundation of a building could be split apart.

Lacter: Kind of an inconvenient truth both for the developers, who have millions of dollars riding on these projects, and for L.A. city officials who are betting on a future that will include many more high rises.  And, we should note that more than two-dozen high rises are either in the process of going up, or are at least on the drawing board.  In case you're wondering why there aren't regulations that monitor this sort of thing, the answer is that there are regulations.  California has a law that requires state geologists to map active earthquake faults, and then set zones on either side of the fault line.

Julian: Has the state done this?

Lacter: The state says it hasn't had the time nor the money to map areas within the city of L.A., though the faults have been known to be in the general vicinity of these projects - and so, you'd think the city would want them tested extensively.  Of course, that would mean more delays, which the developers wouldn't be happy with.

Julian: Of course, seismic studies are not always definitive.

Lacter: They're not - and it's possible that different geologists would come up with different findings.  But so far, most of the information seems to be coming from the developers, and you have to wonder whether it's a great idea to rely on folks who have a financial interest in a project to tell us what's safe and what isn't.  Probably not.

Julian: Your article in the new issue of Los Angeles Magazine raises a broader point about the city's business climate.

Lacter: Steve, for many years, L.A. has been branded as a terrible place to do business because of government interference, but that's largely a myth.  If anything, city officials have been too accommodating.  Frankly, the anti-business rap never made much sense when you consider the thousands of companies that start up here each year.  A study by the accounting firm PricewaterhouseCoopers ranks L.A. particularly high when it comes to ease of doing business, which runs counter to the conventional wisdom.

Julian: You're not saying it's truly easy, are you?

Lacter: Easy, no.  There certainly are plenty of reasons for business owners to pull out their hair.  And those hassles, along with an unemployment rate that remains quite high, has given developers and others the leverage to ask for various giveaways.  All they have to do is say that their projects will generate more jobs, and city officials tend to respond favorably - no matter how questionable those proposals might be.  And, by the way, job creation doesn't always determine economic growth, certainly not in the short term.

Julian: We all remember during the mayoral campaign, candidates were talking about how their policies would lead to lower unemployment...

Lacter: ...right, almost like they could pick up jobs at Ralphs.  Well, it doesn't work that way.  Thing is, the city of L.A. doesn't need to cut so many deals - the local economy is rich enough and broad enough to keep prospering.  Which is why city officials would be much better off laying off the incentives, and focusing on the basics - public safety, transportation, the parks, and libraries.  Do that right, and the business climate will take care of itself.

Mark Lacter writes for Los Angeles Magazine and pens the business blog at LA Observed.com.


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