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≡ BUSINESS TAX ON BALLOT ≡
“We would need to reevaluate our Olympics plan and preparedness, it would put everything that we’re planning to do in preparation for the Olympics in question.”
That’s City of Los Angeles Chief Administrative Officer Matthew Szabo, addressing the City Council on Wednesday, explaining the potential financial shock that passage of a public initiative to eliminate the City’s “gross receipts” tax on business within in the City limits.
Szabo ran through a series of slides which showed the potential impacts of losing this taxing authority:
“So in the first year of loss of this tax, we would realize some prior year taxes, so it would in a $740 million dollars loss in the first year. This loss would create an unprecedented fiscal vacuum which would immediately trigger massive spending reductions.
“Beyond the immediate 740 million dollars shock, my office estimates that repealing the tax would trigger an annual General Fund loss of greater $860 million average and that would be over the first five years, it would increase thereafter.
“To manage a shortfall of this magnitude and rising contractual obligations, the City would be forced to implement measures far more severe than those seen during the Great Recession or during the Covid-19 pandemic. And the reason for that difference is that while those previous crises were significant, they were ultimately transitory shocks followed by a period of recovery.
“In contrast, the permanent elimination of the City’s second largest tax stream would open a massive fiscal-year gap requiring immediate ongoing service reductions.”
He stated that the initiative would hurt public safety, reduce the size of the police force and more:
“So not only would this measure require massive reductions to public safely, it would debilitate our homelessness response, our street cleanliness and put our Olympic preparedness efforts in severe jeopardy. …
“[T]he commitments you made to the communities, the plans and the goals you have for your [Council] districts and your priorities city wide, would largely be rendered moot should the business tax be repealed. should this measure be adopted.
“The primary responsibility for whoever occupies seats around this horseshoe, whoever ccupies the Mayor’s office, will be to oversee and implement a systematic and permanent degradation of our most vital City services.”
However, the City Council had essentially no choice and voted 15-0 to move the measure forward to the November election ballot, as the required number of signatures were confirmed to have been collected. If the measure was not forwarded to the ballot, the proponents of the measure would have quite quickly sued to have it placed on the ballot, or a separate election held, that would cost the City $30 million or more to hold.
Even beyond the Olympic impact, the measure will be furiously lobbied on both sides in the lead-up to the November elections.
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A significant part of the Council session which consumed more than four hours was public comment about the “Olympic wage” law, which is in effect and will raise minimum wages for airport and airport-area hotel workers to $30.00 per hour by 1 July 2028.
A motion by Council President Marqueece Harris-Dawson last December stretched out the increases to 1 July 2030, provoking a furious reaction from labor activists, who showed up in force to protest.
However, Harris-Dawson also explained:
“At the passage of the living-wage ordinance, there is been some conversations which is represented in the motion or amendment that is before you today. I want to assure every member of this Council and every member of the public that the, labor movement has come to the table, in good faith, has moved a lot; the business community has been at the table from the beginning and moved some, and continues to move.
“We frankly, about an hour and a half ago, ran out of time and had to come here and hold the vote. But there is a commitment on both sides to continue to negotiate, so what we have today gets the City Attorney started on a process that we expect to come back to on Tuesday.
“My expectation and I say to all the parties involved, my expectation is what comes back Tuesday, will not be what we have in front of us today. The details of how that happens still have to be worked out. But effectively, it’s our role as a Council to mediate between sort of two opposing forces, the people who work for us and the residents and the people who have businesses and who in many cases are residents of the city.”
After more discussion, a vote was taken on the motion to change and elongate the raises, which passed by 9-6. Let’s see what happens Tuesday.
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