The White Elephant That Bleeds the City Treasury Dry — LA Convention Center and Its Bloated Payroll

Editor’s Note: City Hall wants to tear down half the LA Convention Center, borrow $350 million on top of the $450 million already owed on it and then turn over its operation to AEG to profit from an entertainment complex that includes an NFL stadium, LA Live and Staples Center — all heavily subsidized by taxpayers with at least half of all tax revenue that’s generated going to the Denver-based company. In the meantime, vast amounts of public money and tax dollars that could be keeping cops on the streets and fire stations open is going to pay inflated salaries at the Convention Center — a white elephant that costs the public tens of millions of dollars a year.


By Tim Cavanaugh, Reason.com

Although excessive public-employee salaries are getting close attention in California, many ostensibly private
officials – including a tourism bureau boss who makes almost
$500,000 a year – are paid mostly or entirely from public money. In
some cases, these compensation packages are higher than the pay of
public employees who have been the focus of public
outrage. 

LA Inc. is a non-profit that functions as Los Angeles’ convention
and visitors bureau. LA Inc. is organized as a 501(c)(6). In its tax filing (LA-Inc tax.pdf) LA Inc.
describes its main function: “Advance the prosperity of LA’s
visitor economy and the livelihoods that depend on it.” 

LA-Inc.jpg

LA Inc.’s budget in 2009 was
$19.4 million. About $15.6 million of that money came directly from
the public: $10.4 million from a portion of the city’s 14 percent
hotel room tax and $5.2 million from Los Angeles World Airports.
Another $1.3 million came from membership fees and $2.4 million
from business activity, including advertising in LA Inc.’s visitors
guide. But by far the largest portion comes from public funds. If
you want to know what happens to all those taxes and fees that run
up your airport and hotel bills, this is one example. 

LA Inc.’s budget will soon be going up thanks to a recently
approved additional 1.5 percent hotel tax. Mark Liberman, LA Inc.’s president and CEO, says the new
dedicated tax could double the organization’s budget. 

Where does all that money go? More than 40 percent of it goes to
pay staffers. Salaries, pensions, benefits and other compensation
make up $8.6 million of the organization’s spending. All of LA
Inc.’s executives make well over $100,000 a year in total
compensation. 

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REASON Magazine: Community Redevelopment — The $6 Billion Scam

Jerry Brown’s Plan to Kill Community ‘Redevelopment’ Is Fiscally Sound, Morally Right and Probably Doomed

TIM CAVANAUGH, Senior Editor Reason Magazine

At what point does a public institution move beyond mere
self-interest or ineffectuality and become actively evil? Two
proposals in California Gov. Jerry Brown’s 2011-12 austerity budget
provide a useful comparison.

With his plan to ax the state’s system of “enterprise zones” and
related tax credits, Brown wants to do away with a program whose
history of failure can be charitably blamed on bad luck or
miscarried good intentions. But by trying to kill the state’s 425
redevelopment agencies (RDAs), the governor is taking on–and
robustly criticizing–a gang of thugs whose activities closely
resemble those of a criminal enterprise.

Brown has plenty of reason to cut both entities. The state faces
a $25 billion deficit during the next two years, and both programs
are enormous money losers. By eliminating enterprise zone tax
breaks (which include hiring credits, interest deductions, special
treatment for sales taxes paid, and a credit for employees who earn
wages within a given area), the governor expects to make an
additional $343 million available in the 2010-11 budget and $581
million in 2011-12. The savings to state and local governments from
deep-sixing redevelopment funding are expected to be even greater:
an estimated $5 billion to $6 billion during the same
period. 

That’s the budget-hawk reason for eliminating these programs.
But the much more important reason, which Brown’s 2011-12 budget
summary explains in surprising detail, is that both are manifest
failures even on their own very forgiving terms. 

Enterprise zones create few jobs and almost never increase
hiring for the poor local residents they are supposed to help. The
budget summary cites a 2005 legislative analyst’s finding that “EZs
have little if any impact on the creation of new economic activity
or employment.” In the kind of misallocation language you’d expect
to find in a classical economics textbook rather than a government
document, the summary also notes that the few increases in hiring
or business “are not generally a result of new activity, but,
instead, from the shift of activity into a zone that otherwise
would have occurred elsewhere.” This anemic shifting of value comes
at an enormous cost. A 2002 report from the W.E. Upjohn Institute
for Employment Research found that enterprise zones cost state and
local governments a whopping $60,000 for every job created in a
given zone.

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