Los Angeles Mayor Antonio Villaraigosa
LA in real estate crisis
US cities seek extra revenue
US metro economies 2011
Big pharma versus US cities
US cities in crisis - for now
2009 homelessnees in US cities
Real estate USA
Stimulus package for US cities
NYC prepares for future
US subprime mortgage crisis
Local government finance - USA
US cities finances
USA: Demolition as planning tool
Failed US immigration reform
US urban homelessness
US metro agenda
Urban poverty in the US
US cities in fiscal crisis
US local government
City Mayors reports news from towns and cities around the world. Worldwide | Elections | North America | Latin America | Europe | Asia | Africa | Events |
Mayors from The Americas, Europe. Asia, Australia and Africa are competing for the annual World Mayor Award. More
City Mayors ranks the world’s largest as well as richest cities and urban areas. It also ranks the cities in individual countries, and provides a list of the capital cities of some 200 sovereign countries. More
City Mayors lists and features urban events, conferences and conventions aimed at urban decision makers and those with an interst in cities worldwide. More
City Mayors reports political events, analyses the issues and depicts the main players. More
City Mayors describes and explains the structures and workings of local government in Europe, The Americas, Asia, Australia and Africa. More
City Mayors profiles city leaders from around the world and questions them about their achievements, policies and aims. More
City Mayors deals with economic and investment issues affecting towns and cities. More
City Mayors reports on how business developments impact on cities and examines cooperation between cities and the private sector. More
City Mayors describes and explains financial issues affecting local government. More
City Mayors reports urban environmental developments and examines the challenges faced by cities worldwide. More
City Mayors reports on and discusses urban development issues in developed and developing countries. More
City Mayors reports on developments in urban society and behaviour and reviews relevant research. More
City Mayors deals with urban transport issues in developed and developing countries and features the world’s greatest metro systems. More
City Mayors examines education issues and policies affecting children and adults in urban areas. More
City Mayors investigates health issues affecting urban areas with an emphasis on health in cities in developing countries. More
City Mayors examines the contributions history and culture make to urban society and environment. More
City Mayors examines the importance of urban tourism to city economies. More
City Mayors describes the history, architecture and politics of the greatest city halls in the world. More
City Mayors invites readers to write short stories about people in cities around the world. More
City Mayors questions those who govern the world’s cities and talks to men and women who contribute to urban society and environment. More
City Mayors profiles national and international organisations representing cities as well as those dealing with urban issues. More
City Mayors reports on major national and international sporting events and their impact on cities. More
City Mayors lists cities and city organisations, profiles individual mayors and provides information on hundreds of urban events. More
Los Angeles is paying the price
for mayor’s focus on real estate
By Joel Kotkin*
15 May 2008: Ever since his election in 2005, Los Angeles Mayor Antonio Villaraigosa has been portrayed as a politician with a future that possibly included the governorship. As soon as he entered office, he launched an impressive succession of ‘bold’ initiatives among them, to make the Los Angeles Police Department a 10,000-cop force, to ‘green’ the port of Los Angeles, to improve the academic scores of some of LA Unified's worst-performing schools. Until the real estate bubble burst, he oversaw a building boom downtown and elsewhere, casting himself as a visionary re-creating LA as a model of ‘elegant density’.
Debate the issues raised in this article
But when it came to that part of the city's economy not connected to real estate, Villaraigosa might be compared to Emperor Nero. As the city has continued to lose thousands of middle-class jobs in aerospace, manufacturing and high-end business services since 2005, Villaraigosa has basically stood by and fiddled. From February 2007 to February 2008, the county suffered the biggest percentage of job losses, some 0.7 per cent, of the 10 largest metropolitan areas in the country, according to the US Bureau of Labor Statistics' most recent report.
The combination of the housing meltdown and steady job losses in non-real estate sectors means that Los Angeles is now surpassed only by a handful of the bigger Rust Belt economic basket cases, like Detroit, for the title of worst big-city economy in the nation.
To be sure, the falloff in jobs cannot be solely laid at the feet of City Hall because there have been declines in other parts of Southern California. But the trend reveals the shortcomings of Villaraigosa's near-exclusive focus on real estate-related speculative growth and relative inattention to sectors more critical to the city's long-term economic growth.
The problem is that, as property values and real estate-related employment, most notably in the construction and mortgage sectors, have cratered, there is little, save for the tourism industry, to take up the economic slack. That fact has come home to roost in recent weeks as Villaraigosa searches for revenue to shore up the city's out-of-balance budget. And, unfortunately, the pain may be around for a while because once the current wave of building, which was financed before today's credit crunch. ends, there is little prospect of a pickup in construction in the immediate future.
All this makes the erosion of jobs outside real estate even more troubling. Since 2006, employment in LA County has dropped by about two per cent in the manufacturing, financial services, retail and information sectors, the latter of which includes the entertainment industry. Meanwhile, business expansions in the county in 2007 fell 22.5 per cent, according to an April report from the Los Angeles County Economic Development Corp., a non-profit organization.
Apparently, Villaraigosa didn't see the economic downturn coming; he has already conceded that he didn't recognize how precarious the revenues from the real estate boom might be. Had he known last August what he knows now, the mayor has said, he would not have approved big raises for city workers.
City Planning Director Gail Goldberg was amazed to find that Los Angeles, unlike her former hometown of San Diego, still had no city department dedicated to economic development. Nor is there any single person in city government recognized as in charge of boosting local commerce.
Los Angeles could certainly use such a department. The most recent Kosmont-Rose Institute "Cost of Doing Business Survey" reported that Los Angeles remains the second-most-expensive city for businesses, behind Santa Monica, in the county and third most in the state, behind San Francisco and Santa Monica. Any hope of reform in terms of tax or regulatory relief, suggests Larry Kosmont, the report's author, is unlikely because of the city's fiscal crisis.
Ironically, among the biggest economic losers during the Villaraigosa administration may be working-class Latinos, who constitute a key element of his constituency. Traditionally, Latinos have relied on manufacturing for jobs, but, countywide, these jobs have declined 15 per cent since 2002.
Many of the employment losses have been concentrated in automotive, aerospace and heavy industry. In contrast, the garment industry, now the largest industrial employer in the city, has largely defied the slow erosion of jobs in the city. But that may be about to change.
Uri Harkham, president of Jonathan Martin, a clothing manufacturer, has cut his workforce from 600 to 120 during the last few years. He blames City Hall for the cutback because it has not protected the area from immigration crackdowns and has not supported worker-training programs. Worse still, he says, had been the speculative pressures of developers seeking to build residential units in the garment district, which have driven up rents for manufacturers and wholesalers.
Harkham, who has worked in the fashion industry for 35 years, believes that if this situation continues, the once-thriving garment district will eventually lose its primacy as the center of the West Coast rag trade.
But it's more than the garment industry that needs attention from City Hall. The city's small-business sector, which remains the best hope for LA's economic recovery, remains burdened by what many entrepreneurs claim is an onerous regulatory regime that favors the well-connected and big financial interests. "It's extremely difficult to do business in Los Angeles," Eastside retail developer Jose de Jesus Legaspi said. "The regulations are difficult to manage. ... Everyone has to kiss the rings of the [City Hall politicians]."
Yet despite the problems, businesspeople like Legaspi and Metchek believe that Los Angeles can find a way to restart its economy after the real estate bubble. After all, the city and region still possess many of the assets concentrations of design genius in entertainment and fashion, a pool of skilled industrial workers and strong ties to the rapidly growing Pacific Rim economies, which drove recovery in the mid- and late-1990s.
And there remains the considerable energy of the city's immigrant community, which constitutes roughly half of LA's total workforce, according to a recent study by the Migration Policy Institute. Between 1997 and 2007, according to statistics compiled by Praxis Strategy Group, a consulting firm, the number of Latino- and Asian-owned businesses grew far more rapidly nearly 40 per cent among Latinos and more than 22 per cent among Asians, compared with 15 per cent overall than those of other ethnic groups. Today, foreign-born Angelenos are twice as likely to be self-employed than their native-born counterparts.
Los Angeles needs to tap the entrepreneurial spirit of these immigrants to grow economically. But that means scaling back its infatuation with high-profile real estate development in favor of the mundane business of enhancing employment opportunities through training workers, reducing regulatory burdens and fostering more cooperation among our still-diverse industrial base. That's not a politically sexy choice for the mayor, but it remains the best way to restore LA's tarnished status as a city of opportunity.
*An internationally-recognized authority on global, economic, political and social trends, Joel Kotkin is the author of the critically acclaimed book, THE CITY: A GLOBAL HISTORY. Currently, he is writing a book on the American future for Spring 2009 publication by Penguin Publishing, which will look at how the nation will evolve in the next four decades. Kotkin is Presidential Fellow in Urban Futures at Chapman University in Orange, California. A highly respected speaker and futurist, he consults for many leading economic development organizations, private companies, regions and cities. Joel is also a Senior Fellow with the New America Foundation in Washington, DC; a Senior Fellow with the Center for an Urban Future in New York City; and a Senior Consultant with the Praxis Strategy Group in Fargo, North Dakota. (www.joelkotkin.com/index.htm)
Comment & Debate
City Mayors is inviting its readers to engage in a debate on the issues raised in the article on this page. Please post your comments below. Your comments should deal with the topics of this article and must be legal and ethical. You may also reply to and/or challenge comments of other readers. While we endeavour to publish all relevant comments, we reserve the right to edit them and to reject unsuitable contributions.
Please add your comment
Los Angeles under construction (Photo by Daquella Manera)
On other pages
US subprime mortgage crisis hurts individuals and whole communities
Homeownership has long been the basis of community revitalization efforts in American cities. Homeowners bring well-documented stability and investment to neighborhoods. The recent rise in mortgage foreclosures, fueled by subprime lending, seriously threatens neighborhood stability and revitalization.
Home purchases in the United States are typically financed by mortgage loans. Home mortgages are indexed to the prime rate, that is, the interest rate commercial banks charge their most creditworthy customers.
Mortgages with the lowest interest rates are available to customers whose creditworthiness, or ability to repay the loan, is so high that there is little risk to the lender. “Subprime” mortgages are offered to borrowers who don’t meet the credit standards for borrowing in the prime market. These loans are more expensive for borrowers with rates higher than prevailing prime rates, presumably to compensate lenders for the additional risks associated with lending to less creditworthy borrowers. Subprime loans are characterized by low ‘introductory’ interest rates, usually for the first two or three years. These rates frequently rise rapidly in subsequent years, resulting in payments that can increase hundreds of dollars each month.
The subprime mortgage market has expanded dramatically in the US, growing at an annual rate of 25 per cent between 1994 and 2005, a tenfold increase in a decade. In 2005, the number of homeowners defaulting on their subprime mortgages began to soar. More