2015 CA Summit - Perception vs. Reality: Is California Business Friendly?

Global Recognition & Strategic Positioning

• Los Angeles Mayor Eric Garcetti reported that after meeting with over 195 country representatives at the Paris Climate Summit, international leaders identified LA as a unique global model for inspiring similar climate and economic actions.
• The Bolloré Group (French electric car sharing operator) announced a $25 million investment in Los Angeles, citing the city as the global cutting edge of people and technology.
• Major internet infrastructure providers announced the largest build-outs in their history for LA:
  • Google Fiber: Largest build-out ever for the company in any city.
  • AT&T (GigaPower): Provided internet speeds 200 times current averages.
• AT&T and Google executives stated their decisions to invest in LA were driven by the city's efficient permitting processes and ability to "get it done," contrasting this with delays in other major tech hubs like San Francisco and Silicon Valley.

Economic Indicators & Business Growth

• Los Angeles added nearly 90,000 new jobs in the last two years, reducing the unemployment rate by 4%.
• Over 50,000 new businesses registered in LA in the last two years, averaging more than one new business for every two jobs created.
• LA now has more entrepreneurs per capita than any other large U.S. city, with 1 in 172 residents being an entrepreneur.
• Film and television investment reached $1.3 billion in Southern California in the last year alone, supported by a $350 million annual expansion of state film tax credits.
• The aerospace sector received over $60 million in federal grants via an Advanced Manufacturing Partnership designation, uniting supply chains across LA, San Diego, Orange, and Ventura counties.
• LA's "Clean Tech Incubator" was ranked the #1 green technology incubator in the world and #6 globally by the Vice President.
• Digital technology companies, including Riot Games (founded 5 years prior), have created 1,500 local jobs, with executives citing LA's diverse workforce, global connectivity (LAX as the busiest origin/destination airport), and business-friendly tax rates as key factors.
• LA has surpassed Boston to become the second-largest financial services hub in the U.S., behind only New York.

Policy Reforms & Regulatory Changes

• The city implemented a "three-step" parallel permitting process, reducing construction timelines for major projects (e.g., Wilshire Grand, Metropolis) from two and a half years to 3–6 months.
• Los Angeles announced the elimination of its punitive gross receipts tax, which previously taxed startups based on revenue rather than profit.
• Mayor Garcetti set a goal to build 100,000 housing units; 37,000 are currently underway, described as the city's most significant building boom since its history.
• The minimum wage has been raised to increase consumption and business friendliness.

Demographic Shifts & Social Capital

• Los Angeles is identified as the most diverse city in human history, with demographics shifting away from European ancestry; by 2014, Hispanics became the largest ethnic group (15 million), and Asians are the fastest-growing.
• Mortgage data shows a complete shift in top homebuyer surnames from European names (Smith, Johnson) to Asian (Chen, Li, Wang) and Hispanic names by 2014.
• 70% of all major U.S. economic and social developments originate in California.
• 95% of the world's consumers live outside the U.S., with small and medium enterprises (SMEs) representing 98% of the 300,000 U.S. companies actively exporting.

Challenges Identified by Panelists

• Cost of Business: High real estate costs drive up labor expenses, making California less competitive compared to states like Texas and Florida.
• Housing Affordability: California now has the largest wage-rent gap in the country, leading to the label of the "least affordable county" in America and driving out young talent.
• Tax Structure: California ranks 50th on the State Tax Index; high personal income taxes (affecting 92% of businesses) and complex regulations disproportionately burden small businesses.
• Education Funding: State funding for public universities has decreased significantly over decades, creating a risk of "terminal decline" in the state's skill set if not addressed.
• Regulatory Complexity: Small businesses face excessive red tape in licensing and compliance, with some municipalities requiring up to 21 steps for business registration.

Forward-Looking Statements & Strategic Recommendations

• State Treasurer John Chiang: Proposes creating a "one-stop shop" digital portal for businesses to navigate tax and permit obligations, aiming to reduce bureaucratic silos and administrative costs.
• Small Business Administration (Donna): Advocates for streamlining regulations, reducing tax complexity, and eliminating ineffective government programs to improve ease of doing business.
• OneWest Bank (Steve): Suggests diversifying and simplifying the state tax base while capitalizing on strong economic conditions to reduce the burden of high income and capital gains taxes.
• Milken Institute: Emphasizes California's leadership potential in biosciences, noting that the top 5 of the top 12 global universities are located in the state and that foreign-born doctoral students in science represent a critical asset.
• Global Trade: Panelists highlighted the need to assist the 1% of small businesses currently exporting to capture the broader global market, leveraging LA's position as a gateway to the Pacific Rim.

Cultural & Innovation Assets

• LA is ranked #1 globally for city brand strength (above New York and London) by The Guardian, driven by weather, entertainment, and economy.
• The city is leveraging its "curiosity" factor to lead in autonomous vehicles, 3D printing (reducing prosthetic costs from $20,000 to $20), and green technology.
• Los Angeles is investing $8.5 billion to redo all LAX terminals and is pursuing a tunnel under the 405 freeway to improve infrastructure connectivity.