Los Angeles Hires a Jobs Chief

By TAMARA AUDI

Facing a widening budget deficit and regional unemployment stuck above 12%, Mayor Antonio Villaraigosa has decided to place a vast swath of city government under a former private-sector executive charged with making Los Angeles more business friendly.

On Monday, Mr. Villaraigosa is expected to name Austin Beutner, a former partner at private-equity giant Blackstone Group and co-founder of the boutique investment-banking firm Evercore Partners, as the ailing city’s first economy chief.

The 49-year-old Mr. Beutner will have broad powers. About half of city government departments — from the Port of Los Angeles to the city’s sprawling Department of Water and Power utility — will report to him. Mr. Beutner will report directly to Mr. Villaraigosa.

In a letter Mr. Villaraigosa sent to Mr. Beutner when hiring him, the mayor said, “I recognize we need a top to bottom revitalization and refocus of our economic development team here at City Hall to make certain job creation is the overarching focus at all levels and in all offices and departments.”

Mr. Beutner’s appointment is a part of “a greatly expanded and retooled vision of economic development in the city,” said Chief Deputy Mayor Jay Carson. “We have to view every decision we make through the prism of job creation.”

Southern California’s economy has been among the hardest hit in the country. The area’s housing market was one of the first to collapse. And in Los Angeles, mainstays such as the film industry have suffered as other states woo productions away with rich tax incentives. Last week, the city was dealt a psychological blow when Northrop Grumman Corp., the last major firm of the region’s once-dominant aerospace industry, announced it was moving its headquarters to the Washington, D.C. area.

Like many cities, Los Angeles has slashed services as it tries to close an $80 million budget gap. City revenue, much of it generated from business taxes, has plummeted. If the trend continues, the city could face a deficit of more than $1 billion in two years, according to some predictions. An estimated 150,000 jobs have been lost in the city since January 2008. The unemployment rate in Los Angeles County was 12.6% in October, compared with 10% for the U.S. overall.

In an interview, Mr. Beutner said his goals were to create jobs, and “to make Los Angeles the most business-friendly city in the country.”

Mr. Beutner faces a daunting task. Los Angeles business owners have long complained they are trapped in a tangle of regulations and taxes that make doing business in the city difficult and expensive. In a November survey of Los Angeles business owners, 74% characterized the city as unfriendly to business.

“We have a city government that thinks last about the effects of laws and regulations on the business community, and how [those laws and regulations] affect businesses staying in Los Angeles and new business coming into the city,” said David Fleming, founder of the Los Angeles County Business Federation, an association of business chambers that conducted the survey.

Mr. Beutner said one of his first steps would be to better familiarize himself with the city and he planned to meet with city-hall staffers, labor unions and visit city sites, such as the ports. He said he was aware of business owners’ complaints about prohibitive taxes and regulations, and would seek to reduce red tape to make the city more business friendly.

Mr. Beutner, whose title is first deputy mayor and chief executive for economic and business policy, starts Monday. His annual salary is $1.

Businesses don’t have to go far to escape the problems of the city and still be part of the metro area. Los Angeles is surrounded by a myriad of smaller cities knitted together by an expansive highway system. Many Los Angeles residents buy everything from groceries, to the refrigerator they keep them in, outside the city. Some major stores that sell big-ticket items have moved to neighboring cities to avoid the high cost and difficulty of doing business there, such as delays in obtaining building permits, and a range of fees and taxes higher than most other cities in the area, business leaders said.

However, the city does have some tools at its disposal. The Department of Water and Power, the biggest municipal-owned utility in the nation, has an enormous capital-expenditure budget. It could try to lure firms to locate in the area by promising to purchase equipment such as solar panels from them, for example.

The mayor’s office also concedes that institutions such as the airport, one of the 10 busiest in the world, haven’t been managed in a way to maximize their business-development potential.

Mr. Beutner acknowledged the scope of the challenge. “The hardest thing is going to be to change the mindset here,” Mr. Beutner said. “For the first time in a long time the city is going to be forced to change the way it does things. The most fundamental thing is to change the mindset of those who work in the city [government]. We serve business. They’re our customers as opposed to the other way around.”

Mr. Beutner was part of a State Department effort under President Bill Clinton to create jobs in post-communist Russia. Mr. Beutner said the effort worked well and that he helped find financing for rabbit farmers in far-flung corners of Russia and established a lending system for homes and autos.

Roger Altman, who founded Evercore with Mr. Beutner in 1995 and is now its chairman, said one quality that is likely to serve Mr. Beutner well in his new role is his ability to remain calm. “I never saw Austin lose it, ever,” Mr. Altman said.

Mr. Beutner left Evercore in 2008, after a 2007 mountain-biking accident that broke his neck and nearly killed him. Mr. Beutner says he is fully recovered and back to cycling. Mr. Beutner is married with four children, and has lived in Los Angeles for a decade.

Source: WSJ, January 14, 2010