Study Cites L.A.'s High Business Costs

The survey, conducted by the Los Angeles-based Kosmont Cos. and the Rose Institute of State and Local Government at Claremont McKenna University, ranks 398 cities throughout the US on the basis of business costs, taxes, fees and incentives. It assigns each city to one of five categories: very low cost, low cost, medium cost, high cost and very high cost.

This year, Los Angeles fell into the category of very high cost and ranked third-most-expensive in California, where the Kosmont-Rose Survey says that cities are in decent fiscal shape for the short term but need to find long-term solutions to their budget problems. One of the key factors leading to the high cost of doing business is that state support for city budgets has diminished over the past 20 years, the report points out, leaving California cities "challenged to find new sources of revenue."

One of the chief reasons for the high cost of doing business in most cities is that communities continue to increase local business taxes and fees to meet the demand for improved local services, according to the survey. Cities are left with only two basic options available to raise funds, either raise taxes or encourage development.

In addition to Los Angeles, other very high cost cities in Los Angeles County include Santa Monica, Culver City, Inglewood, Compton, and Bell. Other very high cost cities in California include San Francisco, Oakland, Berkeley, Rancho Santa Margarita, Richmond and San Bernardino.

Communities in Texas, Nevada, Oklahoma, and Colorado still consistently provide low cost areas in which to do business, but all regions of the US face competition from the low-cost business environments in countries like China and India. Also, voters in California have rejected proposals by elected leaders to find solutions to spending problems, as evidenced by the failed tax initiatives in the last election, the survey notes.

"If the voters are resisting economic development after systematically eliminating the ability of local leaders to raise taxes," says Larry Kosmont, CEO and president of Kosmont Cos., "then just where are local leaders expected to find the money to pay for the services that these same constituents want?