This time last year, Michael Mooslin faced a crossroads with his 15-year-old company, Color Me Mine Enterprises Inc. The business, a franchiser of 140 paint-your-own ceramics stores, was nearing the end of its lease on its Lankershim Boulevard headquarters. Following years of renting, Mooslin was anxious to purchase his own building, preferably in the city of L.A. He struggled to find a suitable space but eventually found a 6,700-square-foot mixed-use property in Glendale. The two-story building was perfect, and while Mooslin wanted to stay in Los Angeles proper, what sealed the deal had nothing to do with square footage, floor plans or mortgage rates; it concerned sales tax, which is far lower in Glendale than in Los Angeles. “That’s a big negative for us because we’re in the franchise business and we collect royalties from all over the world. That just cripples a little company like us,” said Mooslin. The possible savings were enough to convince Mooslin to take Color Me Mine out of the city. “Given comparable alternatives in L.A., Glendale was the logical choice,” he said. Mooslin follows a well-worn path for an alarming number of Valley business owners who have abandoned Los Angeles in favor of more business-friendly locales. While statistics are limited, even conservative estimates show that the Valley has relinquished hundreds of jobs to other areas of the country over the past few years. Among the largest Valley losses: Tech company Unova Inc., which relocated its headquarters and some 200 jobs to Everett, Wash., from Woodland Hills in 2003; Washington Mutual, which cut 1,000 jobs at its Chatsworth call center early this year; and Easton Bell Sports Inc., which moved most of its production and 250 jobs out of Van Nuys to China. Other companies that have left or downsized include manufacturer Holga Inc., appraiser Buxbaum Group and merchant company iPayment Inc. The flurry of relocations is being fueled, say those familiar with the situation, by a tangle of overlapping conditions, city policies and economic factors from concerns about the city’s bloated approval process and void of developable land to good mortgages, workers tired of commute times and a general trend of outsourcing overseas. Ken Hitts, with the Los Angeles County Economic Development Corp. who works with the Economic Alliance of the San Fernando Valley said city policies, such as its high gross receipts tax, make it difficult to retain and attract business that know about the conditions. “That’s been an impediment for a number of companies,” he said. “We’ve lost businesses. The information is out there.” Red tape issues But the biggest issue, say those familiar with the trend, is Los Angeles’ notorious red tape, especially concerning new building projects. Woodland Hills planning and land use attorney Fred Gaines said the bloated bureaucracy has given L.A. a bad reputation among business owners, brokers and developers. “It’s well known that if you’re going to do development in the city of L.A., you’re going to have substantial time delays and substantial added costs when you’re dealing with city bureaucracy,” he said. He said the issues boil down to a lack of organization between the city’s planning, building and safety, public works and engineering departments. “Projects are half-built and there are issues with street widening. Because these departments aren’t coordinating,” he said. “You have so many different departments and there are developers that say ‘I’m going to stay out of the city of L.A.” City Councilwoman Wendy Greuel, who represents the eastern portion of the Valley, said the problems are an example of departments not looking at the big picture. “Sometimes the city makes it more complicated based on one experience they had and they (put in) all these checks and balances,” she said. “So it turns into a long process.” Chief Zoning Administrator Michael LoGrande acknowledged that it is common for projects to become mired in bureaucracy as various city, county and state departments each become involved. “We see a lot of red tape, especially with small projects,” he said. But he also said the city is working to streamline the process, creating express lines at plan check counters and easier access. LoGrande also said the department has faced limited resources and a backlog of cases. “A lot of it is playing catching up,” he said, adding that the department has its largest case volume in six years. Some of it can be fixed, he said, if local and regional officials were willing to get on the same page when it comes to approvals. “If we can get control, we can help,” he said. “We’re doing a lot of work,” LoGrande said. “But we still have a ways to go.” Other cities benefit from process Overall, city officials say they are working to keep and attract business in the city. Mayor Antonio Villaraigosa and his business team take credit for aggressively recruiting retail into the eastern Valley and the city council has also pushed through business tax reforms. But officials are also quick to point out that what the Valley is experiencing with job loses is hardly unique, mirroring what’s happening in many areas of the state and country grappling with increased health insurance and workers compensation costs and overseas competition. That logic would make sense if all of the Valley’s jobs were going overseas. But in reality, a sizeable chunk of companies that have left the area haven’t moved to new states they’ve gone to Los Angeles-adjacent cities, many of which have capitalized on the situation by creating pro-business incentives. Cities like Westlake Village, which has no business tax, Simi Valley, Calabasas and Camarillo have all seen their corporate roster flourish. But the real winner of the Valley ex-pat game is Santa Clarita, now a significant base of operations for Princess Cruises, Advanced Bionics Pharmavite and a score of other companies. Santa Clarita Economic Development and Marketing Manager Carrie Rogers said the city is attractive to businesses because it doesn’t have a gross receipt or utility tax, has a streamlined approval process something that’s possible in a city just 15 percent the size of the San Fernando Valley and lays claim to lots of available space. That’s what helped convince L/B/W Insurance & Financial Services Inc. two years ago to move from rented space in Van Nuys to a Santa Clarita warehouse they own, said Vice President of Operations Gail Jenkins. “We were able to buy a building and build it out to our specs,” Jenkins said. “We would have never been able to do that in the San Fernando Valley. It gave us a nicer facility.” It also didn’t hurt that Santa Clarita’s affordability made it easier for workers to live nearby, cutting down on commute times and improving working morale. Today, the company has made a habit of hiring locals sick of driving far. “It seems we’re able to tap into people in this area that didn’t want to go to the Valley,” she said. “It gave us that edge.” Those types of benefits are exactly what city officials tout when they woo brokers, real estate divisions and businesses out of Los Angeles, Rogers said. “We market ourselves as being friendly with less taxes. It’s an accessible government,” she said. The tactic has paid off and Santa Clarita now claims scores of former Valley operations including Bill Thomas Associates Inc., Specialty Motors, Worldwide Direct, Trigg Labs Inc., Cardinal Distributing and Silgan Plastics Corp. The reason companies have jumped ship in droves, Rogers said, is simple: “We’re being told that Santa Clarita is more responsive with plans and the turnaround is much faster. When someone calls, they’re not hearing 10 different things from 10 different people. They get answers.” Hitts of LAEDC said L.A. could learn from what Santa Clarita and other nearby cities have accomplished. “They do a good job,” he said. “They get it.”
