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Monday, Jun 17, 2024


mike1st/19″/mark2nd BEN SULLIVAN Staff Reporter Woodland Hills business leaders are finding there’s just one problem with being an industry town: Industries can relocate; towns can’t. The same concentration of health maintenance organizations that has long made Woodland Hills the envy of other parts of the city now leaves it economically vulnerable to a threatened exodus of managed care companies from L.A. “It would be devastating,” said Thomas DeLong, a spokesman for the Woodland Hills Chamber of Commerce. “They’re the major companies in the area with the largest number of employees.” Beyond causing a citywide loss of tax revenue, the departure of one or more of the HMOs would have a secondary impact throughout the West San Fernando Valley, said City Councilwoman Laura Chick, whose Third District encompasses much of the San Fernando Valley. The 6,000-plus Woodland Hills employees of the HMOs shop, eat and use the services of hundreds of other businesses in the area, she said, spending millions of dollars annually. “The ripple effect on employee spending in the area would be terrible,” DeLong added. The HMOs in question Blue Cross of California, CareAmerica Health Plans, Health Net and Prudential HealthCare are all located in the Warner Center section of Woodland Hills. They are demanding a lower business tax than the one the city now requires them to pay. They also are squabbling with the city over an estimated $57 million in back taxes the City Clerk’s Office has provisionally determined that the companies owe. The HMOs contend their industry is unfairly categorized in the “professionals” category of the city’s business tax code, exposing them to the highest tax rate of roughly $6 per $1,000 of gross revenue. A measure put forward by Chick would reclassify the companies to the “miscellaneous service” category, which would nominally charge them just $4.41 for every $1,000 they take in. If not granted the tax concession, the four companies and Maxicare Health Plans in downtown L.A. say they will move to a city with no business tax, or one with a tax substantially lower than L.A.’s. The potential annual savings from such a move could range from a few hundred thousand dollars up to several million dollars, depending on the size of the HMOs. “In one fell swoop, it could start to turn Warner Center into a ghost town,” Chick said. “That in and of itself is horrific, but the reverberating effect is also enormous.” Warner Center Properties, the district’s biggest office landlord, would be left with a glut of empty office space. The four HMOs account for roughly 30 percent of total Warner Center occupancy. Finding comparable tenants would be difficult, according to Andy Fishburn, the CB Commercial Real Estate Group’s vice president who heads up the leasing team at Warner Center Properties. With nearly 1 million square feet in office space between them, “they absolutely anchor this marketplace,” Fishburn said. CareAmerica, whose sublease expires at the end of 1998, is the most likely to vacate, Fishburn believes, and the loss of its approximately 225,000-square-foot presence alone would be a major blow to the center. “In all likelihood, you’re not going to find a large player to step right into that,” Fishburn said. Turnover at Warner Center is typically about 50,000 square feet a year. Filling the CareAmerica space would, at that rate, represent the equivalent of roughly four years of brokerage work, he said. As potentially painful as a mass departure would be, there are those who say L.A. should not allow itself to be “held hostage” by a handful of disgruntled corporations. “We must be even-handed in our enforcement,” said City Councilwoman Rita Walters, whose Ninth District includes MaxiCare’s downtown headquarters. “We’ve got companies (in downtown and South Central L.A.) struggling, but they pay their taxes every year.” Walters said the HMOs’ threat to relocate “could be a smoke screen to avoid paying their back taxes” altogether. The HMOs deny that characterization. If the HMOs did move, they probably wouldn’t go far. Nearby Calabasas to the north, or Burbank to east, are considered the most likely destinations for a new home, both because of their favorable taxes and close proximity to the companies’ Valley employee base. Those two cities and others as far afield as Palmdale have been lobbying for the HMOs’ business. Larry Kosmont, president of the Kosmont & Associates Inc. consulting group, said the HMOs rely on upper-middle-class, college-educated employees whose spouses generally also work just the sort of residents who populate the West Valley. Because these employees don’t rely solely on a high salary from the HMOs, many would likely quit before agreeing to a major commute to and from work, Kosmont said. “The key thing for these companies is the availability of a strong labor pool,” Kosmont said. “They have at their finger tips in the West Valley and adjacent area a large pool of educated, second-income wage earners who want convenient access to work. So it’s a perfect fit.”

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