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John Petro

The Business Friendly City

As the national economy continues to shed jobs, cities are looking for ways to grapple with high levels of unemployment. In Las Vegas, Mayor Oscar Goodman is hoping that construction of a new City Hall will spur new development in the city's central business district. New York City Mayor Michael Bloomberg touted his Five Borough Economic Opportunity Plan, which includes job training initiatives, programs to assist small businesses, and capital construction projects.

In Los Angeles this week, Mayor Antonio Villaraigosa hired former investment banker Austin Beutner to fill the newly-created position of First Deputy Mayor and Chief Executive for Economic and Business Policy. The First Deputy Mayor will be charged with accelerating job creation. "He will drastically change the City's approach to job creation and economic development," Villaraigosa announced on Monday.

The Wall Street Journal reports that 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 directly to him."

Beutner gives some hints about how he intends to use these powers. He will take steps to "make Los Angeles the most business-friendly city in the country."

But what characteristics make a city more or less business friendly? Is it simply low tax rates and minimal regulation? The Los Angeles County Business Federation would say yes: "We have a city government that thinks last about the effects of laws and regulation on the business community, and how [they] affect businesses staying in Low Angeles and new business coming into the city."

I would argue that both taxes and regulation are essential functions of local government that actually serve the interests of business. Of course there are instances in which certain taxes can incentivize the wrong types of behavior or when some regulations may be outdated or no longer serve their intended purpose.

But overall, businesses need cities to provide high-quality services and public goods: public education, sanitation, transportation, public safety, and public parks, to name a few. Businesses also need a regulatory environment that provides safety and accountability both for businesses and customers. No restaurant wants to be fined for a health code violation, but customers demand that city inspectors will protect their health and safety.

Beyond providing services and protecting public health and safety, I would argue that cities can play an even more meaningful role. Writing for the Nation in 2005, Peter Dreier writes of Mayor Villaraigosa's election victory earlier that year, "He needs to be a new kind of probusines mayor--by redefining a 'healthy business climate' to mean prosperity that is shared by working people, one that lifts the working poor into the middle class."

If you think about it, does a city made up of the working poor really constitute a healthy business climate? Not if you consider how private capital tends to flee low-income neighborhoods, how property values suffer, and how low-income families have less disposable income to spend on good and services. Not if you consider the educational outcomes of children in poverty and how businesses are attracted to cities with highly-skilled workers.

Progressive policies that promote higher wages for working families and provide basic benefits, like the right to take off of work when you are sick, can actually create a stronger business climate. Let's hope that Los Angeles' new jobs czar realizes this as well.

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Posted at 2:37 PM, Jan 13, 2010 in Urban Affairs
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