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L.A. Official: 'Living Wage' Mandate Hasn't Stifled Development By Us
Capital New York
Dana Rubinstein

November 29, 2011
View the Original Article

Donald Spivack, the city official who drafted Los Angeles's 2003 policy that imposed a "living wage" on developers who receive certain city subsidies, says the policy has not stifled development there.

“It hasn’t deterred developers, and it hasn’t deterred the kinds of tenants we’re looking for,” said Spivack, who testified in favor of New York City’s living wage proposal at a City Council hearing on the matter last week. “We think we get better-quality tenants as a result of it."

One of the main arguments marshalled by opponents of living wage in New York City, including some unions, is that it will deter development in low-income areas where development is already difficult enough.

The wage requirements would apply to developers who receive city subsidies and whose annual revenue is greater than $5 million.

In his testimony last week, Tokumbo Shobowale, chief of staff to the deputy mayor for economic development, argued that “incentive programs have been created specifically to encourage investments in job-creating projects in neighborhoods where these kinds of investments have not historically been made.”

“The effect of this bill would be to act as a disincentive to those investments,” he continued. “Instead of making it easier to create jobs, this wage mandate would make it harder."

But L.A.’s policy applied exclusively to low-income areas, in particular to its 31 so-called redevelopment-project areas in places like northeast San Fernando Valley and South L.A.

“They were exclusively, at least from their inception, low-income areas that had serious dilapidation and deterioration,” says Spivack.

Rather than stifle development in those neighborhoods, Spivack says that the policy has actually stabilized the neighborhoods.

“People in the neighborhoods have more income, they have more money to spend and it helps the local shops in the neighborhoods where they live,” he said.

The policy enacted in 2003 by the City Redevelopment Agency, Los Angeles’ corollary to New York City’s Economic Development Corporation, is very similar to the bill currently under consideration here. (The bill is supported by a majority of the City Council, but it is being held up Council Speaker Christine Quinn over concerns that there aren't sufficiently clear-cut exemptions for commercial tenants.)

The ordinance in L.A. was controversial when it first went into effect in 1997. But according to Spivack, by 2003, at which time he was the agency’s deputy chief of operations, the arguments had died down.

“People saw it wasn’t the job-killer that everyone was projecting,” he said.

In some ways, L.A.’s 2003 policy is farther-reaching than the one that has been proposed for New York City, because it applies to developers who have received as little as $100,000 in financial assistance, as well as to manufacturers.

The proposal under consideration now in New York City expressly exempts manufacturers and would apply only to businesses with $5 million or more in projected annual revenue.

But in other ways, the L.A. ordinance is more limited. Unlike the New York City proposal, it does not automatically apply to the retail tenants of developers who receive city subsidies, even though it can apply to their anchor tenants.

Spivack cited a shopping center in Northeast San Fernando Valley, where the anchor tenant is Costco, as an example of the latter. Development of the store, part of a "green" mall called Plaza Pacoima, broke ground in January 2009.

“We saw no impact in terms of people not wanting to deal with us,” said Spivack. “A lot of times, just to be very frank about it, when you have a bad economy, the private financing market is not financing much of anything. Sometimes the public financing is the only financing available.”