A Los Angeles city council member has vowed to spend much of 2009 laying the groundwork for a plan designed to turn the city into an anchor of California’s life-science industry on a par with the San Francisco Bay Area and San Diego.
Greig Smith, the Republican chairman of the council’s Jobs, Growth and Business Tax Reform Committee, conceded that LA is unlikely any time soon to draw a concentration of life-sci employers comparable to those in the Bay Area or San Diego.
But Smith, who represents part of the western San Fernando Valley on the 15-member council, told BioRegion News the city has several ingredients for developing its own life-sci supercluster: The presence of academic research institutions, one biotech giant, and large swaths of industrial land suitable for redevelopment.
In a recent interview, Smith said his committee will hold hearings in January on a measure whose title spells out its purpose: “Promote a Biotechnology Sector[by] marketing L.A. to academia and the private sector as a biotech center.”
The measure is one of 13 Smith introduced as part of a package of LA-centric economic-development proposals, which he has dubbed the Los Angeles Legislative Economic Action Plan or LA LEAP.
The complete LA LEAP package includes legislation allowing the City Council to:
Allow the city to negotiate tax incentives with private employers without approval of the City Council — the subject of a March 10 voter referendum;
- Create a new city office of economic development independent of the office of Mayor Antonio Villaraigosa, a Democrat who is seeking re-election in 2009. Smith said the economic-development office would also require voter approval in March since it involves a change to the city charter, which now bars Villaraigosa and council members from negotiating jobs-for-incentives deals with employers and developers;
- Offer city funds to help proprietors spruce up storefronts;
- Create new job training and placement programs within LA high schools;
- Study additional tax cuts for businesses; and
- Promote a nascent local clean-technology sector as a job-growth engine.
According to Smith, cleantech and biotech disciplines could be fused into a single “green” tech sector that could generate jobs and promote use of alternative energy. To that end, the council recently passed a law allowing LA to generate 400 megawatts of power — enough to support 400,000 homes — by installing solar panels on roof space it would lease from owners of commercial buildings in exchange for reduced property tax and water bills.
One life-sci area where Los Angeles should focus, Smith said, is stem-cell research, a segment that has drawn only a handful of employers and researchers to the state. The city is home to two academic research centers devoted to regenerative medicine and backed by the same benefactor:
- The Eli and Edythe Broad Center of Regenerative Medicine and Stem Cell Research at University of California, Los Angeles; and
- The Eli and Edythe Broad CIRM Center for Regenerative Medicine and Stem Cell Research at the University of Southern California. On Sept. 6, USC broke ground on the $80 million facility.
Smith said LA officials had tried to woo several stem-cell companies soon after state voters in 2004 gave the state the green light to borrow $3 billion to pay for regenerative medicine research.
He declined to name them, but said that “we sat down with all of them. Almost all of them ended up going to northern California, up in the Silicon Valley. The Silicon Valley is the prime example of being able to make deals,” said Smith. “They’ve done a tremendous job.”
Yet California’s two other bioclusters have a presence in the field as well. The state’s stem-cell research agency, the California Institute for Regenerative Medicine, is headquartered in San Francisco, the nation’s top biocluster. And San Diego is home to the Sanford Consortium for Regenerative Medicine, renamed this fall after receiving a $30 million donation from Sioux Falls, SD, philanthropist T. Denny Sanford.
The consortium will use that money, plus $43 million awarded in May by CIRM, to construct a research facility on North Torrey Pines Road [BRN, Oct. 6; Sept. 22].
Los Angeles’ inability to sustain a life-sci cluster on a par with San Francisco and San Diego is the topic of a study by Steven Casper, an associate professor at the Keck Graduate Institute in Claremont, Calif. In 2007, KGI received an $84,000 grant toward the study from the John Randolph Haynes and Dora Haynes Foundation.
Earlier this year, Casper offered several glimpses into the shortcomings of LA as a biotech hub in Creating Successful Biotech Clusters, a presentation made for a Stanford University conference. These shortcomings include:
- Fewer serial founders: Those in LA accounted for 21, or 20 percent, of the 106 founders of LA biotechs established in 2005, versus 45, or 25 percent, of San Diego’s 179 firms founded that year, and 123, or 46 percent, of San Francisco’s 269 companies created in ’05.
- Few public companies: Fewer than five in Los Angeles, versus 44 in the Bay Area and 40 in the San Diego region.
- A lack of social ties linking managers and scientists across firms, compared with the San Francisco and San Diego areas.
Casper also found that 88 percent, or 149 of the 170 LA-based biotech executives who left their job between 1981 and 2005 moved out of the region’s life-sci cluster altogether. This compares with 58 percent, or 466 of the 809 San Francisco executives who left the Bay Area biotech cluster during that period.
The number of executives changing jobs within a cluster stood at 42 percent, or 343 of the 809 departing Bay Area execs, but only 12 percent, or 21 of LA bio honchos.
Smith’s economic-development office would employ professionals charged with attracting new businesses and their jobs to LA by stressing that the life-sciences industry is among several higher-wage, higher-growth industries, Smith said.
The city’s economic-development effort is now centralized in an office of Villaraigosa.
“My goal is to sit down with the mayor and discuss this and see if we can’t take his unit and use it as a basis to create a whole new department of the city that’s independent of the mayor’s office,” Smith said. He added that he envisions the mayor retaining control by hiring the person who would run the department.
But Villaraigosa’s commitment to expanding economic development soon is uncertain at best. The mayor is scrambling to plug a $110 million budget shortfall in fiscal 2009’s $7 billion budget that he has said publicly will likely result in the city laying off employees and curtailing new services.
He has asked the council to approve by Jan. 1, 2009, a series of 1-percent cuts to the budgets of the police, fire, and emergency-management departments; and 3-percent cuts to all other city agencies.
For fiscal year 2010, which begins July 1, Villaraigosa has said the deficit on a budget projected at $7.2 billion could balloon to $400 million due to shrinking sales tax revenue.
“That doesn’t give us a lot of room to reduce revenue streams,” Smith said. “But I’m a free-market kind of guy. If you make tax cuts, you increase your revenue in the long run.”
Yet the mayor has also said the cuts would not affect his earlier promise to hire 1,000 new police officers — a pledge Smith and the council’s Democratic majority have said should be re-examined given the budget squeeze. The council prefers a hiring freeze on new police officers and firefighters from January through June.
Emulating San Francisco
Smith said he envisioned the department would work with officials to draw life-sciences employers to a life-sciences zone that the city could create within now-vacant industrial land. That’s a strategy similar to San Francisco’s successful plan to rezone its Mission Bay section into a life-sci expanse that now houses a second campus for the University of California, San Francisco; a new facility for the J. David Gladstone Institutes; as well as the two life-sci buildings completed — and one under construction — by Alexandria Real Estate Equities.
LA now requires that businesses seeking tax breaks be considered by the City Council case-by-case, allowing council members in some cases to impose additional conditions in exchange for approvals. While proponents of this format claim that it helps create economic deals that balance benefits between the city and companies, opponents like Smith contend it discourages those companies from locating to or expanding within Los Angeles.
“We want decent quality [life-sci jobs in LA] paying livable wages. There should be some sort of guarantees about this.”
“We can’t make a long-term deal sometimes, and you see where cities like Marietta, Ga., and states like North Carolina are building large industrial parks. They’re making deals on the taxes on the land. We can’t do that,” he said.
“They’re making deals on eliminating certain taxes for long periods of time. We cannot do that,” Smith said. “This will loosen things up and allow the mayor and the council together to approve those kinds of deals.”
LA LEAP has drawn fire from the pro-labor Los Angeles Alliance for a New Economy, which claims that any additional tax benefits for employers should be coupled with a requirement that that they pay above-minimum “living” wages and other stipulations.
“We should set a higher standard for those companies receiving the incentives. We want decent quality jobs paying livable wages,” James Elmendorf, policy director for LAANE, told the Los Angeles Business Journal. “There should be some sort of guarantees about this.”
Smith’s package of proposals would limit the state’s gross tax receipts by requiring an automatic rollback of the tax during tough economic times. Los Angeles has rolled back taxes in recent years: In 2004, Villaraigosa’s predecessor James Hahn signed into law a measure that reduced from 75 to seven the number of categories used in the calculation of taxes paid by businesses. More importantly, he also phased in a 15-percent, four-year cut in business taxes that helped generate $141 million for the city.
Yet Los Angeles is California’s third-costliest city for doing business, behind San Francisco and Santa Monica, according to the 2008 Cost of Doing Business survey from the Kosmont Companies and the Rose Institute for State and Local Government at Claremont McKenna College.
LA LEAP expands on a study released in January 2008 by the Los Angeles Economy and Jobs Committee, a privately funded, 26-member panel appointed by Villaraigosa. The committee’s eight-page report, titled Building a World-Class City for the 21st Century: Recommendations for Job Growth and a Stronger Economy in Los Angeles, recommended 100 steps that could help jumpstart LA’s economy, including eight related to the life sciences:
- Use city agencies to promote technology growth;
- Partner with local universities to keep tech-startup firms in the city;
- Lobby for increased federal funding for research in life-sci and other technologies;
- Arrange a roundtable discussion of experts, leaders, and venture capitalists to develop further plans to grow the biotech industry;
- Identify an additional location for building a hub for biotech and medical device manufacturing in West LA;
- Facilitate development of USC’s biomedical campus, and urge Los Angeles County to support its development;
- Direct Villaraigosa’s Business Team to seek government and private sector biotech funding; and
- Publicly announce the launch of a life-sciences initiative.
The report identified eight employment sectors on which it recommended the city anchor its economic-development strategy: higher education, entertainment and other creative industries, logistics/goods movement, technology, tourism/hospitality, manufacturing, and international trade.
Building a World-Class City recommends the city set aside 8 percent of all land for industrial use, based on a projection that industrial employers create four times the number of jobs, and six times the wages, of retail centers.
Italso recommendsthe council create the economic-development department, rebuild the Port of Los Angeles, redevelop low-income neighborhoods, streamline the city’s land-use and permitting processes, warm a climate that the report concluded was unfriendly to businesses, and modernize Los Angeles International Airport. Villaraigosa embraced this last recommendation on Nov. 18 when he unveiled a plan to rebuild the airport’s Tom Bradley International Terminal at a cost of up to $6 billion.
Smith said his LA LEAP package emerged from a series of meetings held across the city with business owners and other residents. He said he and members of his committee were startled recently by one finding in a recent report from the city Economic Development Corp. that while the city’s population grew by 1 million people during the past 10 to 15 years, the city lost 50,000 jobs during that period.
“We kind of looked at each other and said, ‘Whoa! That’s startling news.’” We asked the question to business, ‘What is wrong with LA? Why aren’t we doing a better job?’
No Pretty Picture
While Los Angeles may best be known for Hollywood, TV studios, and the stars who work there, the city has the nation’s largest number of manufacturing jobs. But that sector has shriveled in recent years, losing a total 54,500 jobs in the year ended October, according to the California Employment Development Department.
That includes most of the 9,800 manufacturing jobs lost during the year in the metropolitan statistical area that includes Los Angeles and nearby Long Beach and Glendale, according to the state EDD.
Long term, LA has lost thousands of manufacturing jobs, though how many depends on who is studying the numbers. The city claims it lost 106,446 net manufacturing jobs between 1990 and 2007. While the EDD could not immediately confirm that number, since it measures sector-by-sector employment by metropolitan statistical area, the agency showed the MSA losing almost half its manufacturing jobs during that period to 443,600 from 804,700.
According to the state EDD, during the year ended October the number fell 2.2 percent to 433,800 jobs.
Most of LA’s lost manufacturing jobs, Smith said, were shed by corporate giants that include US Steel, Uniroyal Tires, General Motor, and Ford. Even worse, between 1980 and 2000, Los Angeles lost 230,289 manufacturing jobs, offsetting job gains in every other region of California, according to the California State Library’s California Research Bureau. That’s a far cry from the period from 1940 to 1970, when LA ranked behind only Detroit as the nation’s top auto manufacturing city.
The city’s industrial section south of downtown LA, along the namesake river, is one area suitable for redevelopment with life-sci employers, given its proximity to University of Southern California and Glendale Memorial Hospital and Health Center, Smith said.
“We have a huge amount of vacancies in there, and we’re looking at changing the zoning, and then maybe purchasing some of the land and creating an industrial park that we would own, and where we could let people come in for $1 a year or whatever we would want as the owner of the property,” he said.
“We’re looking at picking a zone of Los Angeles like they’ve done in North Carolina, and just say, ‘This is our industrial growth area.’ We’re going to pick and choose the companies we want to come here. Biotech is one that’s high because there are very good quality jobs,” Smith added.
Neither the life sciences nor any other industries are likely to flock to LA, he added, until the city warms a business climate he said has too often been chilly to entrepreneurs and developers.
“LA has a rep that it deserves, and that was that it was not pro-business. In 1980, we had five of the Fortune 500 corporations headquartered in our city. Today, they’re all gone. We need to look at signs inside ourselves and say, ‘What’s wrong?’ And that’s what led to this package,” Smith said.
Smith said he had not worked with the industry group committed to building up life-sci in LA and nearby suburban counties, the Southern California Biomedical Council. The group, also known as SoCalBio, represents life sciences companies, academic institutions, research centers, service providers and other employers in Los Angeles and five suburban counties, Orange, Riverside, San Bernardino, Ventura, and Santa Barbara.
Ahmed Enany, SoCalBio’s president and CEO, told BRN via e-mail he questioned whether LA can emerge into a biotech hub simply through marketing, no matter how savvy.
“I don't know what the statement ‘marketing L.A. to academia and the private sector as a biotech center’ really means. What academia? What industry? And where? Which parts of LA that needs to be marketed? The Valley? The West side? Downtown? San Pedro? Why? Where is the proof that marketing is the key to growing biotechnology in the city?” Enany said.
“Is San Diego a biotech hub because the City of San Diego markets La Jolla to academia and industry as a biotech hub?” Enany added.
Enany said SoCalBio is “always in communication with the Mayor's LA Business Team regarding specific industry issues.
“But, notwithstanding pronouncements and speeches made every now and then about supporting biotech development in the city, I have yet to see a city plan about how to accomplish this objective,” he added, except for a listing of ongoing projects to which the city contributed little or no funding, such as the USC Broad stem cell institute.
According to SoCalBio, Los Angeles is part of a six-county region that has some 900 biotech, pharmaceutical and medical device businesses; a precise number of LA bio businesses was unavailable. The region’s best known biotechnology company is Amgen, which is headquartered 43 miles northwest of LA in Thousand Oaks, Calif.
The Los Angeles-Long Beach-Santa Ana metropolitan statistical area — a region defined by the US Census Bureau — had the nation’s highest number of medical device employees in 2006, with 29,722 staffers; the second largest number of research, testing, and medical laboratories employees with 26,323 people; and the sixth-highest number of employees in drug and pharmaceutical companies in 2006, with 12,002 staffers, according to a report on California’s life-sci industry released last June by Battelle Memorial Foundation and available here.