An editorial by Tim Hodge…
There has been much written about the loss of important major employers and other businesses in Simi Valley. When it comes to economic vitality, there is no doubt that the tide is ebbing rather than coming in.
There has been nearly as much written about the efforts of City Government to keep and/or attract new business. Some of that focus has been about providing large cash incentives for business to come to the city. Throwing money at businesses like Nordstrom is not the answer and the City Council was wise not to pay that tribute. This is not because a Nordstom wouldn’t have been a fantastic addition, but because giving tax dollars away like some Central Committee is not what we are supposed to be doing in a market driven economy.
Instead, maybe the better approach is to evaluate what we shouldn’t be doing. Seeing what other cities aren’t doing, and in not doing are encouraging economic growth, doesn’t require a long walk.
The City of Santa Clarita is known as the most business friendly city in Los Angeles County. The growth they have experienced is not based on tossing out the building code or allowing any ugly building to go up. Instead, it is based on what they don’t do plus what they do better.
A quick look at the City of Santa Clarita website reveals the following about their business taxes:
1) NO Business License Fee;
2) NO Utility Users Tax;
3) NO Gross Receipts Tax
In addition, Santa Clarita has Enterprise Zones that provide further State Tax incentives and provides for a Use Tax program for state tax payments that results further tax incentives to the business.
That City provides a financial incentive of 5-10% for local vendors making it more likely the City can do their own shopping locally and support jobs and services. They have a One Stop permitting program, an Expedited Permitting process for commercial and industrial users of less than 3,000 square feet, a published guide for opening a small business and a published 21 point plan for business growth.
Looking at the Simi Valley website, we show a Facade Renovation Program on Los Angeles Street and also on Tapo Street. In addition, the “Business Incentive” page discusses demographics of our citizens and the Shop Simi Valley First program.
Simi Valley charges for business licenses and we do have a gross receipts tax. At just $37.50 per $100,000 in gross revenues, it doesn’t sound like much. But, most larger businesses are pleased with a post-tax performance of 3%. If a business could save $37.50 per $100k in sales, and figure out a way to do that every other week, that business would improve their annual bottom line by 34%.
For business, it is about doing the right thing as often as possible to keep costs down and compete. Yes, even the gross receipts tax is a point of consideration when a business considers Simi Valley.
Certainly reducing or eliminating these costs will impact total revenues, at least in the short term. We are all hoping the economy rebounds, and when it does, will Simi Valley be the city of choice for expansion? Will we be on the forefront of cities doing the right thing to make the permitting process effective and certain? Will we invest not by giving money away, but by reducing the tax burden on every business in Simi Valley…the new and the existing?
Maybe not all of these programs will work for Simi Valley. A deeper examination of how they are working for Santa Clarita would be in order. We do know there are a great many cities calling for the attention of prospective employers, retail shopping and restaurant opportunities. No City Council should not be choosing winners and losers in the tax game. That leads to many of the ills that have plagued governments for at least the last century.
Those of us that know Simi Valley know what a fantastic place it is to live. Keeping it that way requires balance in all areas, including economic strength. Being good at what we have to do with respect to planning and permitting, and by reducing taxes that other cities would charge, would give Simi Valley a still better chance to compete and thrive.