The city of Los Angeles will not be bankrupt, Mayor Antonio Villaraigosa told CNBC, dismissing former L.A. Mayor Richard Riordan's gloomy prediction that the city will be bankrupt by 2014.
The unemployment rate in Los Angeles currently stands at 14.5 percent, much higher than the 9.6 percent national average and the 12 percent unemployment rate for the state of California as a whole.
Villaraigosa blamed the high unemployment rate on the downtick of three of the city’s main industries: construction, imports and film. “These are three key areas where you see a drop and a big reason why we have an unemployment rate of 14.5 percent,” Villaraigosa said.
The unemployment rate for construction alone stands at about 35 percent, coming off of a 5-year construction boom in the downtown L.A. area that has since collapsed. Imports are down as well, which for a city that serves as the gateway for 44 percent of all seaborne goods in the United States has a large impact on jobs.
In an effort to attract more small businesses to the Los Angeles area, which will create more jobs, Villaraigosa has declared a business tax holiday for any business that wants to move to LA.
“We’re focused on bringing in business, supporting particularly small business so we can bring in the revenue so that we can get to better times,” Villaraigosa said. The tax break stipulates that new businesses will not have to pay gross receipt tax for three years.
Villaraigosa has stood by the president’s $50 billion transportation and infrastructure initiative, despite criticism that the stimulus is not working or creating jobs despite aggressive spending on part of the federal government.
“Not all spending is equal,” Villaraigosa said in response to this criticism. “When you spend money on building our transportation system, expanding our highway system, repairing our bridges — this is important. It’s important to the economy. $50 billion dollars is a drop in the bucket.”
Infrastructure Key to Recovery
According to Villaraigosa, infrastructure is key to economic recovery — a realization that he said has taken the United States longer than the rest of the world to come to. He noted that Europe, China, and even developing world countries invest more on infrastructure than the United States does.
“What makes America different is our technological know-how,” he said. "Unfortunately, we’re not putting that technological know-how to work. I believe that we do need to invest in infrastructure and I don’t buy the argument that’s just wasteful spending.”
Los Angeles is the second-largest city in the United States, and California is the eighth largest economy in the world. Villaraigosa blames the state’s historical problem with balancing its budget on deadlock partisanship in the state’s government and a lack of attentiveness to the needs of cities at the federal level.
“The needs of cities fall on deaf ears, even though cities generate about 89 percent of the wealth creation in America,” he said.
He advocated for major investment in urban centers in order to revitalize the economy, but conceded that it’s difficult to pass a budget in California: “Sacramento is as broken as Washington, D.C.”
Villaraigosa remained hopeful that through tough budget decisions and infrastructure spending Los Angeles would be able to pull itself out of fiscal peril.
As mayor, he sees himself as above some of the partisanship that keeps state and federal officials from getting things done, and he plans to carry on with cutting business taxes despite progress with the same efforts at the federal level.
“I don’t have the luxury to be an ideologue. I have to get things done,” he said.
The city’s ability to right itself ultimately depends on the ability of its citizens to implement tough fiscal decisions, according to Villaraigosa. “This city has always been a city of dreamers, but a city of doers, as well,” he said.