Pencils down, amateur policy wonks: Is a $16,000-a-year job really worth $40,000 in public subsidies paid thanks to the leaders at Los Angeles City Hall?
That strange question is quietly being decided on Thursday, January 21, by the Los Angeles Community Redevelopment Agency, whose Board of Commissioners is expected to vote on a deal with developer Pacific Center Place that will hand the firm a city-owned piece of land and public loans nearing $6 million. All to move 30 jobs a few miles out of the city of South Gate and into South Los Angeles — and then call it “job creation.”
The vote this week focuses on relocating a small garment-industry factory just 3.7 miles, from working-class South Gate, across the city limits, and into L.A.
Should such a move, essentially stealing a small number of low-wage jobs from a neighboring and heavily minority suburb, be considered job creation? “In this economy, anything that creates jobs is job creation,” insists Bruce Ackerman, the CRA commission chair, a political appointee of Mayor Antonio Villaraigosa’s. But, “It’s got to be a good business deal — until I see the numbers, I can’t really weigh in,” he qualifies.
In truth, Ackerman has all but signed off on the strange deal. He supported it when it was brought before him at a CRA commission meeting on December 17 and, when commissioners deadlocked on the controversial plan at that time, Ackerman pushed for its reconsideration this week.
Ackerman is president and CEO of the Alliance of the San Fernando Valley, a business-booster organization, and his expertise is not in creating jobs. His online résumé shows that he is focused on building the coffers of Chamber of Commerce–type organizations, not on gaining hands-on knowledge about running private companies.
Under the deal terms that Ackerman has been pushing, the CRA would turn over to developer Pacific Center Place a South Los Angeles property at 812 East 59th Street, which it originally purchased for $2.7 million in public funds. The CRA would also provide a $750,000 forgivable loan, for a total of nearly $3 million in low-interest government loans. All of that help — both free and sweetheart loans — would flow to Pacific Center Place, owned by Sam Eshaghian, who develops land for the garment industry.
In return, Eshaghian would bring to South Los Angeles 30 existing jobs connected to a small garment-related manufacturer called D&J Sportswear, now based in South Gate.
The agreement maps out a schedule by which the number of jobs would, theoretically, grow to 40 in D&J’s fourth year and, it is hoped, expand to 74 jobs in its fifth year. At that point, if this employment projection is ever reached, the developer would be forgiven the full sum of the smaller $750,000 loan.
What is the CRA really up to here? A basic analysis using a commonly accepted industry formula demonstrates that if the estimated 74 jobs are ever delivered — a gamble that could backfire badly — each of those 74 jobs would have cost L.A. taxpayers more than $40,000. If only 40 jobs are created, the cost to taxpayers for each job could nearly double. And at least half of the envisioned 74 jobs would pay only the so-called living wage, currently $11.55 per hour, or about $23,100 a year. Under this plan, the other half of the workers could be hired at minimum wage, about $16,000 annually.
“I think this is a terrible deal for the city and for the people of South Los Angeles, who deserve better,” says Ackerman’s colleague, CRA Commissioner Madeline Janis, who termed the deal “more [money spent] per job than I’ve seen for a long time at the CRA.”
For South Gate, whose unemployment rate has hovered between 15.5 percent and 16 percent, a competing bid to keep Los Angeles City Hall from stealing those jobs is not in the cards.
“There’s no way I could even entertain” a similar package, says Steve Lefever, the city’s director of community development. “I don’t have the level of resources that L.A. is considering for this particular move.”
South Gate Mayor Henry C. Gonzalez is far more blunt. “That kind of money, for 30 or 40 jobs, is crazy,” Gonzalez tells the Weekly.
Gonzalez has hands-on experience luring industry to his small city, which was abandoned by big car manufacturers in the 1980s. He is a former bargainer for the United Auto Workers and is his city’s first Latino mayor. “I always ran for office on the basis of jobs, jobs, jobs,” he says.
In the mid-1980s he negotiated with General Motors to sell their former South Gate plant land to the city for $12 million instead of the appraised $38 million. The city created an industrial park that became home to Koos Manufacturing and its 300 jobs. Later, Gonzalez helped Koos to secure a second South Gate plant. Today, Koos, a garment manufacturer, provides 1,700 jobs in South Gate.
Eshaghian is a third-generation garment manufacturer, who first interacted with D&J Sportswear when the company supplied goods for his business specializing in women’s clothing. The CRA-backed project, if approved January 21, would be his first involving public subsidies — but not his first venture as a developer for garment-related industries. Three years ago, he purchased a property in South L.A. that now houses American Apparel and another manufacturer.
