Why L.A.'s red tape is still a problem for businesses

In a nutshell, too many departments making too many separate - and often contradictory - decisions about the way a business must operate. The city is trying to make the process more efficient, especially with regard to restaurant permits, but there's a culture inside many of these agencies that's hard to shake. Here are some snippets from my piece in the February issue of Los Angeles magazine:

If you want a rough approximation of hell on earth, try opening a restaurant in the City of Los Angeles. It's not just the dozen or more government agencies that need to sign off on a project--or the lack of communication between the Building and Safety guy who says that the electrical outlets are fine and the Fire Department guy who says that they have to be replaced. It's not even the intramural squabbling between the Planning Department and the Area Planning Commission over whether to require six or eight parking spaces. What makes L.A.'s system so horrible--often dragging out approvals for a year or longer--is an institutional disregard for anyone running a business. In this world, bureaucracy is what rules, and if you don't like it, well, tough.


When a small business owner is held up by nonsensical regulations, the fallout can be considerable, not just for him or her but for the entire L.A. economy. The business loses out on thousands of dollars in potential sales, which means that people aren't hired, suppliers don't get work, and the city doesn't receive tax revenues--no small matter given an escalating budget deficit. If business owners have to pay rent while waiting for all the city permits to clear, they could be hard-pressed to make up for the losses once the operation finally does open. Sometimes the cash runs out before the permits are in hand. Sometimes an owner pulls up anchor and moves to a more accommodating area. "Los Angeles is one of the most hostile cities for entrepreneurship and small business that we've come across," says Michael Bindas, a senior attorney with the Libertarian-leaning Institute for Justice who last year surveyed L.A.'s regulatory climate. "It's strangling businesses with red tape, and it pretty much affects every calling."


Even incremental reform will be a long, bloody slog. Fixing the problem means examining what everybody does, not to mention how well they do it, to determine where the system, in [Deputy Mayor Austin] Beutner's words, "can be reorganized and reoriented." It also means firings and transfers and massive amounts of retraining, along with needling county and state officials to do the same with their people. Most of all, it means changing attitudes. "We're making progress," Beutner says. "You have to change the process so that various departments can do things in parallel--work side by side with each other, share the same information. You have to find people who say, 'OK, I get it. Our job is to try to foster a better environment for business.'‚ÄČ" He's clearly on the right track, but I'll believe it when I see it.

I was on John Rabe's "Off-Ramp" program over the weekend to talk about red tape in L.A.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
Mark Lacter, business writer and editor was 59
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