Big Businesses still soaking up millions in tax breaks, courtesy of City Council
By Dave Wielenga

ILLUSTRATION by ALICE RUTHERFORD

By voting yet again to give tax breaks—this time, more than $2 million worth—to developers and big businesses on some of the city’s most-desirable properties, the Long Beach City Council has signaled that local government officials still don’t believe their own ballyhoo about the city’s makeover from post-industrial ugly duckling to revitalized tourist-town swan.

The fine print in two hurriedly-passed items on the Council’s June 19 agenda will rebate $1.5 million in city bed taxes to the developers of a soon-to-be-built waterfront Residence Inn hotel and will kick back half of the city’s sales-tax revenue from Marina Pacifica Mall—up to $980,000—to its owners if they rent a space to Best Buy.

Such acts of corporate welfare have been typical in Long Beach since the early 1990s. Originally, they were justified as ways to jumpstart the new local tourist economy after the old manufacturing-based setup was ruined by the departure of the Navy in 1994 and the depletion of jobs at companies like Boeing.

How are these giveaways justified today, after hundreds and hundreds of millions of dollars in public money have been poured into the redevelopment of economic districts on Pine Avenue, the Pike, Shoreline Village, Belmont Shore, and Marina Pacifica; the expansion of the Convention Center; and the creation of the Aquarium of the Pacific?

The same way.

“Incentivizing” is the way Second District Councilmember Suja Lowenthal describes it. “It’s unfortunate, but we’re still at a point where we need to incentivize certain retailers.”

That’s Third District Councilmember Gary DeLong’s take, too. He made the motion for the Marina Pacifica tax kickback.

“The [tax] income Best Buy would generate, even with a rebate, is higher than the alternative companies that would rent the space,” DeLong argues.

Perhaps so, but a memo to the Council from city staff acknowledges that the idea for the kickback came from Marina Pacifica’s landlord, who is seeking protection from the ups and downs of the free market. “The rental rate Best Buy is willing to pay is below that which returns an adequate return on investment,” said the memo, not mentioning exactly what kind of return might be deemed “adequate.”

But DeLong is insistent.

“The money the city receives from sales tax pays for more police officers, schools, and parks—things all people use,” he says. “If there were another alternative, I’d be glad to hear about it at a City Council meeting.”

If DeLong is serious, he ought to take his ears to a meeting of the Lakewood City Council.

“Lakewood has never given away sales-tax revenue to induce businesses to come here or to keep them here,” says Donald Waldie, city spokesman and author of the exquisite Southern California memoir Holy Land. “The truth is that because cities with redevelopment agencies have been extraordinarily accommodating, some large corporations calculate sales-tax rebates in their business plans. So it goes from an inducement to calculated income. That methodology is difficult to defend.”

Long Beach councilmembers Gerrie Schipske and Dee Andrews voted against the tax rebate.

“It has opened the invitation to any other major sales-tax generator to ask for the same deal,” Schipske explained on her blog.

Meanwhile, the Best Buy store in Lakewood Center pays full city sales tax. So do other tenants like Circuit City, Macy’s, Target, J.C. Penney, and Mervyns. Despite that hard line, Lakewood Center has remained the thriving centerpiece to that city’s economy since 1952—and it’s not even freeway-adjacent.

Lakewood also doesn’t have a waterfront, which is where Long Beach is being extraordinarily accommodating to Residence Inn developers Kam Baboff and Jim Gray.

On Oct. 4, 2005, the City Council granted them a 66-year lease for $788,000—total—on land alongside the Queen Mary and Coast Hotel. Councilmember Rae Gabelich voted against the deal. “We have a very valuable piece of land, considering the renaissance of this city,” she said, suggesting that Long Beach was selling itself short by “a couple million dollars.”

Although Baboff and Gray had sought a long-term lease that would, as they put it, “reflect a land-acquisition deal,” they didn’t act like landowners—or even capitalists—when tight earthquake-safety standards increased construction costs. Instead, they came back to the City Council last month to ask for more favors. And the Council complied with 1.5 million of them—the discount in bed-tax dollars the hotel will receive over the next 10 years. Meanwhile, Long Beach has agreed to spend another $1 million to upgrade streets, medians, and landscaping around the new hotel. A Redevelopment Agency official justifies that as “investing in infrastructure to spur development.”

Gabelich assessed it differently, calling the land deal “an outrageous gift.”

In other words, the same ol’ same ol’.

Additional reporting by Dan Steinbacher