The Los Angeles County Economic Development Corp. could lose critical funding it uses to retain businesses in the region and lure new ones here.
Earlier this month, the county Board of Supervisors voted to allow other local economic development organizations to apply for some of the $1.25 million the county gives each year to the LAEDC.
It would be the first time in the organization’s 31-year history that its monopoly on county money would be challenged.
Already, at least one rival group, the Santa Clarita Valley Economic Development Corp., plans to apply for $200,000 of the LAEDC funds and others may follow. If that money goes to Santa Clarita, it would be a blow to the LAEDC.
“A significant reduction in funding would impact our ability to help as many businesses,” said spokesman Colin Maynard, who added the vote came as a complete surprise.
The $1.25 million in county funding represents about 18 percent of the LAEDC’s budget of about $7 million. The move to allow other economic development groups to bid for it was led by Supervisor Mike Antonovich, who represents the northern county, including the Santa Clarita and Antelope valleys.
A spokesman for Antonovich said the motion was not aimed at punishing the LAEDC, but rather the supervisor was responding to requests from the Santa Clarita Valley EDC and other organizations in his district for county funding to boost their efforts at economic development and business retention.
“Nothing in this motion precludes the LAEDC from receiving any funds,” said Antonovich spokesman Tony Bell. “Instead, it expands eligibility (for these funds) to include all economic development corporations.”
Larry Kosmont, an L.A. economic development consultant, believes that the heightened competition is the result of several factors, including the recession and the abolition of redevelopment agencies over the last 18 months.
“It’s unfortunate for the LAEDC, but economic development dollars are in very short supply right now,” he said.
Long-time role
The county established the LAEDC in 1981 as part of the county’s industrial development bond program. In the 1990s, the LAEDC became the county’s principal economic development organization, with the goal of retaining businesses, attracting businesses, and distributing economic data and forecasts.
With the LAEDC taking on all these tasks, county supervisors gradually increased funding for the organization, from $500,000 a year in the mid-1990s. It’s been at the current level of $1.25 million since 2008. (Business Journal Publisher Matt Toledo is a member of its Executive Committee, which oversees the organization’s budget.)
But as the LAEDC continued to receive more money, other regional organizations within the county felt increasingly left out and started seeking their own funds from the county. Jonas Peterson, chief executive of the Santa Clarita Valley EDC, declined to discuss the matter beyond this prepared statement: “We have a proposal (for funding) into Supervisor Antonovich’s office. We are appreciative of the economic support his office has provided.”
However, a loss of funding by the LAEDC would not necessarily benefit all other economic development groups. For example, the LAEDC provides some subsidies to the Valley Economic Alliance, which provides assistance to businesses in the San Fernando Valley, as well as the Santa Clarita Valley EDC.
Ron Wood, chief executive of the Valley Economic Alliance, said he’s concerned about losing both in-kind and direct aid, including funding for a staff member’s salary.
“We would not be able to replicate the statistical and promotional materials we now receive from the LAEDC,” he said. “This is material that helps convince businesses in the San Fernando Valley to stay put or helps convince companies outside the region to set up shop here.”
There is also a concern that economic development groups within the county could start using county funds to lure companies away from each other’s jurisdictions.
“If the Santa Clarita Valley EDC received money directly from the county, they could be tempted to try to recruit businesses from over the hill here in the San Fernando Valley,” Wood said. “That kind of internecine warfare doesn’t do the region any good and it’s what the LAEDC as a regional organization scrupulously tries to avoid.”
Both Wood and Kosmont said that county budget officials should bar the groups from using the funds to lure businesses from other parts of the county.
However, even with such a ban, Wood said economic development could suffer.
“A move like this just fragments the general effort and that’s not good for anyone. It may solve some local cash-flow issues for one group or another, but it’s not enough money,” he said.
Kosmont said that if many groups were to seek a share of the funding, that would severely dilute economic development efforts. But spreading out the funds among a few organizations might be beneficial.
“I still think that if only one or two groups get some of the funding now going to the LAEDC … it could spur some more innovative and diverse approaches to economic development,” he said.
