According to Larry Kosmont, president of Kosmont Companies of Los Angeles, a consultancy specializing in public/private partnerships, what separates some counties is how they reacted to Proposition 13, a grassroots consumer proposition passed in 1978 that limits the ability of state and local government to increase taxes based on property evaluation.Kosmont
says some municipalities reacted by raising sales taxes to generate revenue.
"There has been a rush to sales taxes at the local level.Some cities have gone from sales taxes making up 10 percent of their revenue to 35 to 40 percent.Property taxes have gone from making up a third of the city's budget to a quarter," says Kosmont
."Some cities like Miami and New York appear to be more expensive places to do business than Los Angeles and San Francisco at the local level, but when you factor in the state income taxes and then sales taxes, the local competitive advantages go away at the state level."Kosmont
says smaller cities with lower property, business and sales taxes should be able to compete against larger cities like San Francisco, which also has a high payroll tax, making it the most expensive California city in which to do business.Kosmont
says the state is paying too much attention to finding new industries and not enough to housing for the employees those companies need.As a result of Prop 13 limiting their ability to tax residential property, some communities believe residential development costs more money than the communities can make on services, he
notes."There is a disregard for housing, and that will come back to haunt the state.If there is a shortage of housing in a community, a company is going to look elsewhere to put its expansion," says Kosmont