Culver City has become the most expensive city in which to do business, not only in Los Angeles County but in several western states, according to a survey released last month that examined the various costs faced by businesses in more than 150 cities. .
This survey was co-authored by El Segundo economic development consulting firm Kosmont Cos. and by the Rose Institute of State and Local Government at Claremont McKenna College. It compares local taxes, fees, business property rents and other costs businesses face in 158 cities, primarily in Southern California, but also in nine western states as well as Minnesota and Texas.
The survey was scaled down from previous years and only looked at 30 cities in Los Angeles County. Nonetheless, the county’s cities dominated the high-cost rankings, holding seven of the top 10 spots among all 158 cities. In addition to Culver City, the cities of Irwindale, Los Angeles, Inglewood, El Segundo, Long Beach and Covina were among the 10 most expensive cities to do business.
None of the Los Angeles County cities were among the seven least expensive cities in the survey.
“There are many advantages to doing business in Southern California, but the cost makes it hard to overcome,” said Ken Miller, director of the Rose Institute and co-author of the survey.
The cost of conducting business surveys was originally developed in the mid-1990s by Kosmont Cos. It was started by Larry Cosmont, founder and economic development consultant, as a tool for companies to compare municipal taxes and fees throughout Southern California on an annual basis.
Cosmonaut eventually partnered with the Rose Institute, using the latter’s resources to help expand the survey coverage area to cities in other states, eventually ranking over 300 cities.
When the pandemic struck, the survey stalled. Last month, a new survey was released: the number of cities compared was cut in half to 158, the comparison variables for each city were reduced from 12 to seven, and the ranking methodology was revamped. . The survey now compares sales and utility taxes, business license fees/taxes, minimum wage levels, median office rents, median home values, and crime frequency. The survey attributes the higher crime frequency – including property theft – to the burden of increased costs for businesses.
low LA focus
From a local perspective, the biggest change was a sharp decrease in the number of Los Angeles County cities from 74 in the 2019 survey to just 30 this time. The main geographic concentration of cities is now the San Gabriel Valley and the South Bay region, with no cities visible from the San Fernando Valley and points further west and north.
According to the survey, the focus on the San Gabriel Valley was because “cities were chosen out of the Rose Institute’s location” in Claremont. Focusing on the South Bay, the survey said the area has become a “hub for new businesses”.
In most of the past years when the survey was conducted, Los Angeles ranked either first or second as the most expensive city in the county. But in this survey, Los Angeles came in third, behind Culver City and Irwindale. Culver City topped the list for the first time in several years, being in the most expensive category for six of the seven variables. The city also tied with Seattle as the most expensive of all 158 cities surveyed.
Los Angeles fell just short of the most expensive category in sales tax, median home value, and crime frequency. But the city’s position may change once again, the survey press release notes, with the passage of Measure ULA in the city of Los Angeles in November to increase the documentary transfer tax on property sales of more than $5 million.
The survey states, “Recent measurements of City of Los Angeles voters’ approval of ULA…show how businesses — especially those buying or selling property in the county’s largest city — will bear the additional cost.” “
Inglewood has risen in the cost ranking of the fourth most expensive city to do business in LA County. With the opening of SoFi Stadium and the nearing completion of the K (Crenshaw-LAX) rail line running through the city, property values have soared there.
The survey also included a section on business headquarters entering and leaving California for the first time, looking at destination cities for business headquarters leaving the state.
Not surprisingly, many businesses ended up in the adjacent states of Nevada, Oregon and Arizona. The top five destination cities were Las Vegas; New York; Reno, Nevada; Phoenix and Portland, Oregon.
Contrary to the war of rhetoric between Texas and California in recent years, Texas has not been the top spot for business headquarters relocating from California: Austin, Houston and Dallas came in at No. 6, 8 and 11, respectively.
The survey also tracked the number of business headquarters relocating to California and found that figure grew more quickly than the number of business headquarters leaving the state. During the 1990s, 5,581 business headquarters were tracked to have moved to the state; During the 2010s, this number almost quadrupled to 23,087. The number of business headquarters leaving the state nearly tripled during 2010 to 31,490 during those periods.
The survey did not separate out the cities within California that business headquarters were either moved to or away from.