In Downtown L.A. Resurgence, Ensuring All Residents Benefit

Written by Amanda Maher

“For decades, Downtown has been the dark center of L.A.,” wrote journalist Brett Martin. “…But amid the glittering towers and crumbly Art Deco facades, a new generation … [is] creating a neighborhood as electrifying and gritty as New York in the ‘70s.”

Indeed, downtown Los Angeles is making a comeback. It’s happened quickly, but certainly not overnight. The city’s transformation began in 1999, when the City Council adopted an adaptive reuse ordinance that made it easier for private developers to invest in and rehabilitate deteriorating buildings. Since then, more than 700 businesses have moved downtown. Residential development has exploded, and the downtown population has swelled from an estimated 19,000 in 1999 to 58,000 by 2014.

Much of this growth can be attributed to the $4.2 billion Los Angeles Sports and Entertainment District development (commonly known as “L.A. Live”). As described in a recent What Works Case Study, the massive mixed-use project required upwards of $150 million in public subsidies, but only after the developer agreed to sign the “Staples Center CBA,” one of the most progressive community benefits agreements ever created, one that involved negotiations with a coalition of over 30 stakeholder groups. The massive complex has generated a constant flow of downtown foot traffic, and visitors flock to the area for shows, performances and sporting events at the Staples Center and Nokia Theater, which anchor L.A. Live.

But it’s not just the tourism and entertainment industries that are reaping the benefit of L.A. Live and downtown’s resurgence. There’s suddenly a burgeoning tech scene, too. “Like many Angelenos, (tech entrepreneurs have) become charmed by the new, revitalized downtown,” wrote Andrea Chang for the LA Times.

As the area around L.A. Live is redeveloped, tech entrepreneurs are pushing eastward toward the Arts District – an area that still struggles commercial vacancies and high crime, but which boasts lower rent than much of L.A. and a charming neighborhood vibe.

By some estimates, there are more than 78 tech-oriented firms now located in downtown Los Angeles. During the industry’s early years, many of the tech companies skewed toward e-commerce, given the proximity to L.A.’s fashion district and the abundance of warehousing space and manufacturing facilities. Nasty Gal, a $100-million vintage clothing company, opened a 50,000 square foot facility combining office and warehouse space, as well as a showroom. Figs (trendy medical scrubs), Milk & Honey (customized shoes) and Poprageous (leggings) are just a few of the many e-commerce companies located nearby.

With the city’s reputation for movies, entertainment and fashion people tend to forget about the strength of the local manufacturing industry, explained Jamie Kantrowitz, managing director at Mesa Global Digital Media. “We’re a great place to build e-commerce companies because we have the largest manufacturing business in America.”

As downtown’s tech scene grows, it’s evolving beyond e-commerce. Mobile app, hardware, digital media, and clean tech companies are popping up left and right. Co-working locations, business incubators and accelerators have also sprung up in the area and are feeding the entrepreneurial ecosystem. The neighborhood also attracts a diverse, talented workforce.

As the neighborhood’s tech industry continues to grow, the City will face a dilemma much like it did with the development of the Los Angeles Sports and Entertainment District: How will it prevent the displacement of long-time residents and ensure that lower-income individuals have access to these new opportunities? Los Angeles has proven a leader in negotiating Community Benefits Agreements, and it will be primed to do the same when corporate tenants make the leap downtown, too.

Stakeholders need only look north to San Francisco for guidance. The City has successfully negotiated CBAs with tech companies in order to attract these firms to underdeveloped areas like Central Market and the Tenderloin. The City offers a lucrative payroll tax exemption to companies willing to move to this area, but in exchange, these companies must agree to participate in the city-run First Source Hiring program, which connects local residents to entry level jobs.

Companies seeking a payroll tax exclusion north of $1 million must also sign onto a CBA with the City and the community. Through this mechanism, for example, Twitter has provided grants and in-kind service donations to several program that focus on preparing underserved youth for future education and career opportunities. Similarly, Yammer has supported local organizations engaged in workforce development, including a nearly $500,000 software donation to Hire Up, which prepares homeless and at-risk youth for employment opportunities.

As downtown LA’s tech cluster continues to grow, CBAs or similar agreements offer an opportunity for the city to ensure that all residents benefit from downtown’s revitalization.