DTLA is Resilient and Will Recover Like It Has Before
with Thoughts by Chris Thornberg, PhD, Beacon Economics
We're in the depths of a global public health and economic crisis. Industries that are critical to our local economy and the fabric of our daily life like tourism, hospitality, arts and entertainment, food and beverage, and transportation have been hit hard. We know that the COVID-19 crisis will challenge us like never before. It's not clear when, but we're optimistic Downtown will recover. We're confident because we've recovered from major crises and economic hardships such as 9/11 and the Great Recession, and DTLA remains the civic, economic and cultural heart of Los Angeles.
Part of our proof is a new report by Beacon Economics we're releasing today: Downtown's Contribution to the City of Los Angeles' Economy, 1999-2019. DTLA has grown rapidly over the past two decades thanks to key policies and significant public and private investments. Over this time, DTLA has played an increasingly important role in the City of Los Angeles' economic and fiscal health on just one percent of the city's land. To measure this impact, CCA partnered with Beacon Economics to analyze DTLA's contributions to the city's tax revenues, jobs and businesses.
While we originally hoped to release this report as a celebration of how far DTLA has come over the past 20 years, we're glad that we can publish it as a reminder of how strong DTLA has been through difficult times and as a lens to view our future on the other side of this crisis.
Key highlights from the report include:
- Over the period 1998-2016, DTLA accounted for 34 percent of all private jobs added to the city's economy.
- Beyond its contribution to total jobs, DTLA has been a significant contributor to key growth industries. DTLA accounted for:
- 40% of the city's employment growth in the Arts and Entertainment Industry.
- 64% of the employment growth in the Construction Industry.
- 40% of the employment growth in the Management of Companies and Enterprises Industries.
- 43% of the employment growth in the Professional, Scientific and Technical Services Industries.
- In 2016, DTLA employers paid an annual average wage of $74,883 compared to $59,254 for the entire city economy. The gap between DTLA and City of LA wages has increased over time. In 1994, DTLA wages were 15% higher than the city average; in 2016 DTLA wages were 26% higher. As such, DTLA has become an important contributor to citywide wage growth.
- DTLA has become an increasingly important revenue generator for the city.
- Since the late 1990s, DTLA's share of the city's Transient Occupancy Tax (TOT) revenue has increased from 18% to 24%.
- Since the late 1990s, DTLA's share of the city's assessed property values increased from 5% to 7%.
- While since the mid-2000s, DTLA's share of the city's sales tax receipts increased from 19% to 23%.
- Finally, the average business in DTLA yields $6,000 per year in business taxes compared to $2,500 for the entire city.
- Small businesses (i.e., fewer than 50 employees) make up 95% of all establishments in the City of LA, and around 1,900 additional small businesses emerged in the DTLA economy since the 1990s
CCA will continue to support DTLA's resilience and advocate for its future. We remain focused on policies and projects like the DTLA 2040 Community Plan Update that will shape DTLA, and we thank our members for working together to sustain the success of DTLA.
We invite you to join us for a presentation of the report by Beacon Economics at our virtual Policy Committee meeting on April 22 from 8:30 am-10:00am. Meeting details to come shortly.
Thoughts from Chris Thornberg, PhD, Founding Partner of Beacon Economics
There is little doubt that the U.S. and California economies are experiencing an unprecedented slowdown driven by the public health mandates enacted to contain the Novel Coronavirus. But while the statistics released over the next few months will be jarring, Beacon Economics does not believe the slowdown will lead to a sustained economic downturn comparable to something like the Great Recession. Rather, we expect a rapid return to normalcy in the second half of the year.
The critical difference has to do with the nature of the negative shock that is at the root of the turmoil. In 2008, the economy was pushed into a recession by the 2007 collapse of the subprime credit pipeline that had vastly overheated portions of the U.S. economy in preceding years. Millions of construction, real estate, finance, and retail jobs were lost permanently in the collapse. That led to years of painful rebuilding by these workers and industries. Today, the shock, albeit rapid, is inherently temporary. As soon as the nation's healthcare experts and infrastructure contain the spread of the virus, the public health mandates that have restricted economic activity will be removed and the economy will start to function normally again. In short, the employment interruptions being experienced today are furloughed jobs rather than lost jobs.
The slowdown will, however, cause some long run damage to the economy. Businesses and households that were already on the financial edge may well be pushed over the cliff due to the loss of income occurring right now--leading to true structural harm. The good news is that at both the Federal and local level there have been significant policy prescriptions enacted to help those who are struggling survive the tough weeks ahead. The more successful these efforts are now, the faster the U.S. economy will bounce back in the second half of the year. Beacon Economics expects a sharp negative decline in the second quarter, but robust and positive growth numbers in the second half of 2020. By the end of the year the economy should be back on track.