February 23, 2004, Monday

SECTION: A SECTION; Pg. A01

LENGTH: 981 words

HEADLINE: Attracting business: How Inland cities rate;
SURVEY: Some locales give companies a break on utility taxes and fees. Some don't.

BYLINE: JACK KATZANEK; THE PRESS-ENTERPRISE

BODY:

Cities need taxes and fees from businesses to survive, but some
are more willing to give a relocating company a break than
others.
Hemet, Corona, Temecula, Murrieta and Ontario are among the best
bets in Inland Southern California for companies looking for
lower-cost sites, according to a widely used survey released today.
San Bernardino, Rialto and unincorporated San Bernardino County
were the worst in the Inland Empire for attracting businesses,
according to the 2004 Kosmont-Rose Institute Cost of Doing Business
Survey.
The survey looks at six kinds of taxes, including business
license levies, utility and telephone use taxes, and property
tax. Cities and counties are sorted into five categories. A
single dollar sign means a city offers businesses a great
deal. Five dollar signs are the poorest rating.
The Kosmont Survey is read by businesses looking to relocate and
heavily used by real estate agents and brokers who make
pitches to these businesses, said Joel Kosmont, president and
chief executive officer of Los Angeles-based Kosmont Cos. The
consulting firm prepared the report with the Rose Institute of
State and Local Government at Claremont McKenna College.
City taxes and fees arenot the first thing a company looks at
when they're considering relocation, Kosmont said. They look
at transportation arteries, the local labor pool and other
strengths and weaknesses that are usually outside a city's
control.
"Once they've done that to narrow it down, they hone in on
costs," Kosmont said by phone. "That's when the taxes and fees
get examined."
The survey looks at 314 cities nationwide, and Kosmont said that
for many California addresses it's a given that property taxes
will be high. That in turn puts more pressure on cities,
because the implementation of a tax on utility use is at local
government's discretion.
Also, a business tax can be based on profits, net or gross, or
square footage used. A city has leeway here.
Corona, for example, does not tax its utility users, and that's
one of the reasons the city scores well every year, said Nancy
Martin, economic development manager.
"We don't have a utility user tax, and when you see others
charging 9 or 10 percent, well, that makes a difference,"
Martin said by phone.
Other factors in Corona include a streamlined city permit
process, and Martin admitted that the city gains from a fairly
well-educated work force. Companies can recruit from a pool of
people who arrive at the office or factory in better moods
because they didn't have to commute to work.
Ontario also scored well, and the airport and other
transportation arteries have a lot to do with that. But the
City Council has made a conscious effort to be attractive to
businesses, said Mary Jane Olhasso, the city's economic
development director.
"(Cities) all have to charge fees based on our cost recovery
needs," Olhasso said by phone. "But the City Council wants to
keep us business-friendly, and the city manager runs a lean
operation here."
Ontario has no utility tax, and its business license fees are
fairly inexpensive, Olhasso said. Also, the city has negotiated
favorable water rates, which gives it a chance to attract firms
such as Coca-Cola, which makes syrup at an Ontario plant.
Only four cities in California, and none in Southern California,
received the top, one-dollar-sign rating. Some cities that did
score high are directly competing with California for business
relocations: Las Vegas, Henderson and Reno in Nevada, Mesa,
Ariz., and Salt Lake City.
Riverside received four dollar signs, but Michael Beck, deputy
city manager, said the Kosmont survey doesn't consider enough
factors, including the fact that Riverside and a few other Inland
cities have municipal electricity systems.
Rialto's poor grade can probably be traced to the 8 percent
utility tax the city voted in last year, said Robb Steel,
redevelopment director. The city levels with companies it
attempts to recruit, reminding them the voters will consider
ending the tax in five years, Steel said.
"It's a cause for concern. We do have to compete with cities
with lower tax," Steel said by phone. "But we had to put
police and fire on the street."
Steel said Rialto's advantage is cheaper land than Ontario and
Rancho Cucamonga, another city with tax breaks. Also, he
doesn't know of any companies that have said no to Rialto
because of the utility tax.
This type of levy has been a sore spot for San Bernardino
Councilman Neil Derry for several years. Along with the utility
tax, the city's business tax is based on a company's gross, not
net, revenues.
Derry said he believes the jobs that could be attracted will
eventually offset a loss of revenue. He said it makes marketing
the industrial development at the former Norton Air Force Base
more difficult.
"It's very successful at raising revenue," Derry said by phone.
The utility tax raises $ 20 million a year, a fifth of San
Bernardino's revenue. "But our failure to reduce it negatively
affects our efforts to attract business."
* * *
The 2004 Kosmont-Rose Institute Cost of Doing Business Survey
ranked Inland areas based on the cost of running a business. How
Riverside and San Bernardino county areas placed:
THE CHEAPEST: Chino, Chino Hills, Ontario, Rancho Cucamonga,
Upland, Corona, Hemet, Murrieta, Temecula, unincorporated Riverside
County.
NOT BAD FOR THE BUCK: Adelanto, Apple Valley, Colton, Palm Desert.
FAIRLY PRICEY: Fontana, Indio, Moreno Valley, Palm Springs,
Redlands, Riverside.
EXPENSIVE: RIALTO, SAN BERNARDINO, UNINCORPORATED SAN BERNARDINO
COUNTY.
--SOURCE: KOSMONT COS.

GRAPHIC: CHART

LOAD-DATE: February 23, 2004