Dear Honorable Councilmember _____________:

Throughout the discussions in the City Council and among the Los Angeles
business community, one message is clear --now is the time to make our
Business Tax System simpler, competitive and business friendly.

Working together, we have developed a joint tax reform proposal that
attracts start-up businesses, provides broad-based tax relief for nearly
two-thirds of existing businesses in Los Angeles, and most importantly
simplifies our tax code. Moreover, the joint proposal will encourage
compliance and improve enforcement, thereby protecting the General Fund.

We urge you to consider the proposal as an amendment to Option A and a
replacement for Option C in the current instructions to the City Attorney.

The major components of the plan are:

1) A single Standard Industry Code (SIC) system so that companies no
longer have to file in multiple categories.

2) A first year start-up exemption for businesses earning up to $500,000
in gross receipts to attract new businesses to Los Angeles.

3) Reduced impact on the General Fund. Instead of $20.4 million of
relief under the original proposal, relief is now limited to $16.2
million1, representing a 6% overall tax reduction.

4) A rate structure that increases the number of industries receiving tax
relief and protects the General Fund by lowering all business categories
to the rate immediately beneath their current average rate. The new rates
are: $1.18, $1.35, $1.50, $1.70, $2.50, $3.10, $4.50 and $5.50.

5) A common tax rate for similar industries to reduce the complexity of
filing and auditing.

6) A commitment that the Business Tax Advisory Group and the City Council
will consider additional tax relief for at least the following industries
and businesses:

-biomedical, biotechnical
-wholesale trade (durable goods)
-manufacturing
-computer industries (including multimedia)
-job training
-creative industries (writers, directors, musicians, artists)
-increasing incentives for companies which locate in Los Angeles
-increasing the level of the $5,000 exemption to higher amounts in the
future

7) A consistent minimum tax of $75 for businesses with more than $5,000 in
gross receipts.

8) General Fund protection including Amnesty 2000 and an innovative Use
Tax incentive that will benefit both the City and businesses.

9) An exemption for businesses earning less than $5,000 in gross receipts.
These companies will only pay the $25 filing tax.

10) A fiscal year filing option so businesses can choose their own
reporting period.

11) Improved compliance through an auditing and amnesty program.

12) Better enforcement for businesses in the City if pending State
legislation allows the City Clerk access to California Franchise Tax
Board data.

13) A Business Tax Advisory Group with public and private sector
participants to address implementation and to provide further input on
simplification and tax relief.

14) Continued exemption for industries such as stevedoring, railroads, gas
and electricity (defined by LAMC Sec. 21.142, and 21.190 (c)(5)(a, c and
e)). Taxation of these industries should be contemplated in a separate
policy discussion advocated above.

15) A 2003 sunset to the Revenue Shortfall Provision so that taxes may not
be raised thereafter without a vote of the people.

16) Secondary SIC Code filing only for businesses with secondary gross
receipts above $1 million and that represent more than 40% of
total receipts.

17) A new tax treatment for motion picture producers and distributors, as
proposed by Council member Jackie Goldberg, that limits the up-front
payments to the $75 minimum tax.

18) A filing tax for all businesses of $25 (instead of $20 under the
original proposal).

We have reached a critical point in the City*s economy. Despite economic
growth, the business community continues to be frustrated by the high cost
of doing business in Los Angeles, and by the sense that neighboring cities
pay closer attention to their needs.

Los Angeles needs business tax reform now, both to attract the
entrepreneurs who will keep our economy growing well into the future, and
to retain the businesses that make it one of the most robust in the world.

We urge you to consider this joint proposal as an amendment to Option A
and a replacement for Option C in the current instructions to the City
Attorney.

Respectfully,

Mayor Richard J. Riordan Councilmember Richard Alatorre
Councilmember Mike Feuer