> ## Content Index > Fetch the complete content index at: https://www.christopherrising.com/llms.txt > Use this file to discover other available public pages before exploring further. # The Money Stops at the City Line - URL: https://www.christopherrising.com/the-money-stops-at-the-city-line/ - Published: 2026-08-04T13:47:29.000Z - Updated: 2026-08-04T15:58:13.000Z - Author: Christopher Rising *Part II of III* The story you will hear at every conference this year is that Los Angeles has bottomed, and the numbers people reach for are real ones: roughly $37 billion of sales volume across the metro last year, lenders quoting again, commercial mortgage distress running below the national average in office as well as overall. I have sat through that presentation this spring and had no argument with any of it. Then you notice what the slide is measuring. Every one of those numbers describes a region. **Draw a line around the City of Los Angeles and run them again.** ## THE BUILDINGS THAT LEAVE Start with what happens when nobody wants the asset. When a building sells, its assessed value resets to the price. The 777 Tower traded for $120 million in cash — about $117 million of buyer money, with roughly $163 million of building upgrades budgeted on top. Every sale like it rewrites the roll lower. Now watch the second exit, because it is worse. The Gas Company Tower — fifty-two stories, once collateral for more than $600 million of Brookfield debt — went through default and receivership, and the County of Los Angeles bought it for about $200 million. The markdown alone would have cut the building's taxes. The government purchase ends them: the day the County took title, the building came off the roll altogether. **Marked down, then removed.** The buyer is a government, and the city general fund that pays for police and fire gets nothing and loses a little every year from here. Nobody broke a rule. That is the point. **One tower is a rounding error. The question is what the tenth one does to a tax base.** And look at who is left bidding. Capital Group is paying around $210 million for Bank of America Plaza — appraised at $605 million in 2016 — at roughly $150 a foot, for a building it will occupy itself. Carolwood, a local sponsor, took the Aon Center. The DWP is taking 865 Figueroa. Brookfield has defaulted on well over a billion dollars of downtown debt across multiple towers. Downtown did clear. It just cleared into the hands of owner-users buying their own offices, local private sponsors with no committee to answer to, and two government agencies that will never pay tax on any of it — which is not the same thing as a market finding a floor, however it prints in the volume tables. **The institutional bid did not show up.** ## AND THE BUILDINGS THAT ARE TAKEN There is a quieter version of the same subtraction, and it does not take a government agency buying itself an office. When a nonprofit owns and operates housing for low-income tenants, California exempts the property — Revenue and Taxation Code section 214, the welfare exemption. For genuinely new affordable development that is a fair trade: you want the units, you give up the tax, and something got built that otherwise would not have. Even that exemption keeps widening — a 2019 law lifted the old $10 million assessed-value cap, a 2024 change broadened who qualifies — but at least the bargain buys you housing. The other version does not. A Joint Powers Authority — CSCDA, CalCHA, the California Municipal Finance Authority — issues tax-exempt bonds and buys an existing, fully taxable, market-rate apartment building, and because a government body sits inside the JPA the building goes exempt the day the deal closes. No new unit is built. **A taxable building simply comes off the roll**, and in exchange the tenants get modest rent caps, often set for households earning up to a hundred and twenty percent of area median income — which in much of this county is not who you picture when you hear "workforce housing." Roughly $5 billion of these bonds took about nine thousand apartments off the roll, at an average north of $540,000 a unit, in the coastal cities where the lost tax hurts most. Each one was paying property tax the day before and nothing the day after. Then came the tell. In January 2024 the state's own assessors — the people whose job is to put property on the roll — asked the Legislature to treat these buildings as taxable "possessory interests" and pull them back on. When the tax collectors are the ones asking to undo a housing program, you are not watching a policy debate. **You are watching the roll hollowed out in real time.** Building housing that did not exist is a trade. Taking a revenue-producing building off the roll and calling it a housing program is financial engineering — and it belongs on the same ledger as everything else leaving this base. ## NOBODY IS UNDERWRITING THE CITY I could give you my read on why. I would rather give you theirs. Sean Burton runs Cityview, an institutional multifamily manager that was for years among the most active developers in this city. This June, asked where he is building: "We are down to our last new development in the City of Los Angeles, and it's a deal that pre-dated Measure ULA. **We are not underwriting new development deals in Los Angeles.** We're building in Culver City, San Diego, Irvine, Walnut Creek, Seattle, Denver — so it's not like we're not building. But L.A. has become near impossible to build new housing because of ULA." Culver City is four miles from downtown, and it charges its own transfer tax — Measure RE — nearly as steep as ULA. The capital went anyway. **That is not a market call, and it is not one tax. It is a jurisdiction call.** Watch where the region's one genuinely booming sector is landing, too. Anduril is building more than a million feet by the Long Beach airport, and the advanced-manufacturing and defense expansions of the last two years have gone to El Segundo, Torrance, Gardena, Carson, Long Beach. Some of that is seventy years of aerospace gravity in the South Bay. But the City of Los Angeles is not on the list, and nobody is surprised that it isn't. I said a version of this to a reporter last month, and I will stand on it here. Downtown should be the easy answer — the basis has reset, the buildings are good, the location is irreplaceable. Then the city makes the trade impossible: the top tax rate, no incentive, and streets and transit it has not made safe enough. The safety piece is a real number, and it lands on owners rather than on the city budget. I will price it in Part III. ## AND NOTHING IS GETTING BUILT This is the part that should end the argument, because housing is the one thing everyone in this city says they want. The City of Los Angeles approved 15,289 new residential units in 2022\. In 2025 it approved 8,714 — down forty-three percent, and that count already excludes backyard accessory units. Count the ADUs and the picture gets worse, not better: they now run about forty percent of everything the city permits. Purpose-built apartments, the thing institutional capital actually finances, fell to 7,038 units in 2024, the lowest in more than a decade. **Los Angeles is meeting a housing crisis with granny flats.** Set that against the obligation. The state has assigned the City of Los Angeles roughly 457,000 units for the eight years ending in 2029, which works out to about 57,000 approvals a year, which is a number the city has not come within shouting distance of in any year of the cycle and has stopped pretending it will. **It is running at roughly a sixth of that.** RAND published the accounting in May. Measure ULA has raised $1.2 billion for housing and tenant assistance. It has also cut high-value sales by thirty-one percent, deterred more than nine thousand housing units, and cost Los Angeles and its related agencies $452 million in forgone revenue. A UCLA analysis puts the suppression at roughly 1,900 apartments a year. **That is a housing tax that produced less housing.** Measure ULA should be repealed — not indexed, not amended, not carved up, repealed. And the people who passed it are starting to say so themselves. The president of the City Council said in June, about ULA: **"I can tell you with certainty ULA has not helped."** And before anyone says the real problem is permitting, look at what happened when the city fixed permitting. Executive Directive 1 fast-tracked fully affordable projects: more than 43,000 units proposed, about 34,000 cleared planning, just over 8,000 permitted — twenty-three percent. The city streamlined the entitlement and the buildings still did not get built, because **the entitlement was never the binding constraint.** Whether the deal pencils inside the city limits is. ## FEWER PEOPLE ARE STARTING ANYTHING In 2015, 60,550 new businesses registered in the City of Los Angeles. In 2025, 35,593\. **That is a forty-one percent decline in a decade**, from the city's own filings. The category that collapsed hardest names the industry: motion picture and video businesses registering in the city fell from 846 in 2022 to 219 in 2025 — down seventy-four percent in three years. Now the tax. Los Angeles taxes gross receipts — *revenue, not profit* — at rates running from about a tenth of a percent to just over four tenths, depending on what you do. Read that with an operator's eye. **A business that loses money still pays.** A business running a four percent margin hands over roughly a tenth of its profit for the privilege of having an address, which is a rate no one would ever propose out loud if it were described that way, and which nobody notices because it is described as four tenths of one percent instead. The small-business exemption sits at $100,000 of gross receipts and has not moved in about twenty years, while everything it was written to shelter got more expensive. Run it on a professional services firm doing $2 million with twenty people. In the City of Los Angeles, at the top rate, that is $8,500 a year. In Burbank, which charges a flat base plus a per-employee amount instead, it is a few hundred dollars. Of the eighty-eight cities in Los Angeles County, only a handful levy one at all. So let me be direct, because I have been asked and would rather say it plainly. **I am one hundred percent against a tax on gross receipts. Not the rate — the base.** Taxing revenue instead of profit punishes precisely the businesses a city should want and rewards the ones that can leave, and it bites hardest at the bottom of the margin stack, which is where the jobs are. If Los Angeles wants to tax business activity, tax what a business actually earns. **A tax on net is a conversation worth having. A tax on gross is a policy that funds itself by shrinking its own base.** The city had one chance to be rid of it and traded it away. A coalition of business groups qualified a repeal for this November, filing petitions in February that cleared with more than 79,000 valid signatures, and the measure was certified in March. Then, in May, the proponents filed to withdraw it — announced by the Mayor's office as part of a deal that delayed the hotel and airport wage schedule, pushing $30 an hour from 2028 out to 2030\. The Council approved the withdrawal, and in June passed an ordinance repealing the election call itself. **The measure is gone. The tax stays. The wage increases arrive anyway, two years later.** Nobody who pays this tax got to vote on it. ## THE NUMBERS THAT LOOK LIKE RECOVERY The bull case rests on three real numbers, and I would rather take on its strongest version than a weak one. Gross receipts revenue is rising, not falling — from $509 million in 2016-17 to a projected $832 million this year. New restaurant openings in the city hit a record in 2025\. And the region's capital markets genuinely are recovering, which is where this piece started. Every one of those is true. Every one of them points the same way I do. The tax line grows in nominal dollars while the number of businesses forming inside the city falls by four in ten — which is what it looks like when fewer, larger firms carry a heavier load. Restaurants keep opening because people keep trying, on two-to-four-point margins, into taxable revenue that adjusted for inflation has gone backward to 2012\. That is not a boom. That is churn. And the region's capital markets are healthy precisely because capital has somewhere else to go inside the same region: Culver City, El Segundo, Long Beach, Torrance, Burbank, Irvine. Even the regional read is slipping. When PwC and the Urban Land Institute surveyed more than 1,700 investors, developers and lenders for this year's outlook, Los Angeles fell ten places — the sharpest drop of any primary market in the country, landing above only Washington, D.C. Dallas finished first, Miami third, Nashville sixth, Phoenix tenth. That survey covers the whole metro, Culver City and El Segundo included. **The city dragged the average down, not up.** **The county looks fine because the county includes the places the money went.** ## SO PUT PART II TOGETHER The tax base is leaving four ways at once: buildings resetting lower when they sell, buildings coming off the roll entirely when a government buys them, buildings quietly exempted when a nonprofit or a bond authority takes them off, and a transfer tax that stopped the transactions that would have refreshed the roll at all. Institutional capital has stopped underwriting new development inside the city and says so by name. Housing approvals are down forty-three percent from the 2022 peak against a state obligation the city is meeting at about one sixth. New business formation is down forty-one percent in a decade. And the one instrument that would have removed the worst tax on the books was pulled off the ballot in a trade nobody who pays it was party to. None of that is a forecast. It is the assessment roll, the city's own business filings, the permit counts, a RAND study, and the investors saying it out loud. A city can survive a bad market. Markets come back. What a city cannot survive is being the one jurisdiction in its own region that capital has decided to route around — because that does not reverse when the cycle turns. It reverses when the policy changes, and nothing here suggests anybody is in a hurry. **The money did not leave Los Angeles. It stopped crossing the city line.** *Part III, Thursday: what all of it costs. The four thousand police officers nobody has priced. The security bill that lands on private owners instead of the city budget. And what actually happens the day a judgment arrives — who ends up in control, and the precise moment elected officials stop making decisions. It is not bankruptcy. Bankruptcy would be the merciful version.* — Christopher C. Rising