Beutner Tells Downgraded Los Angeles `Grow Up' as Ex-Banker Woos Employers
After breaking his neck in a bicycle accident in California’s Santa Monica Mountains three years ago, Austin Beutner decided to re-evaluate his life.
“I had saved money,” said the 50-year-old co-founder of investment bank Evercore Partners Inc. “I wanted to sit back.”
Instead, Beutner took a tougher course. In January, he became the self-described “jobs czar” for Los Angeles Mayor Antonio Villaraigosa at a salary of $1 a year. As first deputy mayor overseeing 13 departments, Beutner was charged with improving the business climate in the second-largest U.S. city as it navigates the longest economic slump since the 1930s.
The task pitted him against the inertia of municipal governance in April when the mayor named him interim head of the Department of Water and Power, the largest U.S. municipal utility. Beutner was told to bring accountability to an agency that made national headlines by withholding $73 million due the city in a debate over rate increases. When he announced $263 million of cost savings after his first month on the job, he said, city council members didn’t react.
“In the private sector, I would have had a standing ovation,” Beutner said in a July 15 interview. “As a city, we need to grow up and focus on things that really matter.”
What matters to 3.8 million Los Angeles residents is what the city will do about 12.5 percent unemployment, which exceeds the 9.6 percent national average, and declining tax revenue that opened a projected $320 million budget gap next fiscal year.
Short of Cash
The city’s “low level” of cash reserves prompted Fitch Ratings to cut its grade on $1.47 billion of general-obligation bonds on April 16 by one level to A+, its fifth-highest rank.
“We need to revitalize the economy,” Beutner’s boss, Villaraigosa, 57, said in a telephone interview. “Would I have done this prior to the recession? The answer is no.”
Beutner has had success. He lured the U.S. base of Chinese electric-car maker BYD Co. to Los Angeles in April. He did so by getting city departments to offer incentives, including reduced port fees and $2 million of street and other improvements for the Shenzhen, China-based company’s new building.
“Congratulations to Austin Beutner for creating such a business-friendly environment allowing us to make these investments,” BYD Chairman Wang Chuanfu said at a Sept. 12 contract signing in Los Angeles.
The cost of the package drew criticism in the local media.
“Even if the company creates 102 jobs, each one will cost taxpayers more than $50,000 at the same time city businesses grapple with some of the highest municipal taxes in the country,” the Los Angeles Business Journal wrote.
The infrastructure the city promised BYD will create 900 more jobs than the 150 anticipated by the company, Beutner said. They include electricians to install high-voltage power outlets in homes to recharge the company’s cars and engineers to design industrial-size batteries for power storage.
Beutner also won a reduction in city taxes for Internet companies and a three-year tax holiday for all businesses relocating to Los Angeles. That could add another 55,000 jobs, the city estimates.
The city’s borrowing cost has fallen during Beutner’s tenure. The yield difference between a 4 ¼ percent Los Angeles general-obligation bond maturing in 2022 and a Bloomberg Fair Value index of comparable-maturity bonds rated AAA to A- has narrowed from this year’s high of 65 points on Feb. 9 to 27 points on Sept. 15. A basis point is 0.01 percentage point.
Beutner’s career started in 1982 in the mergers and acquisition department of Citigroup Inc.’s Smith Barney, Harris Upham & Co. In 1996, he co-founded New York-based Evercore with Roger Altman, a former Treasury Department official under President Bill Clinton.
As supervisor of the firm’s private-equity investments, Beutner led the 1999 acquisition of National Enquirer parent American Media Inc., said David Pecker, American Media’s chairman. In his last three years at Evercore, Beutner earned more than $12 million, U.S. Securities and Exchange Commission filings show.
Beutner has been a Los Angeles resident for the past 10 years. He was lured to City Hall after meeting with Villaraigosa aide Jay Carson at a breakfast last year hosted by Richard Riordan, a former Los Angeles mayor, who was looking for ideas for fixing the city,
Riordan said in an interview that Beutner is a possible mayoral candidate in 2013. Philanthropist Eli Broad, who also attended the breakfast, agreed in an e-mail that Beutner could be a good contender.
Too Busy to Run
Beutner, a registered independent, said he’s made no decision on a run. He’s busy trying to reconcile the demands of Los Angelenos to the city’s economic realities.
In late August, for example, Beutner lobbied to delay a requirement that the city utility use less ocean water to cool its power plants. He said the utility can’t afford the $2.2 billion cost of the rule, urged by conservationists to protect marine life.
Environmentalists complained about Beutner’s stance, saying the cost estimate was exaggerated. The utility is now negotiating a compromise with state regulators.
“This is a problem I would have dealt with five years ago” as a private business executive, Beutner said. “In the public sector, it’s easier to just bury it and let someone else worry about it.”
Beutner’s single-mindedness also drew fire when he proposed raising water rates and selling the department’s landmark downtown headquarters after the utility agreed to make the payment it owed the city.
“He’s got the mindset of a takeover artist, someone who comes into a failing business, gets rid of people as fast and efficiently as possible,” said Ron Kaye, a former editor at the Los Angeles Daily News and board member of L.A. Clean Sweep, a political action committee challenging incumbents in the March 2011 city council election. “The trouble with that is, this isn’t a business.”
City Hall denizens use “Beutnercrats” to describe the former investment banker’s economic-development team.
At a Sept. 7 meeting of the group, in front of a banner bearing Beutner’s personal motto, “Getting to Yes,” the deputy mayor was being updated about a company that wanted to sell electric trucks to the city. Beutner said Los Angeles wants the company to open an office in town.
“It’s not our attempt to be a fleet-sales effort for them,” Beutner said. “It’s all about the jobs.”