Sizzler Parent Getting Help From International Division By SHELLY GARCIA Senior Reporter Strong performance internationally helped Worldwide Restaurant Concepts Inc. to overcome a few hiccups in its domestic operations during the most recent quarter. Growing pains at Pat & Oscar’s, the company’s newest division, caused a decline in same store sales for the period. But with efforts to reposition the company’s Sizzler chain in the U.S. beginning to pay off, and strong performance in its Australian operations along with a favorable exchange rate, Worldwide’s overall performance remained largely unaffected. Worldwide’s stock price has enjoyed a steady climb as a result, but the company suffered a setback late last week when an E. Coli outbreak at some of its Pat & Oscar’s units sent its share price falling more than 15 percent. At presstime, the outbreak appeared linked to a supplier, not the restaurant, and Worldwide shares began to recover, but analysts expect some volatility until an ongoing investigation is completed. “The worst thing you can have is uncertainty,” said Robert Reid, equity analyst with Briefing.com. “It’s one thing to plug in sales numbers, but when it’s something you can’t quantify, they shoot first and ask questions later.” Sherman Oaks-based Worldwide, operates or franchises 318 Sizzler restaurants worldwide, along with 111 KFC restaurants mostly in Australia, and 21 Pat & Oscar’s units in Southern California. For its first fiscal quarter of 2004 ended July 20, Worldwide reported earnings of $3.6 million or $0.12 per diluted share on $77.8 million in revenues. That compares with net income of $3.3 million or $0.12 per diluted share on revenues of $67.7 million for the comparable period last year. Since the company, formerly called Sizzler, emerged from a Chapter 11 reorganization, a new management team has been hard at work to revitalize the business. Pat & Oscar’s, a casual family restaurant that offers pizza, chicken and ribs and other fare for eat-in and take-out dining, has been the centerpiece of that effort. In San Diego, where nearly half of the units are located, Pat & Oscar’s has grown to account for $33 million in sales, up from about $12 million when the chain was acquired. But the new stores cannibalized sales at some of the existing units, and revenues in the period declined by 3.4 percent on a same-store basis. “We have seen a little bit of deterioration on the existing stores when we built the new units,” said Keith Wall, vice president and CFO. “We kind of expected that, but we felt it was appropriate to expand that market to the point where we now have the ability to do television advertising.” Worldwide is about to roll out a television advertising campaign that Wall said should turn the sales momentum around and at least six new Pat & Oscar’s units will roll out in 2004. Ultimately, Worldwide expects Pat & Oscar’s to account for the largest portion of its domestic sales. But in the meantime, Sizzler remains Worldwide’s largest division, and that restaurant group is still a work in progress. Same store sales for Sizzler declined by 1.5 percent in the U.S. in the most recent quarter. “They upgraded their steaks, which was a good move, but I think it’s just a straight competition thing,” said Leon Gottleib, president of USA International Restaurant Hotel & Franchise Consultants in Tarzana. “They haven’t done enough to attract me or my family, and I think they need to address that.” A new look Worldwide is test marketing a new store design for Sizzler with lighter colors and an open kitchen and hired a food development expert to cook up new menu items. “We haven’t given up on it, and we are excited about the potential for growing the brand,” Wall said. Sizzler restaurants, once a steak and potatoes affair, now offer several chicken dishes, meat loaf, ribs, pastas and shrimp for under $9.99. The company is also expanding the Sizzler stores through franchising. The improvements have led to a significant rise in Worldwide’s stock price, from the low $2 range a year ago to the mid-$3.00 range. On Friday, Oct. 10, shares closed at $3.36.

Lessons Learned Mayor James Hahn says he heard the message sent by secession advocates and claims there’s been progress in providing better services for the Valley in the past year and vows public safety will continue to be his top priority in coming months By JACQUELINE FOX Staff Reporter With few exceptions, the leaders of the secession campaign of 2002 say, despite certification of 26 neighborhood councils, a new government center in Van Nuys and the establishment of two Valley area service cabinets and satellite city halls, not much has changed in the year since Measure F, the initiative on a breakup, was defeated at the polls. There is still a call for more police officers and faster response times, business tax reforms, traffic congestion relief and a fairer share of city services. On the eve of the state’s historic vote to recall its governor, Los Angeles Mayor James Hahn reflected on the year since his own “recall” battle was decided by a 51-49 percent vote in favor of keeping the city whole. Hahn says despite the flaws in the system, neighborhood councils need to be given more time before they are rejected. His focus on public safety remains his top priority and he will push for council support to set aside the funds needed to obtain federal grants to pay for more police officers. Hahn is still in favor of widening the 101 Freeway or extending light rail across the Valley to ease congestion, despite previous and fierce opposition to the idea. His campaign for re-election in 2005 has already begun. Should it smack up against a renewed secession drive, he says he’s ready to fight it head on. Question: It’s been nearly a year since the vote on Measure F and what you described as the biggest battle of your political career. What’s been your primary focus for the Valley since? Answer: Really it’s the same for the Valley as for the rest of the city. My emphasis has been on public safety, seeing what we can do to make the neighborhoods of the Valley safer. We’re pleased that homicides year to date from last year are down over 32 percent in the Valley, and I think that indicates that we’ve been able to turn the corner. Q: Yet the city council rejected your plans to hire more officers this year, largely due to budget concerns. Do you think there will be enough funding in the city’s budget in 2004 to accomplish the goal? A: I may have been a victim of my own success. Last year, for example, for the first time in five years, we actually added numbers to LAPD. Four years before I was mayor the department had shrunk by more than 900 officers. We added over 300 officers last year. Obviously there is a cost in that, but I never heard anybody complain during that period of time as we hired more police officers than we had budgeted for that we should stop doing that. Obviously someone decided that four years before I was mayor there were other priorities more important than the police department. That money didn’t stay in the police department, it went to other priorities. What I’m trying to do is get those priorities back in line. And so we are saying that number one is, we’re putting enough police officers on the street to do the job. Then we’ll start looking at the rest of the city and that’s the message I’m going to be carrying to the city council as we start looking at the budget not only for this year but next year. Q: Immediately after last year’s vote you announced your Teamwork L.A. program which is supposed to force city departments to work more closely with one another to get things done more quickly and efficiently. Describe your view of the program’s progress so far? A: Great. I think that it’s been very successful. As a result of the neighborhood service cabinets early on this year, in the Valley we went and ripped out these pay phones that had been illegally installed that a lot of drug dealers were using. Another example of that was when the DWP heard the call from LAPD about doing something about all these shoes (on telephone wires). It was an example of using a department that had never been involved in public safety work with the police department on a public safety issue. We are going to continue to do that; see how we can get this synergy between all these various departments, working to enhance the quality of life in the neighborhoods. Q: You touted neighborhood councils as the answer to secession. Yet, across the Valley and citywide, there are frustrations with the process and criticism of the city’s department overseeing their formation. What’s your response to the criticism? A: There’s problems, but you know what, we expected some growing pains with this. I think it’s been far more positive than negative. I think people are getting involved and they are making a difference. We’ve gotten into the complaints as well. But we believe that people have to be as inclusive as possible. I think there’s also been some friction between some people who’ve said (to the councils) ‘hey where were you two years ago, or four years ago.?’ People think it’s just homeowners, but we want renters, we want students and people who work in the community to be part of the neighborhood councils. And that’s a different focus. Q: Construction of the East-West rapid busway this year marked an important step, but many say more needs to be done to address traffic issues, and there is a renewed interest in widening the 101 Freeway. What do you think? A: I was the only one who stood his ground on that (widening the 101) while I think a lot of the other elected officials ran for cover. Obviously someone is going to be very concerned when you are talking about taking their house. They are going to be very upset. But look, we didn’t build any of the freeways we’ve built in Southern California without hurting some neighborhoods. I still believe we need to put more capacity on the 101. Q: Would you support extension of the rail system across the Valley? A: I think it’s an idea that we really ought to consider. Obviously people are going to say that it’s very expensive. I thought the best idea would be light rail where the busway (will be), but we had a number of folks who didn’t want light rail. Q: There have been changes in your administration over the last few months that have raised some eyebrows, particularly your former Deputy Mayor for the Valley Felipe Fuentes’ move to chief of staff for Council President Alex Padilla. What’s going on and will the Valley get a replacement deputy mayor? A: Felipe’s job was certainly more than deputy mayor for the Valley. He was also very instrumental in making sure we got the support we needed for the neighborhood councils. We are going through a little bit of a reorganization right now in the mayor’s office. I’m actually interested in slightly downsizing the office. I’ve been asking all the other departments to tighten their belts so I’m looking at the same thing. Certainly somebody who can have a big focus on the Valley is important, but we haven’t made a final decision for a deputy mayor for the Valley. But something along those lines is what we’re looking at. Q: VICA’s annual business forecast is coming up. You didn’t attend last year. Will you attend this year and what can we expect to hear from you? A: Yes. I didn’t go last year because there were politics involved that I didn’t want to play. I think we’ll talk about a lot of the things we’ve talked about here in this interview: Teamwork L.A., what we’ve done to improve delivery of services in the Valley and the (focus) on increasing public safety. Q: What’s the status on recommendations for business tax reforms, specifically changes to the gross receipts tax structure? Will we see that eliminated in 2004? A: The elimination, no. It’s too much a part of our city budget, especially when you see that the state continues to have their greedy paws all over our local tax dollars. The Business Tax Advisory Committee started out with a mission to reform the tax, but I think the goal was to have revenue neutrality, not take money away from police and fire and libraries. I think we can extend their mission. There’s still a lot more to do. SNAPSHOT: James K. Hahn Title: Mayor of Los Angeles Age: 53 Education: B.A. in English and law degree, Pepperdine University Career Turning Point: Serving as an intern for the Legal Aid Family Law Clinic Most Admired Person: Father, Kenneth Personal: Separated; two children

Midwestern Sub Chain Tries To Break Into Valley Market By CARLOS MARTINEZ Staff Reporter With plans for a major expansion in the area, a sub sandwich chain with a Midwestern flavor is the latest to battle the crowded and competitive Valley fast-food market. A second franchised location for Cousins Subs, a Milwaukee, Wis.-based company opened in Encino last week. There are plans for three more in the area by the end of the year and 10 more next year, according to Marshall Wexler, president of MDW Enterprises, who is heading up efforts to eventually bring 25 new Cousins restaurants to the Valley and greater Los Angeles area. “I have no doubt that we’ll be successful in the Valley,” said Wexler from his franchise headquarters in a small back office of a Van Nuys restaurant, which was the first Cousins in the state. Selling larger sandwiches (7 & #733; inches and 15 inches) than its main competitors such as Subway and Quizno’s, the company has grown into 170 restaurants across 10 states in the Midwest. Wexler’s Van Nuys location, which has been operating for two years, has been Cousins’ sole location outside the Midwest until now. Without giving numbers, Wexler said the restaurant is profitable. Although a marketing campaign has yet to start for the new restaurants, Wexler hopes to target local Valley neighborhoods at first. “I really believe that Cousins subs are better than the competition’s,” he said. “Once we get people inside to try them, they’ll know for themselves and that’s going to be the key for us.” But Robert Bond, a private consultant and publisher of Bond’s Franchise Guide, said Wexler’s task may be difficult. “It’s very competitive out there and not everyone is going to succeed so if you have a franchise you have to really stand out or it’s not going to work,” Bond said. With an already crowded fast food market, dominated by McDonald’s, Jack in the Box, Subway and others, Bond predicted Cousins would have a difficult time getting customers initially because of the proliferation of fast food shops in the Valley. But the fact that the company has been successful in the Midwest, however, bodes well for its chances, Bond added. “California taste is much the same as it is in the Midwest so that should help, but it’s really about having a good product and Quizno’s is pretty good and that’s going to be a challenge,” he said. Going up against well-known brands in the Valley will be a daunting task, Bond said, but added that a good location near office buildings, for instance, could improve a franchisee’s chances of success. But Wexler understands this well, having owned a doughnut shop franchise previously. “We’re looking at some good locations right now,” he said. As it is, he’s scouting locations in Chatsworth, Santa Clarita, Northridge and Sherman Oaks, with 10 more shops added next year and another 10 shops by 2005. Wexler’s main concern, however, is marketing the company’s signature submarine sandwiches for his first five restaurants opening this year. Already, a number of potential franchisees have expressed interest in running a franchise in the Valley and elsewhere in the surrounding area, Wexler said. “They’ve seen our success here and in other parts of the country and people want to come on board,” he added. With franchise fees of between $159,000 and $291,000, Cousins’ fees are low compared to larger brand names like McDonald’s which commands fees between $468,000 and $788,000. Although the average shop is generally about 1,600-square-feet, locations can be as small as 400-square-feet. With information seminars about franchising taking place from time to time, Wexler says he’s optimistic about signing a number of new potential franchisees. Bond says interest in new or lesser known franchise opportunities has been growing in recent months. “The fact McDonald’s hasn’t been doing that well along with some of the others has made some people look at new opportunities with fresh ideas,” Bond said.

Teen Passionate About His Doughnut Career While most nineteen year olds spend their hours cramming for final exams, partying at their fraternity or attempting to master the intricacies of the Playstation 2, Matt Massman spends his days working to become the doughnut king of Southern California. Growing up in Beverly Hills, Massman graduated from Beverly Hills High School and briefly enrolled at Santa Monica College, before chafing under the constraints and routine of academia. Initially, Massman planned on becoming a race car driver, a natural career path considering his father maintains an extensive fleet of antique race cars. After failing to become the next Dale Earnhardt, Massman decided to sell real estate, obtaining a broker’s license before realizing that real estate didn’t suit his particular interests. Feeling uncertain about his life, Massman had an epiphany at the Los Angeles Auto Show, where he viewed a man making fresh doughnuts in front of customers using an Orbit donut machine. Massman decided that he would buy an Orbit machine and make doughnuts at local fairs, car shows, and conventions, which ultimately led to his decision to open Baby Donuts at 15030 Ventura Blvd. #2, in Sherman Oaks. “Because I’m so new to the business world, I have a lot to learn. But I already know that I love what I’m doing, there’s never a dull moment. My favorite aspects of my work thus far, have been getting to watch my business grow. Seeing it transform from an idea that I had at the Los Angeles auto show to viewing its opening is a remarkable thing. While it’s fantastically rewarding, it’s also incredibly tough. As the owner you have to wear so many hats, from cleaning up, to ordering supplies, to making sure that everyone does their job perfectly. I’m a perfectionist and I just want to make everything great. “The thing about my store that differentiates us from other doughnut shops is that we have 101 choices of doughnuts. I personally recommend the chocolate mousse and the cinnamon topped. Furthermore, our doughnuts are always hot and fresh, every time you walk through the door. While other stores only bake their doughnuts three times a day, we have doughnuts constantly rolling off of the machines. We even make them right in front of you. Lastly, we deliver; you can’t say that about Winchell’s or Krispy Kreme. “When all is said and done I want to open up as many Baby Donuts franchises as possible. I want to sell as many doughnuts as I can and hopefully do enough business to eventually be open 24 hours a day. I love what I’m doing and want to do it forever. I want to be the doughnut king, and one day have Baby Donuts sponsor a race car team with my logo on the sides of their cars.” Jeff Weiss

Survey Sorts Out Myth, Reality of Office Markets By SHELLY GARCIA Senior Reporter A just released study of real estate trends suggests that while the broader economy has begun to see signs of an uptick, the market for office space is not likely to experience a strong recovery anytime soon. The survey, by Grubb & Ellis and PNC Real Estate Finance, examined office market trends nationally, but with few exceptions, the conclusions are equally applicable to the greater San Fernando Valley market as well, say the authors and local brokers. And even though the local market has, in many ways, fared better than a number of cities around the country, the general outlook is not much different for the Valley than it is for other parts of the city and country. “In some markets the vacancy rate may have a little further to fall,” said Robert Bach, national director for market analysis at Grubb & Ellis. “Other markets will see a bit of a recovery, and I would count L.A. in that. But it’s not going to be a robust economy. It’s not really going to feel that good.” The survey, which attempted to make sense of the many, often conflicting economic signals that have made headlines in recent months, identified some of the commonly held beliefs about the current office real estate market and sought to determine whether they were myth or reality. The survey revealed that, contrary to much of the current thinking among brokers: – Rental rates have not hit bottom, and will continue to fall further, albeit at a slower pace, perhaps for a number of years to come. – Tenants are not signing on for longer lease terms in order to take advantage of lower rates, but rather are continuing to make shorter term decisions until they see significant improvements in the economy. – There has been no measurable migration of Class B tenants to Class A space as happened during the last recession when rents came down. Although the survey conclusions supported several positive signs brokers often point to an economic recovery is underway as is a pickup in real estate activity it did so with caveats. For instance, the survey authors said that while real estate activity has picked up, it is chiefly characterized by more meetings and phone calls, not new leasing activity. That, say local brokers, is equally true in the Valley. “The large deals aren’t really happening,” said Trevor Belden, a partner with Lee & Associates North Los Angeles, who focuses most of his activity on the east Valley office market. “There’s the monster deal that happened in Burbank, but other than that, we haven’t seen any 5,000 or 10,000 square foot tenants running through the market. And we haven’t seen it for 18 months.” Grubb & Ellis statistics put the vacancy rate for the Valley overall at 12.8 percent as of the third quarter ended Sept. 30. The West Valley saw the highest rates, 14.5 percent for the quarter, according to Grubb & Ellis statistics. But when sublease space is factored in, the rates are much higher. According to a just-issued report by Studley, another brokerage company, overall vacancies in the Valley reached 15.8 percent in the third quarter, with Burbank registering the highest rates at 26.2 percent Lagging indicator The problem is that although most signs point to an economic recovery underway, office real estate is a lagging indicator. Not until the recovery begins to generate considerable job growth will tenants return to the leasing market for more space. That lack of activity will continue to exert downward pressure on rental rates, the survey concludes. “I don’t think we’ll see a real increase in rental rates on a national basis for years,” said Bach. Bach reasons that rents won’t start to rise again until the market hits what economists call “equilibrium,” at 10 percent. During the last recession, Bach said, vacancy rates declined an average of one percent a year. Even if this recovery is more robust, and rates decline by 2 percent a year, it will be several years before that point of equilibrium is reached. Brokers point out that landlords have initiated a number of tactics that amount to rent decreases without actually lowering their rental rates. For example, many property owners now offer several months of free rent or “beneficial occupancy,” which means the tenant moves in but doesn’t start paying rent for several months or more. Lee’s Belden disagrees, in part, he said, because dropping rental rates can hurt landlords who are attempting to refinance. But he concedes that some of the larger, publicly held landlords, may well be keeping asking rates stable while dropping effective rents. “What happens is the REITs and pension funds typically have to show a higher rental rate for their shareholders and for Wall Street, but they don’t actually have to show what types of lease rates they’re plugging deals at,” Belden said. Cautious companies One thing is certain: “With very few exceptions, rents are not increasing,” said Paul Stockwell, managing director at Studley. “Rent increases when the demand is starting to outstrip the supply, and that isn’t happening yet.” Most companies in the current recession are moving or expanding only because they absolutely have to, not because they want to take advantage of lucrative lease deals. According to Bach, a fiscally conservative attitude on the part of managers has resulted both in more sublease space and less interest in upgrading office space. During the last recession, many companies held onto space as they downsized and a number of companies moved to more prestigious addresses because they could do so at rents that weren’t much higher than those they were paying for Class B properties. But this time around, many companies unloaded additional space as soon as it became available, and others are staying put no matter the deals out there. “Companies are much more conscious of their bottom line these days and are not willing to trade status for cash flow,” said Bach. “That’s kind of a change in corporate America in all facets of their business.”

Valley Business Officials Warm To New Leader By JACQUELINE FOX Staff Reporter How long the honeymoon for Arnold Schwarzenegger will last in Sacramento is anyone’s guess. But right now, the governor elect, who beat out Gray Davis Oct. 7 in a historic voter revolt, has become the Republican Party’s superhero. He also has received a warm reception from many Valley business leaders who suggest he has the muscle to potentially wrestle significant federal dollars for state programs and will enjoy the kind of access to the White House Californian’s haven’t seen since Ronald Reagan held the office. Plus, Schwarze-negger’s pro-business platform and strong links to California’s tourism and entertainment industries, many say, are an added bonus that could play a role in staving off runaway film production. “I think the entire state is going to be better off,” said David Fleming, chairman of the Economic Alliance of the San Fernando Valley and an attorney with the law firm of Latham and Watkins. Fleming, who served on Schwarzenegger’s campaign finance committee, said, the governor-elect’s moderate position on abortion and gay rights played a significant role in his successful bid to oust a Democrat, Gray Davis, from office. His middle-of-the-road politics, Fleming said, should also make it relatively easy for Schwarzenegger to reach out to Democrats who understand how important his ties to the President are. “Look, he’s already talked to (President) Bush and you can believe that the president is very interested in helping Arnold, particularly with his re-election campaign about to kick into gear,” said Fleming. “He has a very friendly ear in the White House, and I think it’s a great step forward for the Valley’s economy and the state as a whole. And I think he has what it takes to reach out across the aisle and work with members of the other party.” White House attention Bob Stern, president of the Center for Governmental Studies, agrees, that many of the issues impacting businesses in the Valley, indeed across the state, will take top priority with the new governor. He says it’s practically a given that federal funding to prop up California’s economy is already being set aside. “The Bush administration had absolutely no incentive whatsoever to help Gov. Gray Davis,” said Stern. “Since it’s going to take about 39 days for Schwarzenegger to be sworn in, it will probably be 40 days when we start hearing that this amount of money is coming in for this project, and this amount of money is coming in for that one.” However, some local lawmakers, however optimistic, also remain skeptical, largely due to the fact that, aside from nixing Davis’ proposed increases to the vehicle license fee, Schwarzenegger has given few specifics for how he intends to spur economic development. “I’m certain that he means to work with our side of the aisle,” said State Sen. Sheila Kuehl, a Democrat, whose 23rd district includes portions of the Valley. “I know he’s already reached out to Sen. John Burton and I know that the business community is very happy to have a governor who says he wants to protect the ability to thrive in California. But the problem we have so far, is that he has not indicated really what he means by that.” Kuehl said she’s hoping Schwarzenegger’s pro-business programs stretch beyond quick-fixes, such as the modest adjustments made to workers’ compensation and lowering taxes, and include some relief for higher education facilities, particularly the Cal State system, which, without some form of relief, will take a huge hit next year as 2003 budget cuts take hold. “One of the things I hope that the new governor recognizes is the importance of making a connection between good education and a strong labor force,” said Kuehl. Will federal dollars come? Kuehl also cautioned the business community not to get its hopes up regarding federal funding because the states are still grappling with expenses for Bush’s homeland security programs and because the president has earmarked billions in aid to rebuild Iraq, Afghanistan and fight terrorism in the Middle East. “I hope it’s true because we need the money, but I’m not sure it will flow just because there’s a relationship there,” Kuehl said. But in addition to funding, others suggest that simply the change itself, coupled with Schwarzenegger’s strong pro-business pledges, will force companies thinking of moving to the state but put off by the state’s higher costs of doing business here, may feel more compelled to stick it out. “I think this election is a huge morale boost for people who have been suffering under the perception that California is hostile to businesses,” said Bob Scott, director of the Civic Center Group, a former member of the city’s planning commission and leading proponent of new infrastructure programs locally, particularly in the Northeast Valley. Scott added that Schwarzenegger’s high-profile role in Hollywood and international star power carry the potential to boost two of the region’s most vital industries: entertainment and tourism. “He’s in the position where he can come up with some very strong representation on campaigns to help there,” Scott said. Kuehl, however, pointed out that programs implemented by Davis to boost California’s filming sector, such as Film California First, were slashed during the last year to lower the deficit. With Schwarzenegger now wanting to cut out the roughly $4 billion that would come from the boost in the VLF fees, she says, there’s not going to be much left over for him to use for new programs. “Without some kind of tax subsidy, I’m not sure he’s going to convince the industry to stay here,” Kuehl said. “I don’t know where the extra $4 billion would come from.”

Neighborhood Councils Stumble at the Gate By JACQUELINE FOX Staff Reporter The very program created by city hall as the antidote to secession itself the establishment of neighborhood councils has gotten off to a bumpy start with community and business leaders expressing growing discontent with the process created to form them. In the Valley, 26 councils have been certified, with as many as eight to 10 more still forming with 77 certified citywide since the blueprint for the system was finally approved in 2001. It’s expected that there will eventually be as many as 100 councils citywide. A few Valley councils are still in the final stages of formation, but of those certified, only 18 have held elections for board officers. One Valley council has threatened to throw in the towel; another can’t seem to get from certification to elections, despite a two-year gap in between.Many councils have finally received their first installment checks from the city, but are still operating from dining room tables and makeshift offices, as funding for building leases remains stuck somewhere in the pipeline. City officials are calling for patience, pointing out that they are attempting to implement the largest system of neighborhood councils in the country. Nonetheless, frustrations are mounting and many council representatives say the so-called “empowerment” promised four years ago by the neighborhood councils concept has yet to materialize. “The real problem is poor management,” said Stephen Lenske, president of the North Hills Neighborhood Council, the first council to be certified in the Valley. North Hills came close to disbanding in September after the city Department of Neighborhood Empowerment or DONE, which oversees the councils, denied its application for funding to lease a local office space. DONE is in the middle of revamping its guidelines for lease agreements for neighborhood councils, largely due to liability issues that have cropped up. So far, the best it can do for West Hills is to offer a city-owned building roughly 12 miles away, in Panorama City. “You call that empowerment?” said Lenske. “The whole concept of neighborhood councils is to bring government into the community, not take it out of the community.” West Hills is expected to take a vote on disbanding again in November, but Lenske said his group is working closely with DONE on a resolution. Greg Nelson, DONE’s general manager, concedes there are problems, particularly with office leases. But he says for every criticism of his department and staff there is a legitimate effort being made to address it. For example, Nelson said he’s hoping to get city council support for an ordinance change that would give DONE direct power to negotiate and approve office leases for the councils, with more flexibility for renting non-city facilities. “We know that office space is critical for the councils and we want to do whatever it takes to make sure we get them what they need, but we also have liability issues we must confront, particularly when we are talking about leasing private property.” Nelson said. But despite the familiar refrains of dissatisfaction, in this debate both factions share a common goal. “We may be at odds over how fast the process should be moving, but I say just hang on and keep telling us what’s wrong, because that is how we are going to get through this,” said Nelson. “We are on the same team, even if it doesn’t appear that way to some.” Roadblocks claimed One overriding concern, says Jill Banks Barad, vice chairwoman of the Sherman Oaks Neighborhood Council and founder of the Valley Alliance of Neighborhood Councils, is the perception that DONE sets up too many road blocks for councils, particularly when it comes to approving bylaws and elections procedures. And, because both the councils and DONE are represented by the same city attorney, there is also a sense that complaints against DONE about this and other issues aren’t being taken seriously. Barad has met with City Attorney Rocky Delgadillo and asked for changes. “There is a feeling that DONE is simply not being held accountable to anyone,” said Barad. Delgadillo said he has agreed to allocate separate resources for neighborhood councils but offered no clear timeline for doing so. Although he believes reforms are needed he’s also cautioning that his position of authority over city departments is purely advisory. “I have agreed to commit separate resources,” said Delgadillo. “But as to whether or not our departments are functioning properly, I do advise them (on) managing risks and following the law, but I’m not allowed to give orders.” The Valley Glen Neighborhood Council was certified in August of 2001, yet it has been asked to rewrite its proposed bylaws three times since, which has meant putting off its board elections. Now DONE is preparing to revamp election procedures and Valley Glen may be forced to start from scratch. Nelson said one of the potential changes being discussed could require councils to hold their elections within a few months after being certified, or start all over again. “It’s like we’ve been battling it out now for almost two full years and we can’t get to the next step,” said Laurie Levine, Valley Glen’s interim vice president. “Now what we are hearing is we may have to re-apply for certification again. That means going right back to where we were in 2001.” Disconnect seen Barad also said that, in some sectors of the Valley, there is a disconnect between neighborhood councils and the business community, with councils leery of developers’ intentions, and business owners who don’t appear all that interested in viewing the councils as legitimate. Barad’s alliance and the United Chambers Of Commerce held the first of regularly planned forums Oct. 9 with members from both sides, hoping to bridge the divide. “We think there is a need to bring people together to discuss our goals,” said Barad. Other council officials also say that some city council members who represent the Valley have not shown the level of interest in working with neighborhood councils they promised during the height of the secession drive. “When you go to the city council with complaints about DONE, or the process, they just send you back to DONE,” said James Cordaro, president of the Van Nuys Neighborhood Council, whose elections earlier this year were upset by allegations of vote tampering and other issues. City Council President Alex Padilla, who formed a close anti-secession alliance with Hahn last year said, despite efforts to support the councils anyway it can, the city council is expected to remain somewhat neutral. “I’m equally as frustrated,” said Padilla. “But as a city council member and an elected official, if I and or my staff participate too much with a (neighborhood) council, I run the risk of trying to control it. So it’s a delicate balancing act for me.” But some city council members are getting involved. When news spread that West Hills was preparing to disband, for example, City Councilman Dennis Zine and Nelson went before the council’s elected board to urge its members to delay the vote, Nelson said. Councilwoman Wendy Greuel is said to be forming a workshop for council leaders in her district. And, Councilman Greig Smith has introduced a motion that would allow neighborhood councils to determine how the bulk of public works project funds are spent in their districts. “They know what streets need to be paved, which trees need trimming,” said Smith. “This is probably the most substantial direction of authority for the councils introduced so far.”

Capitol Punishment: Political Survival Overtakes Reason Guest Column by Gregory N. Lippe The purpose of my guest column is to inform readers of the many anti-job and anti-business bills our legislators are proposing and to present a scorecard of those Valley legislators who are voting for or against these bills. My goal is to assure that the next time readers vote on whether to re-elect their legislators, they will do so with a better understanding of the performance of these legislators regarding issues affecting jobs and businesses. “Vote for me! I will bring new ideas and positive change to our state government.” These or similar words are frequently said by candidates seeking to be elected to our state legislature. I am sure that many of those candidates, especially those that are new to politics, believe that they can deliver on their promises. Why then, has our state seen a number of new legislators in recent years, yet we haven’t seen new ideas or positive change? Why are new bills that are driving businesses and jobs out of California continuing to be introduced and passed? Why are most of our legislators voting strictly according to party lines instead of basing their decisions on what is good for the state? I interviewed legislators from both parties and found the answers to these questions to be quite disturbing and confirming of certain suspicions that I had. First, there are many who are beholden to special interests that provided significant funds to finance their campaigns. Second, term limits and redistricting have created a situation where legislators’ time is significantly consumed by campaigning for office, either their final term in their current office or for the next office, since they cannot continue in the one they have. Redistricting has resulted in so called “safe seats.” These seats are virtually guaranteed to continue with the same party, since the districts are established according to party lines. The seats are not, however, guaranteed to the incumbent candidate. Therefore, the key election for the incumbent is the primary. To be successful in the primary, he or she must have party support. To maintain party support, a Democrat cannot afford to be outflanked on the left by a Democratic challenger and a Republican cannot afford to be outflanked on the right. Third, is the “you wash my back, I’ll wash yours” concept. If a legislator wants support of others in his party for one or more of his bills, he must support the bills introduced by those whose support he needs. There are also forms of punishment that can be used by a party to deal with those who do not vote with the party. Two examples are found in the recent budget fiasco. First, Jim Brulte, the ranking Republican in the Senate, told his fellow Republicans that if any of them voted for increased income taxes, he would see that they did not get re-elected. Second, when Assemblymembers Keith Richman, R-Northridge, and Joe Canciamilla, D-Pittsburg, proposed a good business-sense budget compromise, neither received the support of their respective parties and Assemblymember Richman was passed over in the selection of the conference committee on workers’ compensation reform even though he was a major champion of reform. All this strongly suggests that the main reason many of our legislators vote as they do is to maintain and further their legislative careers, not to benefit the people of California. The following are two anti-business bills that I have chosen to profile this month: – AB 572: Provides that it is unlawful for an employer to subject an employee to an adverse employment action because the employee refuses to work under a condition or practice that the employee believes is unsafe or dangerous, even if no occupational health standard or order is being violated. Adds new grounds for retaliation suits against employers, increases penalties and adds personal liability to employers. The potential additional costs of insurance and litigation are a disincentive for the creation of jobs and an incentive to utilize fewer employees. Status: Passed Assembly June 2, 2003, failed in Senate committee Aug. 28, 2003. Valley Assemblymembers voting for bill: Frommer, Koretz, Levine, Montanez, Pavley Valley Assemblymembers voting against bill: Richman, Strickland – SB 18: Grants power to the Native American Heritage Commission to block a proposed development project or require expensive project changes or mitigation measures to protect an alleged Native American sacred site from a “substantial adverse change.” The sacred site, to be known as a Traditional Tribal Cultural Site (TTCS) may be either listed in a confidential TTCS Register or be “eligible for listing” in such Register. A Native American tribe could conceivably designate almost any land site as a TTCS eligible for listing in the Register. The commission would then make a final determination and a landowner would either be forced to abide by an adverse decision or go through a lengthy and costly consultation or appeals process with the hope of developing his property. This will potentially stifle development, create tremendous additional costs and cause a significant loss of jobs and decreased property values. Status: Passed Senate June 2, 2003, failed Assembly, Sept. 13, 2003, currently under reconsideration in Assembly with possible action in January 2004. Valley legislators voting for bill: Senate: Alarcon, Kuehl, Scott, Margett, Assembly: Koretz, Levine, Montanez, Pavley, Strickland Valley legislators voting against bill: Senate: Knight, Assembly: Richman Valley legislators absent, abstaining or not voting: Senate: none, Assembly: Frommer Gregory N. Lippe, CPA, is managing partner of the Woodland Hills-based CPA firm of Lever, Lippe, Hellie & Russell LLP (LLHR) and a director of the Valley Industry and Commerce Association (VICA).

Slumping Optics Firm Searching for Merger Partner By CARLOS MARTINEZ Staff Reporter After layoffs, cutbacks and a huge drop in revenue last year, Optical Communication Products is seeking a merger partner to rebuild its business. Having moved its headquarters from Chatsworth to a smaller location in Woodland Hills last month, the company plans to sell its building and continue to cut costs while seeking a potential merger partner. “That whole optics sector has been decimated and hit bottom so there’s nowhere else to go for a lot of companies,” said Dave Kang, an analyst with Roth Capital Partners. After going from $144 million in revenue in 2001 to just $37 million last year, the company has been hit hard in recent years by a free-falling tech market. Despite its acquisitions of two laser technology firms in the past year to help rebuild its bottom line, the company has continued to lose ground, posting a $4.3 million loss or $0.02 per share during the quarter ending June 30, on $9.5 million in sales. That compares to a $1.7 million loss or $0.0 per share on $9.8 million in sales a year earlier. Susie Nemeti, company CFO, said the company would not comment other than confirm the firm is working with Bear Stearns & Co. to evaluate strategic alternatives such as a possible merger or sale. While OCP may be looking for a merger partner to rebuild its business, Kang said he believes the company could still survive without merging with another company. “If it were another company I might say something else, but I believe OCP is in a pretty good cash position to survive this market,” Kang said, referring to the company’s $66.8 million in cash it has on hand. But much of that depends on whether the optics sector will rebound in the next several months. So far, Kang said, the sector has shown no definitive trend other than some sporadic movement in the wireless market primarily from large telecom firms making small equipment purchases. A maker of optical components for the telecom sector, the company had been one of the Valley’s fastest growing technology companies as it took advantage of a burgeoning communications market in the late 1990s and into 2001. The growth of cell phones, the Internet and fiber optics from telecom firms building broadband connections in many cities helped fuel the company’s growth. Starting in 1998, the company’s revenue growth began with $19.6 million, followed by $36 million in 1999, $101.6 million in 2000 and $144 million in 2001. Fruitful relationship Thanks primarily to its relationship with Tokyo-based Furukawa Electric Co. Ltd. which owns a 58.1 percent stake in the firm, OCP has been able to bundle Furukawa products with its own and produce cost-effective components and optics equipment for a variety of telecommunications firms like Alcatel, Nortel Networks, Cisco Systems, Lucent Technologies and others. “They’ve benefited a lot from this relationship and made them particularly efficient in distributing its bundled products,” Kang said. But like many tech firms, the company saw its market nearly dry up as broadband development slowed along with the cell phone and wireless sectors which also slumped. Jonathan Kramer, president of Kramer.firm, a technology consulting company based in Santa Monica, said few optical component firms have adjusted well to a down economy. “There are a lot fewer of them than there were two years ago, but if OCP can hang on, it should bet better sooner rather than later,” he said. While telecoms have stopped building networks and acquiring equipment in great numbers due to an overall surplus of equipment already acquired, Kramer said there are already signs that the telecoms are again in the market for equipment. “Verizon is out there buying some equipment and so is Nortel and it’s not much, but it’s a start,” said Kramer, who is already anticipating a jump in equipment sales by early next year. In the meantime, OCP may well be sold or merge with another company given its cash position and its history of providing equipment to large telecom firms, Kang said. “There’s a chance it could merge or be sold, but I would bet against it,” he said. “It’s a pretty efficient company that made cuts when it had to and thanks to its relationship with Furukawa is able to provide low-cost equipment.” The company’s acquisition of Cielo Communications last October and that of Gore Photonics in February, should help improve its position in the optical market. “The importance of those acquisitions is the VCSEL (Vertical Cavity Surface Emitting Lasers) laser which is the latest type of laser and is much cheaper than traditional lasers,” Kang said. But for those acquisitions to pay off, the market must start opening up, Kang warned. “But I believe the worst is behind them and if they can hang on, they’ll be back.”