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AB 93 – Governor’s Enterprise Zone Elimination Proposal – Passes Committee, Senate to Vote Today

From the Sacramento Bee:

After Gov. Jerry Brown’s proposal to eliminate the state’s enterprise zone program appeared to stall earlier this month, the Brown administration and Democratic legislative leaders rushed forward Monday with a modified version of the plan.

A floor vote on the proposal was expected in the Senate today, despite objections from cities and other proponents of a program in which employers in locally designated areas have received large tax breaks for years.

The modified proposal would largely retain the geographic boundaries of California’s 40 enterprise zones, but with significantly scaled-back hiring credits for companies in those areas.

The proposal released Monday would provide hiring credits only to employers paying between 150 percent and 350 percent of the minimum wage, or between $12 and $28 per hour. Except for small businesses, the program would generally not apply to temporary worker agencies, retailers, restaurants or drinking establishments.

The proposal also includes about $30 million in the budget year beginning July 1 for tax credits negotiated on a case-by-case basis with the administration’s economic development arm.

The proposal maintains Brown’s original bid to create a sales tax exemption for manufacturing and biotech research companies.

The Senate Budget and Fiscal Review Committee approved the measure on Monday, with Democratic lawmakers in support and Republicans opposed. Brown and labor groups have lobbied intensely against the enterprise zone program, saying it is wasteful and ineffective. They have pointed, among other things, to the use of enterprise zone tax credits by strip clubs.
Following the committee vote, H.D. Palmer, a spokesman for Brown’s Department of Finance, said in an email, “We’re encouraged by the vote in Senate Budget Committee to reform what business leaders, workers and others agree is a broken tax incentive system.”

The League of California Cities and the California Chamber of Commerce opposed the measure, and Republican lawmakers objected to receiving the bill in print only hours before the hearing.

They said eliminating enterprise zone hiring credits could harm businesses, particularly in the Central Valley, where wages are relatively low and unemployment high.

While the tax credits Brown proposed may benefit companies in the Silicon Valley and San Diego, said Sen. Tom Berryhill, R-Modesto, they would only hurt small companies in the Central Valley.

“For my area, it’s a back-breaker,” he said.

The nonpartisan Legislative Analyst’s Office has estimated the enterprise zone program will cost California taxpayers $750 million this fiscal year and will exceed $1 billion within several years.

According to a legislative analysis, Brown’s revised proposal would cost the state about $73 million more than under the existing program in the next fiscal year, but result in a savings by 2016-17.

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