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CAEZ Response in Bakersfield Californian

From the Bakersfield Californian:

The California Enterprise Zone Association is fighting back against Gov. Jerry Brown’s proposal to eliminate tax credits for businesses that relocate to or otherwise invest in distressed neighborhoods.

The group is blasting the governor’s plan to eliminate enterprise zones, which is part of a larger proposal that also would do away with local redevelopment agencies.

The governor’s office didn’t return telephone calls seeking comment Wednesday, but when Brown unveiled his proposed budget last month he said difficult choices were necessary to reduce the state’s deficit. Getting rid of only marginally effective business incentives would allow the state to pump more property tax revenue to schools and public safety, he said.

Brown cited a study by the Legislative Analyst’s Office that said enterprise zones don’t generally create new economic activity or employment, but do sometimes draw investment to zones from other parts of the greater metropolitan area in which they’re located.

Max Shenker, a member of the California Association of Enterprise Zones, argued Wednesday that the zones work.

“In our opinion, it does have a huge stimulative effect on the local economy,” he said.

Moreover, failing to deliver on promised tax breaks could land the state in court, Shenker said. Pulling the rug out from under businesses that moved to an area for the incentives is like taking away a 401(k) plan after a contributor has already invested in it, he said.

California has 42 enterprise zones, including three in Kern County. Arvin and Delano have older zones, and Taft has a new provisional one.

An enterprise zone administered jointly by the city of Bakersfield and Kern County expired in 2006, and Shafter’s enterprise zone expired in October of last year.

Bill Stevenson is program coordinator for Employers’ Training Resource, which issues vouchers for enterprise zone tax credits in the region. He estimated the agency issues about 250 vouchers a year each in Arvin and Delano.

Over the course of five years, that adds up to about $28,000 per hire, and that doesn’t even include credits for buying new equipment, Stevenson said.

“That’s a lot of money,” he said. “Depending on how many employees you have, that can be hundreds of thousands of dollars.”

Richard Chapman, president and chief executive officer of the Kern Economic Development Corp., said enterprise zones are one of the “last remaining tools in the toolbox” for luring companies to the county from other areas.

“California has already made it really hard for us with high taxes and bureaucracy,” he said. “If you take this away, that’s going to really make our out-of-state competitors happy. Often times the competition is between states, so we really don’t want to be in a position where our neighbors are offering this and we aren’t.”

The vast majority of the companies now claiming enterprise zone tax credits are businesses that existed before the enterprise zone was formed, but Chapman said there are a few that moved to a zone precisely because of the incentives.

“They ask us about them when they call us,” he said.

None of the companies that moved into active enterprise zones in Kern County returned telephone calls to comment. They include Target in Shafter, The Little Potato Co. in Arvin and Railex in Delano.

Bakersfield and Shafter both said they found their enterprise zones extremely valuable and only allowed them to expire because the time and expense of applying for another one weren’t justified when factoring in the likelihood of success.

“They don’t like to give you one if you’ve already had one, and it’s an extremely elaborate process,” said Brent Green, Shafter’s director of business and economic development.

If enterprise zones go away, it will be a terrible blow for the county’s poorer communities, said Mike Kunz, development associate for Arvin.

“Beverly Hills and downtown San Francisco don’t need enterprise zones,” he said. “But 84 percent of our residents earn below the state median income. We need jobs.”

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