EZ Policy Blog

Here is a press release from the City of West Sacramento:

CONTACTS: Ernesto Lucero, City of West Sacramento
916-617-4539

FOR IMMEDIATE RELEASE

CITY OF WEST SACRAMENTO RECEIVES
ENTERPRISE ZONE DESIGNATION

West Sacramento, Calif., March 2, 2010 – The City of West Sacramento today announced that it has received final designation as an Enterprise Zone by the California Department of Housing and Community Development.

The West Sacramento Enterprise Zone extends throughout the majority of the City and includes portions of the Clarksburg area. The zone has been granted designation until January 2023.

“This is an important step in our continuing efforts to strengthen and diversify our City’s economy,” said Christopher Cabaldon, West Sacramento Mayor. “The tax benefits and other financial incentives that this program provides are an important tool for encouraging the type of business and job growth we want to see here.”

The California Enterprise Zone program provides special state and local incentives to encourage business investment and promote job creation in economically distressed communities. There are currently 42 Enterprise Zones in California.

Businesses located within a California Enterprise Zone are eligible for substantial State tax and financial benefits, including a hiring tax credit, sales and use tax credit, increased expense deductions, and preference for state contracts.

The City expects a substantial number of businesses to take advantage of the Enterprise Zone benefits. Businesses can receive more information about the benefits of locating in West Sacramento online at www.cityofwestsacramento.org.

California communities receive these designations from the State of California through a competitive process. While Zones have similar goals for improving the economic vitality of their communities, each is unique in the local incentives and special assistance they provide to the businesses located within the zone boundaries.

Here’s the video:

According to The Californian, Salinas Valley was granted their final designation on January 30th.  That would make it the first of the 2008 round of applicants to be granted final designation.

The Oakland Enterprise Zone expires tomorrow, Sept. 27, 2008 after 15 years of operation.  Sunday the 28th marks the first day of the new conditionally designated Oakland EZ’s existence.

Oakland is the last of the eight zones to expire in 2008.  Four zones will expire in 2009:

1. Los Angeles – Harbor Area
2. Madera
3. Sacramento – Army Depot
4. Sacramento – Florin/Perkins

As I have mentioned recently, HCD is about to announce the launch of the open competition for these four slots.

The impact of SB 341 can be seen as zones that received conditional designations in 2008 are speeding past those designated in 2006 toward final designation. For example, this story in the Stockton Record:

San Joaquin County is putting the finishing touches on its 638-square-mile enterprise zone, which offers manufacturers and employers attractive tax incentives to help generate jobs and boost the regional economy.

The county Board of Supervisors declared Tuesday that establishing the enterprise zone would result in no significant environmental impact.

And Fran Aguilera, San Joaquin County’s economic development director, said his office will submit final maps and descriptions of the zone for state review within the next couple of weeks.

And don’t miss the conclusion of the article:

Aguilera said final boundaries could be set within the next month or two. The new enterprise zone will be in place for 15 years, with possible additions during that time, and should play a major role in attracting new development to the region.

“This represents billions of dollars in tax credits for businesses in our county,” he said.

Billions?

The Stockton, Shasta Valley, and Kings County Enterprise Zones all expire today, June 21, 2008 after 15 years of operation.  Tomorrow marks the first day of the conditional designation of the new San Joaquin County, Siskiyou County, and Kings County zones.

The Santa Ana Enterprise Zone expires today, June 7, 2008 after 15 years of operation.  Tomorrow marks the first day of the new conditionally designated Santa Ana EZ’s existence.

In its March 2008 “Tax News,” FTB is extolling the virtues of Enterprise Zones in an article called “Possible boost to California’s economy“:

Governor Arnold Schwarzenegger recently announced the conditional designation for eight Enterprise Zones statewide. The zones are East Los Angeles, Kings County, Oakland, Salinas Valley, San Joaquin County, Santa Ana, Siskiyou County, and West Sacramento.

The new designations will take the place of the eight zones set out in statute that are expiring over the next several months. Each zone designation is in effect for 15 years.

In his announcement, the Governor noted, “Enterprise Zones play a key role in revitalizing economically challenged parts of our state. By helping businesses create well-paying jobs, we empower communities to climb the economic ladder and build the state’s overall economy.”
…
In 2006, a report commissioned by the Department of Housing and Community Development (HCD) evaluated the success of Enterprise Zones in spurring economic recovery. The report showed that, on average, within Enterprise Zones between 1990-2000:

* Poverty rates declined 7.35 percent more than the rest of the state.
* Unemployment rates declined 1.2 percent more than the rest of the state.
* Household incomes increased 7.1 percent more than the rest of the state.
* Wage and salary income increased 3.5 percent more than the rest of the state.

In the next step in the designation process, the HCD will issue a conditional designation letter to each of the new zones, outlining conditions that must be met before final designation can be granted. Examples of conditions include a signed memorandum of understanding with HCD, which includes performance measures and benchmarks.

The text of the article quotes the governor as stating rather clearly that Enterprise Zones “play a key role” in boosting the economy, yet the FTB’s title uses the word “possible” in describing the economic benefit.  Interesting.

The first article I could find expressing the reaction of one of the five losing EZ applications comes from the Desert Sun:

The western Coachella Valley on Thursday lost a statewide competition for tax breaks to boost economic development in Desert Hot Springs, Cathedral City and unincorporated areas.

The region was not among the eight new enterprise zones announced by Gov. Arnold Schwarzenegger as part of the state’s plan to aid economically distressed areas.

“It’s a huge disappointment for all of us,” said Riverside County Supervisor Marion Ashley, whose district includes the proposed zone.

“We saw that as a centerpiece for business attraction and retention,” added Rick Daniels, the city manager of Desert Hot Springs.

…

Thirteen applications were submitted for the eight zones open this year and seven of the new designations went to communities that had previously expired zones.

“I don’t think you have a leg up if you are a existing zone or not,” said Chris Westlake, deputy director for the division overseeing enterprise zones in the state Department of Housing and Community Development.

“You are starting from scratch with us,” he added.

Westlake said each application, which can cost in the range of $100,000 to prepare, is judged on a point system in eight categories, from unemployment and job development plans to marketing and property availability.

“They didn’t score very well,” he said of the valley application compared to the others.

Westlake said the scores of all the applicants will be posted on the Internet soon, and his staff will be glad to discuss the choices with applicants, which is just what valley leaders want.

“We want to find out about our scoring,” said John Soulliere, president and CEO of the Coachella Valley Economic Partnership, “to see if there are any issues with our application that would make it impossible for us” to apply again.

If not, then Ashley and Daniels said they plan to give it another shot.

“If we can, within a year or so, we’ll gear up and try to win next time,” Ashley said.

Westlake said there will be four open zones for new designations in 2009. Zones are good for 15 years.

The valley leaders said such a designation is really a key tool for business development, especially in trying to attract firms from out of state.

“My problem as an economic development professional is (that) without an enterprise zone or other benefits zone, a (prospective) business, unless they are flat out in love with California or willing to throw money away, it is hard to attract here,” Soulliere said.

The Sacramento Bee: “W. Sac designated as state Enterprise Zone”

The Sacramento Business Journal: “Governor tabs West Sac as one of eight enterprise zones”

The Monterey County Herald: “Your Town: Salinas Valley pegged for state economic program”

The Lodi News-Sentinel: “Will a state zone marker boost Lodi’s job growth?”

The Salinas Californian: “Valley given a business boost”

The Los Angeles Business Journal: “State Targets East L.A. Economy”

The Stockton Record: “S.J. beefs up enterprise zone”

The Orange County Register: “State renewing program to encourage Santa Ana businesses”

The Desert Sun: “Valley loses tax break bid“

From the Governor’s office:

Gov. Schwarzenegger Announces Eight New Enterprise Zones to Boost California’s Economy

Helping to grow jobs and improve California’s business climate, Governor Arnold Schwarzenegger today announced the conditional designation for eight Enterprise Zones statewide. The zones are Siskiyou County, San Joaquin County, East Los Angeles, Salinas Valley, Kings County, Oakland, West Sacramento and Santa Ana.

“Enterprise Zones play a key role in revitalizing economically challenged parts of our state. By helping businesses create well-paying jobs, we empower communities to climb the economic ladder and build the state’s overall economy,” said Governor Schwarzenegger.

The California Enterprise Zone Program targets economically distressed areas using special state and local incentives to promote business investment and job creation. By encouraging entrepreneurship and employer growth, the program strives to create and sustain economic expansion in California communities.

The new designations will take the place of the eight zones set out in statute which are expiring over the next several months. Each zone designation is in effect for 15 years.

Businesses within Enterprise Zones are eligible for substantial tax credits and benefits, for example:

* Firms can earn $37,440 or more in state tax credits for each qualified employee hired.
* Corporations can earn sales tax credits on purchases of $20 million per year of qualified machinery and machinery parts.
* Up-front expensing of certain depreciable property.
* Lenders to Zone businesses may receive a net interest deduction.
* Unused tax credits can be applied to future tax years, stretching out the benefit of the initial investment.
* Enterprise Zone companies can earn preference points on state contracts.
* Up to 100% Net Operating Loss (NOL) carry-forward. NOL may be carried forward 15 years.

In 2006, Gov. Schwarzenegger released a report commissioned by the Department of Housing and Community Development (HCD) that evaluated the success of Enterprise Zones in spurring economic recovery. The report shows that, on average, within Enterprise Zones between 1990 -2000:

* Poverty rates declined 7.35 percent more than the rest of the state.
* Unemployment rates declined 1.2 percent more than the rest of the state.
*Household incomes increased 7.1 percent more than the rest of the state.
* Wage and salary income increased 3.5 percent more than the rest of the state.

The next step in the designation process will be the HCD issuance of a conditional designation letter to each of the new zones. The letters will outline conditions which must be met to be granted final designation. Examples of conditions include a signed memorandum of understanding with HCD, which includes performance measures and benchmarks.

The eight expiring zones were: Kings County, Los Angeles East Side, Oakland, Pittsburg, Santa Ana, Siskiyou County, and Stockton. Seven of these eight areas have just been awarded new zones along with a brand new zone for Salinas in Monterey County. That leaves Pittsburg as the only expiring zone not to receive a new designation.

We were originally promised the results of the new Enterprise Zone selections on Jan. 2.  Then we were told it would be the week of Jan. 14th.  Well, as one government source put it, “this is the government.”  Another government source told me, “We are close.”

As reported in the Sacramento Bee, Governor Schwarzenegger declared a “fiscal emergency” today and proposed across the board budget cuts throughout the entire State government.

According to Chris Micheli of Aprea & Michel, a source in the Governor’s Office confirmed that the proposed budget includes a $59,000 reduction to the Enterprise Zone program’s budget.  However, there is no proposal to suspend or eliminate the program, nor is there any indication of delaying the announcement of eight new zones expected next week.

The original HCD deadline (Jan. 2 according to page 44 of the Application Guidebook) for releasing the results of the eight winning Enterprise Zone applications has come and gone.  I reported earlier that the Department had announced this date would be delayed in order to give the Governor’s Office time to review the results.

In the mean time, since the decisions have theoretically already be made, it might be interesting to speculate on who the 13 applicants were.  I have found a wide consensus agreeing that all eight expiring areas submitted applications for new zones.  That leaves five more to account for.  Here are some “clues” I have found:

1. The City of Gardena: This article in the Daily Breeze reports that one of the achievements of their City Manager has been the application for an Enterprise Zone.
2. The City of Salinas and Monterey County: There have been a number of article, including this one from The Salinas Californian, touting Salinas Mayor Dennis Donohue’s accomplishments, including the application for an Enterprise Zone including a number of jurisdictions in south Monterey County.
3. Riverside County/West Coachella Valley: The Desert Sun reported on the application for an Enterprise Zone including the cities of Desert Hot Springs and Cathedral City.
4. The City of El Monte: I managed to find these minutes of a meeting of the El Monte Community Redevelopment Agency held 8/21/07 in which a motion was passed to submit an application for an Enterprise Zone designation.
5. ???: I’m not sure who number 13 is, but I did come across these minutes of a City Countil meeting for the City of Carson on 12/19/06 in which a study was authorized to explore a possible EZ application.

Good luck and if all goes well, you will hear the results here first.

According to an email sent to the new zone applicants, the final scoring  announcements will be delayed until approximately the week of January 14, 2008 instead of Jan. 2 as per the original schedule.  While HCD still intends to complete its scoring process by the beginning of January, the extra time is needed to give the administration an opportunity to review the results and time the announcement.

The Lodi News-Sentinel discusses some of the harsh realities of economic development in the San Joaquin Valley.

Nearly every morning, Chip Herman hoses off pools of urine and human feces from the side of his auto detailing shop on South Cherokee Lane.

No matter how hard he tries, however, the longtime Lodi businessman can’t rinse away the root cause of his frustrations: the widespread access to alcohol on the Eastside corridor.

There are roughly 30 places you can buy a drink on Cherokee Lane, from the restaurants and bars to the liquor, grocery and convenience stores.

As the article mentions later, Lodi is part of San Joaquin Valley’s new Enterprise Zone application which includes the City of Stockton as well.

City leaders, including new Mayor JoAnne Mounce, and those who work or live near Cherokee Lane do want changes. They want closer scrutiny of liquor license applications, and a spruced up avenue that serves as a gateway to the city.

The corridor, now a busy but hardly picturesque collection of motels, gas stations and retail shops, is the first place many see when entering Lodi.

“People get a bad impression — they think the whole town is like that,” said Sunil Yadav, owner of the Modern Motor Lodge on South Cherokee, and a member of the Lodi Improvement Committee.

…

Upcoming plans would also allow for taller hotels and offices on the strip. (The city limit would jump from two stories to four). City leaders also want to include Cherokee Lane in the county’s Enterprise Zone, which would make businesses eligible for numerous low-cost loans and tax rebates.

It’s quite an extensive article and worth reading for those interested in what is at stake for California communities waiting to hear about the fate of their Enterprise Zone applications.

The Siskiyou Daily News reports on a recent meeting of the Upstate California Economic Development Council:

[Tonya] Dowse said that economic development in Siskiyou County is ‘light years’ ahead of many other rural counties. The recently created Siskiyou County Industrial Lands Inventory makes it possible for businesses to see online what is available for development, and gives the county a head-start in finding sites to begin preparing. According to Dowse, the Enterprise Zone application process itself ‘created alliances and prioritized economic development among our political leadership county-wide.’

‘We’ve been investing in the tools and the strategy. Once we have our new Enterprise Zone designation, we’ll be able to implement the marketing phase,’ Dowse said.

Ms. Dowse also informed me that the Washington Post recently called Mount Shasta “The best ski resort you’ve never heard of.”

Sources at HCD tell me that they received 13 applications by the deadline last Friday for the 8 available Enterprise Zone openings.

If you have been thinking about applying for one of the eight available Enterprise Zone designations, now would be a good time to for some decisive action — the deadline for applications is today.

The eight expiring zones are:

1. Kings County
2. Los Angeles – East Side
3. Oakland
4. Pittsburg
5.  Santa Ana
6. Siskiyou County
7. Stockton
8. West Sacramento

According to the schedule laid out in HCD’s Application Guidebook, the announcement of the winners will be on January 2, 2008.

There are a pair of stories out today about new communities’ interest in applying for an Enterprise Zone designation. The Desert Sun reports that the Riverside County Board of Supervisors has approved an application that would include the Western Coachella Valley:

“We really need all the help we can to get some economic action out there,” said county Supervisor Marion Ashley, who represents the city. “And particularly Desert Hot Springs needs it.”

The Coachella Valley already has an enterprise zone that has created 12,000 new jobs since 2000 from parts of Coachella into Indio and Thousand Palms. The proposed western Coachella Valley enterprise zone would include parts of Cathedral City and Desert Hot Springs.

“There is no guarantee that every single application will be granted,” said Tom Freeman, spokesman for the county’s economic development department. “We will not be the sole applicant for the new designation.”

The Chico Enterprise-Record, however, describes a much more nuanced issue involving a proposed Regional Enterprise Zone application for the counties of Glenn and Colusa. The Glenn County Board of Supervisors is struggling with the need for an economic development program such as the Enterprise Zone on the one hand, but their inability to come up with the liquid cash resources needed to operate a zone:

WILLOWS — It was one of those good news-bad news scenarios: an idea that could boost Glenn County’s economy, but faced the age-old question, “where’s the money to pay?”

The Board of Supervisors Tuesday heard a proposal to join Colusa County and the cities of Colusa and Williams to apply for a regional enterprise zone designation.

The idea hatched publicly Oct. 25 at a joint-governments meeting between Glenn county and city officials.

County Administrative Officer David Shoemaker Tuesday asked the supervisors to designate a county representative and identify funding solutions; authorize the board chairman to write a letter committing to the county’s participation, if approved; and refer the proposal to the block-grant reuse committee for action.

But while the supervisors agreed the county needs to improve its economy, the main obstacle the proposal faced was the county’s current financial status.

As Supervisor Keith Hansen put it, “we’re saying there is no General Fund money.”

Under the proposal, the costs of hiring a professional to complete the zone application would be split six ways between the two counties and four cities, assuming Orland and Willows are willing to participate. Shoemaker estimated the county share at between $22,000 and $44,000 for that cost.

But the county would also have to come up with $32,000 to $49,000 each year for operation and maintenance of the zone, again depending on the cities’ participation.

The county would also have to enter into a contract with Colusa County and the cities to protect its interest in the zone.

Shoemaker said the county could possibly apply for a community development block grant for the cost of applying for the zone, a possibility later confirmed by Planning Director Dan Obermeyer.

It’s the long-term obligation that is a problem. Not only doesn’t the county have money, but the governor is talking about state budget reductions, and both factors weighed heavily on the supervisors.

Supervisor John Amaro said he didn’t see how the county can go forward and wouldn’t enter into any kind of commitment without first knowing there would be funding.

Supervisor Tracey Quarne said he didn’t want to move ahead until the cities have indicated a solid interest.

“We don’t have any money,” Quarne said. “I can’t see committing to a collaboration if we don’t know if Willows and Orland are on board.”

“The General Fund is fragile,” said Supervisor Mike Murray, a self-described fiscal conservative. “I would not support anything from the General Fund … it’s a math problem.”

But Supervisor Tom McGowan asked, “How do you harvest if you don’t plant seeds?”

McGowan said the county hasn’t done anything “proactive” on economic development. He is the one who initially advocated for the proposal at the joint meeting, and urged the county and cities then to commit to the idea.

“Momentum is growing a little bit … we do have a good chance of being awarded one of these enterprise zones,” McGowan said.

Amaro disagreed that the county isn’t doing anything to improve economically, and reiterated his position that the county can’t commit at this time.

“I think it’s a great project …” Amaro said. “We can’t afford it.”

As discussion wound to an end, Finance Director Don Santoro reminded the board the governor has ordered a 10-percent spending reduction by all state agencies that could affect county programs in the future — a possibility he cautioned the board to think about when looking at ongoing projects.

No decisions were made, although Shoemaker was directed to find out more about the cities’ interest. The board may revisit the proposal at the first meeting in December.

If they are serious, they’ll have to make a decision before December – the applications are due November 16th.