EZ Policy Blog

Sometimes the existence of an Enterprise Zone can help a California business avoid a decision to move out of state.  But can an Enterprise Zone prevent a whole city from annexing itself to Nevada?

In Needles, that may just be the case.

One of the five jurisdictions that applied for an Enterprise Zone in the 2008 round that was not successful was the West Coachella Valley, including such areas as Desert Hot Springs, Riverside County and Cathedral City. At a meeting of the Cathedral City Council on May 28 there was a detailed discussion and debate about attempting another such application for the 2009 round. Within the discussion are many interesting details that provide a window into the issues and challenges facing local jurisdictions when pondering Enterprise Zone designation.

Video of the Council meeting is available here on the City’s website. I have clipped the pertinent section, and here it is [if you receive the EZ Policy Blog by email, click here to view the video]:



Cathedral City Council 5/28/08 from Max Shenker on Vimeo.

Last month I reported on an indication of interest in Kern County to participate in the upcoming 2009 zone applications. The Daily Independent is now reporting that the proposal has been rejected:

The second item is a recommendation from the Community Development Committee not to participate in the Kern County Enterprise Zone pre-application analysis. The Committee unanimously voted down a proposal to pay $15,000 for a study to determine whether any areas in Ridgecrest would qualify as such a zone. Public Services Department Director Jim McRea said the return on investment of an enterprise zone was “questionable.”

The Mohave Daily News offers the following insightful preview into the next round of Enterprise Zone designations along with some valuable insights from HCD’s Chris Westlake:

NEEDLES - As the Needles City Council explores options for growth in another state, there is still at least one option in California that could meet some of the city’s needs: an enterprise zone.

“This is one of the best tools the state has for attraction, retention and expansion of businesses in California,” said Chris Westlake, deputy director for the California Department of Housing and Community Development. “There are several different benefits to it.”

Businesses inside the zone are eligible for sales tax credits, net operating loss deductions and upfront expensing of depreciable property. To help stimulate investment there is a net interest deduction to lenders for businesses located in an enterprise zone.

Westlake said that Needles’ location and size should not be an obstacle to obtaining an enterprise zone because they have historically gone to entities of different sizes.

“These zones are scattered throughout the state. We’ve got them from the most urban areas to the most rural,” the deputy director said. “We’ve done small cities, like the city of Arvin in the central valley, which is very small, to L.A. It varies from year to year.”

Though Needles has been unsuccessful in attempts to acquire an enterprise zone in the past, zones continually become available as their 15-year terms expire. Needles could apply for one of the zones set to expire in early 2009.

“They are coming to an opportune time to do that,” Westlake said. “We have four expiring next year, which means probably within the next two to three months we are going to be issuing requests for proposals from jurisdictions to submit applications for those four slots.”

Though Needles may have as good a chance as any other municipality to receive a zone, the process is a competitive one.

In 2007, 13 jurisdictions applied for eight enterprise zones that became available earlier this year.

The HCD Web site has information on last year’s request for proposals, which Westlake said should be a good guideline for what will be expected in this year’s RFP.

“It won’t be much different from last year’s,” he said.

Jurisdictions have certain requirements that they have to meet, according to Westlake, and must provide certain marketing materials, like marketing plans and economic development strategies.

The process is estimated to take four to five months, from the time the RFP is issued to the time they’re due. No RFP has been issued for the enterprise zones set to expire in 2009; therefore there is not yet a due date set for applications.

“I know we are getting ready to release the RFP, probably in June,” Westlake said.

Even if the city is unable to acquire an enterprise zone, there are other ways the HCD could help the community in the future.

“We have lots of other programs, too,” Westlake said. “I don’t think Needles has used any of our bond programs. We’ve got lots of housing and other programs also.”

Needles City Council member Steve Thomas, who is a proponent of Needles’ annexation into Nevada, said that he would be happy to stay in California if Needles could acquire a zone that would help it compete with other communities in the Tri-state.

“If they give us an enterprise zone that allows us to build homes and allow our businesses to succeed and compete with the surrounding states, then absolutely, we have succeeded in what we want,” Thomas said. “If it’s everything that we need, then there is no reason to leave, absolutely none.”

There is an early indicator of interest in the next round of Enterprise Zone designations coming from Kern County. As is usually the case at this stage of the process, there doesn’t seem to be a particularly in depth understanding of the program or how the process will work. According to The Daily Independent:

All but one of Wednesday’s proposed resolutions appear on the council’s consent calendar and are considered to be routine by city staff. No public hearings are scheduled.

The only action item is a resolution approving $15,000 for “phase one” of forming an “Eastern Kern Enterprise Zone.”

Enterprise Zones - “depressed” economic areas - are eligible for tax relief to businesses and industry electing to expand or develop within a zone, said City Manager Harvey Rose. Once an Enterprise Zone is established, the area is entered into a book circulated among companies interested in relocating. It is “another way of ‘putting us on the map,’” said Rose.

The $15,000 would fund the city’s share of filing an application to the State of California for the Zone. While Enterprise Zones would be helpful to the Mojave Airport and California City, they might not be worthwhile to Ridgecrest because the city is “further along” in its economic development, said Rose.

“This tool may cost us more money than it brings us in business,” said Rose.

It seems there is already interest in a new Enterprise Zone in Calaveras County.  Apparently, there is a hot race for County Supervisor and one candidate is already making promises about creating a zone:

[Gary] Tofanelli, 54, started his career as an ironworker at age 18 and worked his way up to owning his own firm, which builds commercial projects throughout the region.

He said he’d like to create an enterprise zone that would offer tax breaks to bring new businesses to Calaveras County.

“Even the jobs that are here, most of that money is being spent outside this county. We need to entice new businesses here,” Tofanelli said. “We need to do it smartly.”