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Contra Costa Times: “Enterprise zones get Long Beach defense”

This article from the Contra Costa Times does a good job of presenting multiple sides of the discussion:

A Long Beach city official led the charge Monday in Sacramento against a plan to eliminate state enterprise zones, even as recently released studies gave mixed reviews of the zones’ economic benefits.

Craig Johnson, manager of Long Beach’s enterprise zone and president of the California Association of Enterprise Zones, was one of dozens of city officials, business owners and concerned citizens to speak either for or against Gov. Jerry Brown’s plan during an Assembly subcommittee meeting. The meeting was purely informational and the subcommittee didn’t make any decisions.

“Contrary to what you might have heard today … it is a very effective program,” Johnson told the Press-Telegram afterward, adding that in 2010 enterprise zones created 800 jobs in Long Beach. “The idea was to create a program that fostered economic growth. The easier you make it for businesses to operate and do what they do, then they’re going to hire more people.”

However, Jed Kolko, a research fellow at the Public Policy Institute of California, testified at the meeting that his study found otherwise.

“Enterprise zones on average do not raise employment,” Kolko said.

Instead, the zones tend to favor certain areas or certain workers over others in creating jobs, he said.

Enterprise zones are established in low-to-middle-income areas and provide tax incentives for businesses that hire specific types of workers, such as those with a criminal past and people who are receiving unemployment benefits. About 70 percent of Long Beach is in enterprise zones.

The Assembly’s budget subcommittee was discussing both the elimination of enterprise zones and another key proposal of the governor’s budget-balancing plan – the elimination of redevelopment agencies. The agencies allow cities to hold onto property tax revenue, instead of giving it to the state, to spur the development of poor and blighted neighborhoods.

Eliminating the enterprise zones alone is projected to generate $343 million for the state in 2010-11, and $581 million in 2011-12. The new revenue would help cut California’s $28.5 billion budget deficit.

Yet Johnson questioned whether the state could reap such savings, noting that enterprise zones actually save California money by helping businesses grow and taking felons and the unemployed off the government dole.

That doubt was raised as well by Charles Swenson, a research fellow at USC whose own study produced far different results than Kolko’s.
Swenson testified to the subcommittee that unlike Kolko’s study, his looked at enterprise zones throughout the country, and he found that they decreased unemployment by an average of 3.1 percent. In California, that number was 3.4 percent.

Poverty levels also dropped while income levels rose in enterprise zones, Swenson noted.

“Enterprise zones work,” Swenson said. “We think it’s going to increase unemployment if they’re eliminated.”

Meanwhile, adding fuel – and confusion – to the fire, the independent California Budget Project released a study Monday that says enterprise zones are ineffective.

The study notes that the loss in tax revenue to the state because of the zones has risen from $675,000 in 1986 to $465.5 million in 2008, while benefitting mostly large businesses. Corporations with $1 billion or more in total assets claimed more than 70percent of the enterprise zone tax credits, the study says.

The governor has set a March deadline to pass the state budget.

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