The Center of the California Enterprise Zone Information Universe


Editorial: Uncertainty About Enterprise Zones Hurts Growth

Fred Fruehan, a businessman in San Bernardino published the following editorial in the San Bernardino Sun:

For administrators and advocates of the enterprise zone program, each year feels like another round on one of the nation’s top reality competition TV shows. Stakes are high, competition is fierce and elimination is always on the line. Although the program made the final cut again this year, what about next year and the year after that?

Continued uncertainty about the future of the program is limiting its opportunities to perform its purpose – to spur economic growth in low-income areas and incentivize businesses to hire local workers who face barriers to employment. Instead of allowing this program to help generate the economic activity and jobs we need to climb out this recession, special interest groups continue to try to dismantle it year after year, further hurting the areas that desperately need business and jobs.

Each year, ambiguity prevents many existing businesses from making new investments in their zone. Ongoing threats to the program are making businesses hesitant to step up production and hire additional employees.

During recent years, companies like my own have tabled expansion plans and become very cautious about growing their footprint in zone areas. Instead of generating new demand and positioning for growth, businesses have become more stagnant waiting for the outcome of the program to become clearer.

Additionally, debate over enterprise zones is harming the state’s efforts to attract new business and jobs. It is common knowledge that doing business in California is expensive and enterprise zones have served as a great economic development tool to attracting large employers during the last few decades.
But loss of confidence in the program is now causing businesses to overlook enterprise zones, and the state, as a possible site for location. Instead of bringing in new businesses that can provide jobs, we are losing out to neighboring states that can deliver on their incentive packages.

Enterprise zones are critical to helping businesses make expansion and work force investments in areas characterized by high unemployment and low income. This program is contributing to the general welfare of the state by incentivizing companies big and small to provide good-paying jobs to local residents during a time when pro-growth decisions are risky.

Since the state budget was passed, several reform bills – A.B. 1411 and A.B. 1278 – have been introduced to improve the effectiveness of the program.

Although these reforms have good intentions, some simply make it more difficult for businesses to qualify for the incentives, which reduces the programs ability to impact job creation. Pushing reforms that make it more challenging for employers to use and navigate the program will only scare more businesses and jobs away.

Program advocates and opponents agree that the enterprise zone program is not flawless. Reform is needed to create greater transparency and accountability. Moving forward it will be important to focus on discussing common-sense reforms that will make the program better, not worse – something I think everyone can accept.

The enterprise zone program is one of the only economic development tools left in California. During next year’s budget process, where more eliminations might be necessary, any talk of abolishing the program will be a step backward. We need to end this constant struggle over the existence of the program, so we can stop wasting time and resources and focus on making it work better for us. These are steps in the right direction.

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