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EZ Reform Legislation

This morning, State Assemblymember V. Manuel PĂ©rez will hold a press conference at a business location in Coachella to announce new legislation related to the Enterprise Zone program. The two bills, AB 231 and AB 232 are a result of nearly two years of work done by the Assemblyman and his Jobs Committee staff.

AB 231 makes a number of interesting changes to the Targeted Employment Area. Since it would reduce the number of people who could qualify for the tax credit under the category, it is considered a tax levy and therefore will require passage by 2/3 of the legislature. First, the bill redefines the purpose of TEAs. Currently the statute says that the purpose of a TEA is:

…to encourage businesses in an enterprise zone to hire eligible residents of certain geographic areas within a city, county, or city and county.

AB 231 rewrites that purpose to read:

A targeted employment area serves as the residential base of potential low- and moderate-income workers who are available to work in businesses located in an enterprise zone. The purpose of a targeted employment area is to help identify neighborhoods of low-and moderate-income workers for the purpose of providing those workers with employment assistance, training, and job placement. Businesses located in a zone are encouraged to hire locally to help address some of the poverty and economic dislocation that led to the area’s designation as a zone.

The bill would also require zones to update the geographic boundaries of their TEAs once every five years utilizing new methods of data reporting by the U.S. Census Bureau, and would create a wage cap on employees so that higher income earners could not qualify under the TEA category even if they live within a TEA.

AB 232 changes a number of provisions in the Government Code, including a modification of the stated purpose of the program:

The Enterprise Zone Act provides that its purpose is to stimulate business and industrial growth in the depressed areas of the state by relaxing regulatory controls that impede private investment.

This bill would delete that purpose and instead provide that the purpose of the act is to help stabilize local communities, alleviate poverty, and enhance the state’s economic prosperity through the implementation of public and privately funded programs and services that stimulate business and industrial growth in the depressed areas of the state.

AB 232 is not considered a tax levy and therefore will only require a majority vote to pass. The bill strengthens HCD’s power to de-designate poor performing zones and increases some reporting requirements on the zones. It limits the size of future zones to the extent they overlap an expiring zone. The bill also directs other State agencies to provide assistance and take the Enterprise Zone into account when implementing their programs, thereby seeking to strengthen the overall effectiveness of the program.

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