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Fresno Bee: “When legislators were talking about major changes to state incentive programs the company – and 69 jobs – ended up in Georgia”

A large article in the Fresno Bee on the ongoing debate over Enterprise Zones:

A program that is said to have brought millions of dollars and thousands of jobs to the Valley may be in jeopardy.

Gov. Jerry Brown’s budget proposal would eliminate Enterprise Zone programs to help bridge a $25.6 billion state budget shortfall.

Supporters of the programs say the local work force — and the state — would pay dearly in the long run. In Fresno, 488 businesses using the incentives created 1,200 jobs last year alone, city records show.

But not everyone is a fan of the Enterprise Zone and similar incentive programs, which reimburse businesses when they hire disadvantaged workers or buy new equipment. Critics say large out-of-state corporations have pocketed millions by shifting jobs to areas with incentive programs, not creating new jobs.

Enterprise Zones were created 25 years ago to reward businesses for going into areas with high unemployment and large, difficult-to-employ work forces.

“The Enterprise Zone program is one of the only tools that the city of Fresno has when competing with other states for jobs,” said Kelly Vaughan Trevino, Fresno’s incentive zone manager. “Without it, doing business in California is simply too costly and businesses will have no choice but to downsize, close or relocate.”

One Clovis businesswoman is keeping a close eye on the debate. Ladonna Snow says her business, Snowflake Designs, has been booming, but she is worried she will have to slow hiring and curtail expansion if the incentive program is eliminated.

Snow started her business in 1995 out of her home. Today, she employs 29 in a 7,000-square-foot building where workers make gymnastic and dance wear for customers around the world.

She said she could not have met customer demands without a combination of incentives for hiring the poor and disadvantaged, and getting tax credits for equipment purchases.

“They have definitely helped us to grow the business … we try to take advantage of everything we can,” Snow said.

Expensive program
Enterprise Zone incentives have been criticized as a boon for business but a burden for taxpayers by the state Legislative Analyst’s Office, the nonprofit California Budget Project and the Public Policy Institute of California.

The California Budget Project, a Sacramento organization that lobbies the Legislature on behalf of low-income Californians, reported the program’s largest beneficiaries are billion-dollar corporations, and that companies tend to move jobs from one city to another to take advantage of incentives — resulting in no new jobs.

In a 2009 study, the PPIC reported that although some areas were more effective at job creation than others, “we found that employment growth in Enterprise Zones was no greater than comparison areas,” said Jed Kolko, a lead researcher with the PPIC.

Taxpayers spent about $100 million on the program in 1998, but that number jumped to $465 million in 2008, state Franchise Tax Board records show.

Even when times are good, that is too much money to provide for incentives, let alone when budgets are strapped, said Jean Ross, executive director of the California Budget Project.

Revenue for Enterprise Zone programs comes from state taxpayers. The money goes into the state treasury and is divided among companies that declare benefits through the program.

If the Enterprise Zone programs are eliminated, the state would send some of that revenue to all communities in California — not just those with Enterprise Zones — where it could be used for economic development or other purposes, said H.D. Palmer, a spokesman for the state Department of Finance in Sacramento. The rest would be used for other priorities, such as schools.

Loss could hit hard
The PPIC study that questioned the effectiveness of Enterprise Zones has come under fire from critics such as Charles Swenson, a professor of accounting at the University of Southern California who said the PPIC used outdated information.

Swenson said his own 2010 academic study showed that joblessness and poverty rates fell in communities with Enterprise Zones, and that the program evenly benefited large and small companies.

In the Valley, economic development officials credit Enterprise Zones and similar incentive programs as major reasons the area has added thousands of jobs in distribution, food processing and manufacturing since the programs began in the mid-1980s.

Incentives have played a major role in Kings County’s industrial growth in recent years, said Jay Salyer, economic development manager with Kings Economic Development Corporation.

He points to Leprino Foods, which has more than 1,200 workers near Lemoore, and the combined 625 jobs created by Marquez Brothers’ cheese and whey plant and Olam International, a tomato processor.

Community leaders say it’s no coincidence that the Best Buy distribution center in Dinuba, Sears Logistic Services in Delano and Walmart’s distribution center in Porterville are — or were — in Enterprise Zones.

Best Buy has brought about 300 jobs, increased property-tax revenues and pumped more money into the local economy because more people are working, said Ed Todd, Dinuba’s city manager.

Steve Geil, president of the Economic Development Corporation of Fresno County, said 22 companies have come to Fresno County in the past year from out of state or outside the U.S. to take advantage of Enterprise Zone incentives.

Before the incentives were established here four years ago, the county attracted only three to five new companies annually, he said.

Now, when business inquiries are reaching some of their highest levels in years, local officials say, companies eyeing the West Coast are delaying their plans until they know the fate of the state’s incentive program.

The incentive programs can make the difference between landing or losing a prospective employer, Geil said.

For example, he said, Fresno County was trying to lure a Canadian company that makes metal and glass walls a couple of years ago, when legislators were talking about major changes to state incentive programs. The company — and 69 jobs — ended up in Georgia.

“It’s probably the best tool to help close the deal, because it evens the field for us financially,” Geil said. “People want to come here, but they want to know it will pencil out.”

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