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Los Angeles Business Journal on Enterprise Zone “Loophole”

Howard Fine of the Los Angeles Business Journal has written one of the most extensive articles to date on the closing “loopholes” issue and how Enterprise Zones figure in:

Executives at Felbro Inc., a manufacturer of point-of-purchase displays located southeast of downtown Los Angeles, are keeping a wary eye on Sacramento these days.

That’s because Sacramento politicians – from Gov. Arnold Schwarzenegger on down – are now talking about scaling back or eliminating tax breaks for businesses to plug a gaping $16 billion budget hole.

These tax breaks are giveaways to some, but for Felbro they’ve offset the cost of hiring dozens of employees and spending hundreds of thousands of dollars on research and development.

“We’ve stayed here because of these tax credits,” said Felbro vice president Howard Feldner. “Remove those tax credits and we’re going to take much more seriously the offers we have coming in every month from states like Iowa and Nevada to locate facilities there.”

Felbro could have some company.

Finally, phasing out the controversial enterprise zone program would save the state $100 million in the 2008-09 fiscal year in hiring tax credits. Hill noted that the enterprise zone program – in which companies locating in so-called blighted areas can get tax credits of up to $36,000 for each eligible person hired from within the zone – has been criticized in some quarters as having little effect in stimulating the economy

But economic development officials dispute this claim, saying the enterprise zone program is the biggest single tool the state has in its arsenal to keep businesses from expanding or relocating to other states.

“Eliminating the enterprise zone program is one of the most business-unfriendly things the state could do,” said Carrie Rogers, vice president of business assistance and development for the Los Angeles County Economic Development Corp. “The state is one of the most expensive places to do business, and we only have a couple of programs that help offset these costs. We’re still the perfect hunting ground for other states to poach our businesses.”

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