EZ Policy Blog

A recent study, “Economic Development: The Local Perspective,” conducted by the Public Policy Institute of California (PPIC) illustrates how local governments and state programs influence the economic environment in California. The study shows that local development has increased in recent years, with varying rates of success due to social, political, and geographical factors in the respective communities. Most cities believe that their efforts to improve their local economy have worked to some extent, although most feel that there is no approach in place to addresses their individual opportunities as they arise. The PPIC believes that, although there is positive feedback from local governments on the effectiveness of economic policies, there needs to be more formal evaluation of each program’s value. In general, local officials complain that state policies encourage development in retail activity, while granting less support to employment growth and manufacturing. Local officials feel that the retention of old business is more important than fostering and creating new business and that office and retail development are much favored by the state over affordable housing developments or heavy industrial projects.

Enterprise zones were placed under the category of “Economic Support,” which is defined as “undertakings that do not involve the condemnation or purchase and direct transformation of land, but would seem to complement, inform, and even reinforce redeveloped policies.” Many state-sponsored initiatives to encourage environmentally-friendly business strategies and industrial development- such as enterprise zones- are often overlooked by local businesses, “who are unaware of their existence or find applying for them too onerous.” More transparent and widely disseminated information of state programs was a key request from local officials.

When polled on a scale of 1 to 5, with 1 being “not very important” and 5 being “very important,” local respondents ranked the establishment of enterprise zones with an average of 1.8. Unlike the other activities in the Economic Support column, enterprise zones do focus on land uses. However, the authors note that enterprise zones rarely exist in a vacuum. Usually, there is a key redevelopment strategy for the particular area such as government assembly of land and writing it down for private use.

AB 1550, enacted in 2006, requires applicants in targeted areas (i.e., enterprise zones) to set up a comprehensive development program linking various local issues such as housing, transportation, redevelopment, and workforce training. In turn, the state would grant more favorable assistance in these areas and cut through some of the red tape. This and other initiatives to improve communication between state and local government would remove obstacles that prevent cities from attaining full economic development.

The PPIC is also getting ready to re-release a study specifically about the Enterprise Zone program which has already been published by National Bureau of Economic Research last December. I wrote about that report here as well as some of the responses to it, for example, here.