The Center of the California Enterprise Zone Information Universe


PublicCEO: California Forfeits Competitiveness

By Dan Oney at PublicCEO.com:

It really can be a simple equation:

When businesses leave California, California loses jobs.

If California isn’t competitive, then businesses leave California.

Therefore, forgoing competitiveness costs Californians jobs.

A simple premise perhaps, but the nuances of this equation are lost in the Governor’s budget proposal. Eliminating Enterprise Zones and Redevelopment Agencies will greatly reduce California’s ability to attract or retain businesses, and further weaken our job market and economy.

Case in point is the recent announcement by Solopower, a San Jose-based green technology company. The company has decided to open its $340 million production facility in neighboring Oregon. While the firm has taken a tight-lipped approach to their process that led them to Oregon, it is easy to glean what factors may have played in their decision.

Oregon’s Business Department (something that California for all intensive purposes lacks) offered them $20 million in start-up loans. That will help open the doors of the 370,000 square foot facility. That money will put 170 new or current residents of Wilsonville, Oregon, to work.

Additional money that helped draw Solopower to Oregon will come, in part, from property tax abatements.

Solopower will receive about $7 million in tax credits. Should they grow to their full capacity of 500 employees, they’ll receive several million dollars more, for a total of $11 million.

Instead of charging $28 million in property taxes over the next ten years, the company will only have to pay between $17 and $21 million. This reduction in property tax would sometimes affect other taxing districts (including fire or schools) but the deal that was struck creates specific mechanisms to ensure continued funding to those services.

Additionally, the city and county mandated other sources of capital, including investment from private entities and money from the Federal government. And if everything goes sour, the county has agreed to back half of Wilsonville’s general fund liability. This means that in the worst case, Wilsonville will lose about $2 million. A gamble, yes, but the property tax, income tax, sales tax, and other local revenues should quickly cover their stake.

So with $11 million from the city, and as much as $40 million from the state; Oregon was $51 million more attractive than California.

It was a safe gamble for Wilsonville, a smart investment for the county, and a good poach by the state.

Imagine that. A tax incentive from the state, coupled with a tax incentive from the local municipality leads to economic investment from the private sector. This example of economic development spurred by a combination of action from the state and local level proves that investment in incentives for companies work.

It is open season on California’s businesses, and states across the country are hunting. The Wall Street Journal ran a story two weeks ago about how California businesses are being actively poached by other governors.

Part of Florida’s recruitment and advertising strategy involves large investments of time and money into California, tempting businesses to leave a state deemed by Chief Executive magazine as the most anti-business state in the union.

The Wall Street Journal quotes Texas Governor Rick Perry as saying, “”We just keep inviting California businesses to look at the economic climate in Texas, where we treat businesses like assets not villains,” said Texas Governor Rick Perry. See that article here.

The argument from Sacramento is that Redevelopment Agencies and Enterprise Zones simply shift jobs from one part of the state and move them to another: a net gain of zero to the state. But in cases like this, when jobs are created in other parts of the country, there is a zero-gain in the state. But jobs that are not created in California are jobs that are lost to all unemployed Californians.

Sacrificing future competitiveness will not help us retain or create jobs; it will only help extend the current economic struggles.

Reform is acceptable and maybe even necessary, but elimination is irresponsible. Cities, counties, and special districts across California can, should, and must fight to keep Redevelopment Agencies and Enterprise Zones in our future.

Leave a Reply

You must be logged in to post a comment.

Follow maxshenker on Twitter

Receive By Email

Enter your email address and receive the EZ Policy Blog by email.

RSS

Categories