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Sacramento Business Journal: “Enterprise zones brace for change”

The Sacramento Business Journal has the following extensive article on on Enterprise Zones today:

The death of California’s redevelopment agencies makes enterprise zones more necessary than ever to keep and create jobs, say some business and city officials. But ominous language about reform in Gov. Jerry Brown’s proposed budget has them worried.

“The governor was very vague in his budget message,” said Craig Johnson, president of the California Association of Enterprise Zones. “I quite frankly don’t know what his idea of reform is.”

Johnson said he expects one or more bills to be introduced this month. Last year Brown proposed eliminating enterprise zones entirely to save the state $900 million.

The move was backed by a report from the Public Policy Institute of California that claimed employment grew no faster in enterprise zones than in similar areas and that big companies reaped the tax benefits while small-business owners received little benefit.

The state created the enterprise zone program in 1986 to stimulate business investment in depressed areas, offering tax credits to companies that hire workers who often have a tougher time landing jobs – such as military veterans, former foster children or ex-convicts. A business in an enterprise zone can qualify for tax credits of up to $36,000 over five years. Enterprise zones also offer sales-tax breaks, increased deductions for expenses and preference for companies bidding on state contracts, among other benefits.

With the shuttering of redevelopment agencies, enterprise zones are one of the few economic development tools remaining, said Barbara Hayes, president and chief executive at the Sacramento Area Commerce & Trade Organization.

In 2009, the city and county of Sacramento merged their zones and joined Rancho Cordova, which was seeking a zone at the time. The combined zone – a dozen industrial districts on 31,000 acres scattered over the region – more than tripled the area where the benefits are available. The expanded zone received final approval last month.

There’s also a zone in West Sacramento, plus areas where similar benefits are offered, such as McClellan and Mather – former Air Force bases that have been turned into business parks.

Businesses that participate say the enterprise zone program has been essential to keeping them competitive.

“What else is left for employers? What else is left for industry?” asked Tom Kandris, chief executive of American River Packaging in Sacramento. The company, which fashions corrugated cardboard into boxes for wineries and food processors like Blue Diamond Growers, has been participating in the enterprise zone program for years. In 2009, the company weighed closing its Sacramento plant but chose to shut one in Reno instead, partly because of the benefits the local enterprise zone offered.

“I want to stay in California and I was looking for every excuse I could to stay here,” he said. “If we didn’t have the enterprise zone, I don’t know what the recommendation would’ve been.”

The company has about 140 workers in Sacramento, and Kandris said a significant number of them have been hired through the program. He estimated his tax savings was in the six figures.

“It’s necessary for manufacturing if we’re going to survive in this state,” said Dorinda McMillan, director of operations for Woodmack Products Inc. in Rancho Cordova. “There are tremendous fees on us that our competition outside of the state doesn’t have.”

The firm makes burners and other hardware for gas appliances and uses the enterprise zone and various federal programs for all its hiring because of the tax breaks and other benefits.

McMillan said the company has been using federal hiring programs for 20 years, but only recently hired through the enterprise zone when the zone expanded to include Rancho Cordova. Woodmack, which at one point was down to 30 employees from about 120 due to overseas competition, has been hiring of late and has doubled its work force to more than 60 as clients have been coming back to the company.

The hiring of disadvantaged workers requires the same screening as hiring any employee, she said. Some with criminal records have been good employees for decades.

Dean Peckham, a senior project manager with the city of Sacramento, said that hiring through the enterprise zone program has nearly tripled from 2009 to last year. He said he believes the program is safe and won’t be gutted by lawmakers.

He and Micah Runner, economic development manager in Rancho Cordova, said the zone has been an effective tool for keeping companies from relocating.

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