The Center of the California Enterprise Zone Information Universe

The Contra Costa Times Is At It Again

Jessica Guynn is back with a pair of “new” enterprise zone screeds. Yesterday in the Times brings us a surprising rehash of her “investigation” that appeared last April: | 03/30/2006: Tax breaks to aid poor help wealthy
By Jessica Guynn

A state law to help poor people in California has turned into a tax loophole almost as big as the city of Oakland.

In fact, it covers most of Oakland.

Tens of millions of dollars in state tax breaks go to businesses in Oakland and 38 other ‘enterprise zones’ under a two-decade-old program designed to steer money and jobs to California’s most economically depressed areas.

But a Times investigation has found that enterprise zones in Oakland and San Francisco pockmarked years ago by poverty, unemployment and crime now encompass some of the Bay Area’s priciest real estate and the nation’s wealthiest companies, yet businesses there are still getting tax breaks.”

I checked the LexisNexis archive, and this article is an exact reprint of the article that appeared on April 10, 2005. I don’t have a print edition to see if there is any notice stating that this is a reprint, neither Lexis or the online addition provide any indication. If this appeared in the Times 11 months ago, why is it still news today? Of course, from my perspective this is a highly biased piece of agenda journalism; the fact that the Times chose to reprint an 11 month old story without any changes demonstrates its lack of news value. [This baffled me so much that I called the Times to double check whether it actually did appear in print. The person I spoke to could not locate it in yesterday's print edition, but the question still remains why it is being displayed as a new article in at least the online edition -- which, by the way, caused the article to be emailed to me as a Google breaking news item.]

Today, however, the Times has published a follow-up in which Guynn interviewed Assemblyman Arambula:

Assemblyman Juan Arambula, D-Fresno, has presided over an exhaustive process, four hearings in three months, to come up with recommendations for reforming California’s enterprise zones, the single-largest economic development program in the state.

The hearings, the result of a Times investigation [is this true? -- Max], seek to curb alleged abuse of the state corporate tax break that doles out lucrative hiring credits and other incentives in an attempt to boost poor areas and workers. Some companies exploit lax oversight and big loopholes to game the system and shave millions from their tax bills, critics say. Proponents acknowledge problems but say enterprise zones spark much-needed economic growth in areas that suffer from chronic unemployment and poverty.

Next month, Arambula’s committee will consider legislation that would grant two five-year extensions to enterprise zones that are set to expire in the next few years, including five in the Bay Area: Oakland, Pittsburg, Richmond, San Francisco and San Jose. Oakland and San Francisco are two of the most costly and controversial of the state’s enterprise zones because they encompass high-end business districts and high-income neighborhoods.

Arambula says he hopes lawmakers will fold his proposals into that legislation to increase accountability, end abuses and ensure that the communities and people who need help get it. But his ideas aren’t popular with everyone. Tax watchdogs strenuously object to extending the life of these zones while the state agency overseeing them tightens regulations. Consultants, who help companies cash in on the tax credits, contend such restrictions go too far and will drive business from California. What’s clear is that the contentious legislation faces a tough road.

Q Why grant these zones an extension at all?

A What I want to do is to try to reform the entire program. And to do that, it seems to make sense to allow for a brief length of time to allow us as a legislature to pass new legislation with some teeth in it. And to then give everyone in the current as well as the new potential enterprise zones a chance to apply, using the new rules.

Q The zones that would receive a two-year extension would have the same boundaries and the same rules as they currently have?

A Yes. It would be a continuation of the status quo for as short of a time period as possible.

Q So, that would mean that affluent areas would still be part and parcel of these zones, clearly areas that are not in any way poor or distressed?

A The bill that was sent to us by the Senate proposes two five-year extensions for everybody. And our committee staff believes that is not appropriate. What we would like to do is to extend the current designations for as short of a time period as possible and then open up the existing zone designations to anybody who wishes to apply.

Q Some of the zones that you are talking about extending for two years are the state’s most costly and controversial. Have you calculated how much the extensions will cost state taxpayers?

A Not that I am aware of.

Q Why not reform the program and then allow the current zones to reapply?

A I suppose we could simply allow some enterprise zones to expire. But because we have such a lack of direction by prior legislatures, it’s really next to impossible to figure out. There’s nothing that says this is what we can or can’t do.

To me, what is significant is that we are trying to overhaul the whole program and to fix past mistakes by putting clear rules and accountability standards in place.

Q Employers get hiring credits for employing workers from targeted employment areas, some of which cover wealthy areas of Oakland and San Francisco. Will those boundaries remain the same during this two-year extension?

A The other option would be to allow all of the current enterprise zones to expire.

Q How do you propose the state choose enterprise zones in the future?

A I would like to see us use the poverty level and the unemployment level as criteria to screen enterprise zone applicants. That’s not to say that we would award enterprise zones just on the basis of who is the poorest because there will be many applicants who will meet that criteria. Then it’s a matter of looking at who’s best prepared to make the enterprise zone successful.

Q You have focused on tightening eligibility requirements for being considered a disadvantaged worker to make sure that the tax credit is benefiting workers who are truly disadvantaged.

A Yes, very much so. There were two policy goals that led to the creation of the enterprise zone program. One of them was to assist areas that needed help, distressed areas, and the other was to help individuals who faced barriers or who had disadvantages in getting jobs. And, I think we need to honor the commitment to those two goals by making sure that the people who benefit are truly the people in the areas that need it the most.

Q The enterprise zone consultants who help companies collect this tax credit have been very vocal in their opposition to tightening eligibility requirements, even to the point of claiming that an ex-offender should include someone convicted of a misdemeanor.

A We are looking at helping people with significant barriers to employment. A misdemeanor that would not come up or be reflected in a job application in my view would not be a significant barrier.

Q Do you know if the bill’s authors will incorporate your recommendations into the legislation?

A I am waiting for feedback from the authors. It would be my hope that these recommendations could be included in the legislation before the committee. Or they can be included in other legislation that I have available to me. But in one form or another, whether it’s in a particular bill or not, I intend to pursue all of these recommendations.

Q Will this legislation or future legislation involving enterprise zones require a simple majority or a two-thirds majority?

A We are still trying to debate that.

Q If it takes a two-thirds vote, how hard will it to be to get through this legislature?

A It’s too soon to tell. I think the people who would be likely to support this reform effort would be those who want good, clean, effective government and those people who are genuinely concerned about blighted areas and disadvantaged individuals. I would hope that two thirds or more of the legislature shares those views.

Q Do you think your recommendations would save taxpayers money?

A I think they would save money and I think we would see a greater impact in areas that have enterprise zones. If we do it right, the enterprise zone program could be extremely helpful to the state in the long run. On the other hand, if squander our resources, it’s going to give everyone a black eye. A few bad apples will spoil things for everyone else.

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.