Northern California has been experiencing a tremendous pressure to retain jobs in the region due to the tech sector’s drop during the recession. And the tough times may not be over for workers in the area. Bayer HealthCare, one of the largest employers in Oakland and Berkley could leave the region altogether. With this in mind, Berkley and Oakland have partnered to offer a number of tax incentives.

One of the most prominent of these tax breaks could come from the Enterprise Zone program. Current estimates peg the tax break at $13 million dollars in savings over the next 10 years. “There’s a competitive process,” said Bayer spokeswoman Cathy Keck Anderson. “The enterprise zone for the region only strengthens the Berkeley site.”

In this economy, everyone is trying to bring in business any way they can. Real estate professionals have been busy touting the EZ benefits to potential buyers. Often, I come across real estate ads touting the EZ benefits for buyers or lessees. Here is a recent video from a Santa Clarita agent.

Dear CAEZ Members,

On Tuesday, July 21, Tonya Dowse, Max Shenker, Gary Buse, Lina German and I had the opportunity to meet with Jeanne Harriman at the Franchise Tax Board offices. Jeanne introduced us to two of her colleagues, who will be assuming her Enterprise Zone program duties and have been welcomed as part of the CAEZ family. James Dudley and Jaymie Mora have a combined 16 years experience handling Enterprise Zone-related issues for FTB and have been working with Jeanne for many years. They are happy to make themselves available to CAEZ Members. They will be attending our Sacramento Board meetings and handling the FTB update portion of our meeting agenda. They have also been invited to attend and participate in our Annual Conference in Fresno.

Following the Board meeting on Wednesday, July 22, the CAEZ Board of Directors and Advisors met with the new HCD senior management team, which is responsible for the Enterprise Zone program. James Nunn, has been appointed Program Manager for the Enterprise Zone program and Tom Bettencourt has been named the Federal Programs Branch Chief. Frank Luera’s position as Section Chief is still open and a search is underway to fill that slot. Another new face is Kristin Power, Deputy Director for Legislation at HCD. Kristin will be assuming an active role in Enterprise Zone legislation and public policy issues related to the program.

This new management structure has also invited CAEZ to form an HCD/CAEZ Advisory Council, to facilitate better and more frequent communication with the HCD administrative team. The exact shape and structure of this Advisory Council will be discussed between the Board of Directors and HCD staff in the coming weeks. I envision this Advisory Council as a forum for the CAEZ Board and our Members to enhance the program, as well as raise questions and concerns about the program and have them discussed and resolved. I will keep you informed as this develops further.

Thank you for your continued support of CAEZ and the Enterprise Zone program.

CRAIG JOHNSON
President
California Association of Enterprise Zones

On May 7, 2009, the California Court of Appeals ruled in the Dichon case that the burden is on the FTB if they want to audit behind a voucher. The voucher itself is considered prima facie evidence that the employee is qualified. James Dudley, who took over for Frank Luera at the FTB, stated that the FTB is appealing the Dichon case to the Supreme Court. For now, Dichon is the law of the land, but stay tuned to see if the Supremes decide to take it up.

For previous coverage on the case, please click here.

With the need for economic development, certain regions in California are strongly pushing for Enterprise Zone designation.  Most recently, Bruce Stenslie and Steve Kinney, of the Ventura County Star, had this to say about the value of the California Enterprise Zone program:

To understand why cities seek an enterprise-zone designation, and to evaluate its merits, it’s important to understand how it works. Enterprise zones are tied to areas that suffer higher-than-average unemployment and poverty. Businesses within an enterprise zone may receive tax credits for hiring new workers, but only for workers who reside within the enterprise zone or who face serious barriers to employment. The benefits for Oxnard are unique. We have high levels of joblessness in neighborhoods near the city’s industrial and commercial districts, but a disconnect between employers and residents. An enterprise-zone designation will place a premium on the skills developed by workers in the city, by rewarding business with a tax incentive for training and hiring local workers.

If you have a business in an Enterprise Zone, please contact us directly for a free consultation to see the tax credits that are available to you.

Salinas Valley is moving forward with the city’s Enterprise Zone efforts.  From increasing employment opportunities to making the region more attractive to large businesses, the EZ program can help make the entire process as efficient as possible.

Andrew Myrick, the Salinas Valley Enterprise Zone manager wrote the following:

Professor Charles Swenson from the University of Southern California Marshall School of Business confirms that enterprise zones work. His research found that California’s enterprise zone program decreases unemployment rates, boosts wage, salary and household incomes and decreases poverty rates. Another study by the California Department of Housing and Community Development found that poverty rates and unemployment declined and incomes increased more in enterprise zones than in the rest of the state.

Yesterday was the CAEZ quarterly meeting where a host of new faces were introduced to the EZ world. First, replacing Frank Luera at HCD will be Tom Bettencourt and John Nunn. Both men seem to be well suited for the role. Replacing Jeanne Harriman will be Jayme Mora and James Dudley. They have years of Enterprise Zone experience under their belt and seemed very inviting and helpful. James was even brave enough to give the group his email address. We look forward to a very supportive and beneficial relationship with both groups.

Toni Symonds, chief consultant for California State Assembly Committee on Jobs, Economic Development, and the Economy briefed the group regarding AB 1139. Looks like there will be a public hearing on August 18, 2009 and the bill will likely reach the Committee on January 5, 2010. The discussion will focus on what is the purpose and goals of the EZ and whether the program achieves these goals.

Also, AB 1554, a little known bill, should be garnering support by the CAEZ. AB 1554 aligns the reporting period with the period that HCD was actually administering the program. There will be much more to come, especially regarding AB 1139.

Last, the CAEZ annual conference is coming up on November 4-6 in Fresno.

As California companies continue to experience the benefits of the California Enterprise Zone program, other states from the around the nation are re-evaluating their own corporate tax break programs.  The latest state to review the program is Colorado.  Miles Moffeit, from the Denver Post reports:

“Colorado lawmakers started shining a flashlight into the dense state tax code earlier this year, looking for special-interest loopholes they could plug to prevent the budget crisis from deepening.  They found dozens of industry tax breaks that could potentially be nixed or scaled back, according to a report circulating at the Capitol.  Some are shallow pools of potential revenue, such as exemptions on bull-semen sales — estimated to cost the state $3.2 million this year. Others are deeper, such as $600 million worth of breaks expected to go to manufacturing companies for the purchase of component parts.”

The key that these states needs to be reminded of is the total importance of attracting and retaining businesses.  New companies migrating to a state not only creates jobs and tax sales revenue, it also benefits the economic ecosystem of the region.  Real estate, retail sales and the service industries are simply a few of the sectors positively effected by new businesses moving into a city/state.

States from across the country are trying to attract California companies to relocate through a variety of incentive programs, however the Inland Empire area is leveraging the California Enterprise Zone program to retain local businesses.

Bob Dutton, a writer for ‘The Sun’ reported the following two examples of how the EZ program works in the San Bernadino area:

For example, U.S. Rubber Recycling Inc., a manufacturer of recycled rubber flooring products, has been aggressively recruited to relocate to Arizona. They ultimately chose to stay in California because of the incentives and tax credits offered by the Enterprise Zone Program. As a result, 100 good paying jobs remain in California.

A representative from Young Electric Sign Co., a manufacturer of custom electric signs, also shared how they relocated their Southern California operations to San Bernardino solely because of the Enterprise Zone Program. The incentives compelled them to stop looking in other areas because the San Bernardino Valley Enterprise Zone provided the incentives needed to grow their business and staff.

In case you missed it, this piece was recently published in the San Bernardino Sun and Inland Valley Daily Bulletin.

By Sen. Bob Dutton

It’s no secret that California is facing an economic crisis not seen since the Great Depression. Unemployment in the Inland Empire has now reached 13 percent, and the state is facing a $26 billion deficit.

While the entire nation is suffering during this economic downturn, I believe there is a direct correlation between California having the fourth highest unemployment rate in the Country and this state’s anti-business climate.

I’ve repeatedly referred to study after study, including from Forbes Magazine, Chief Executive Magazine and the American Legislative Exchange Council which show that California continues to rank as the most expensive place to do business. I believe these studies and California having the fourth highest unemployment rate in the nation are directly related and why businesses are fleeing California for nearby states that offer a more business-friendly atmosphere.

Companies of all sizes are being lured to Texas, Arizona, Nevada, Washington and Oregon. Nevada, for example, has rolled out the welcome mat and is aggressively recruiting businesses to not only with an advertising campaign but by keeping costs and regulations to a minimum that make our neighbors to the west a very attractive place for a struggling California businesses to succeed.

California is a major economic power, but we are losing our standing in the nation and world because of the unneeded and unnecessary regulations on businesses that are forcing them to leave. If we are going to ever turn around California’s economy it must come through the creation of private sector jobs.

Recently, I met with representatives from the San Bernardino Valley Enterprise Zone along with some of the zone’s businesses who traveled to Sacramento to talk about the value of the Enterprise Zone Program. This program is one of the only remaining incentive programs that California still possesses. I believe it must be maintained and protected, if not expanded, to continue the support of business growth in this state.

We talked about how this valuable program played a key role in keeping these businesses in the state. Without it, their businesses would be in financial jeopardy and they would be forced to leave creating an even worse business environment.