Despite the fact that new businesses in Santa Clarita will be able to take part in the Enterprise Zone program, Jonathan Randles has reported that new legislation is being discussed that could make the area’s EZ program much less effective.

Randles reports that Assemblyman John Perez, D-Los Angeles, is sponsoring an amendment that would require businesses to hire full-time employees and give their employees health benefits to receive the full tax credits.

This would dramatically decrease the effectiveness of the EZ program, since the costs of the health benefits would essentially wipe out the savings from the Enterprise Zone credits.

The Enterprise Zone Program targets economically distressed areas throughout California. Special state incentives encourage business investment and promote the creation of new jobs. The purpose of the program is to provide tax incentives to businesses and allow private sector market forces to revive the local economy. On November 6, 1991 the State designated the Shasta Metro Enterprise Zone, which expired on November 5, 2006. Shasta County applied for a new zone and received final designation effective November 6, 2006 to November 5, 2021. The new zone has some differences in boundaries, but encompasses all of the industrial and most of the commercial zoned areas.

SHASTA METRO ENTERPRISE ZONE BENEFITS

The state offers the following tax credits and benefits that reduce the cost of hiring new employees and investing in equipment in the Shasta Metro Enterprise Zone:

• Hiring Tax Credit
• Sales and Use Tax Credit
• Business Expense Deduction
• Net Operating Loss Carryover
• Deduction for Lenders
• Bid preference on State of California contracts

HIRING TAX CREDIT

If you regularly hire new employees or you are planning an expansion, this tax credit can save you thousands of dollars. By hiring “qualified” employees, you can claim up to 50% of your employee’s wages in the first year of employment. The credit percentage decreases by 10% annually, phasing out after five years.

Hiring Tax Credit Vouchers must be processed through our vouchering agent at the Smart Business Resource Center. Please visit the Smart Business Resource Center for more information

Targeted Employment Areas: Residents of certain designated lower income areas can qualify Enterprise Zone employers for substantial hiring credits. Click here to see if an employee’s address is within the Targeted Employment Area (TEA).

SALES AND USE TAX CREDIT

Individuals, partnerships and limited liability companies may claim a credit equal to the sales or use tax paid or incurred on the first $1 million of qualified machinery purchased. For corporations, the limit goes up to $20 million. Some lease options may qualify as well.

Qualified property is machinery or machinery parts used to:

• Manufacture, process, fabricate, or otherwise assemble a product;
• Produce renewable energy resources; or
• Control air or water pollution.

In addition, qualified property is:

• Data processing and communications equipment including, but not limited to, computers, computer-automated drafting systems, copy machines, telephone systems, and fax machines; and
• Motion picture manufacturing equipment central to production and postproduction, including but not limited to, cameras, audio recorders, and digital image and sound processing equipment.

The business must use the property exclusively within the boundaries of the Enterprise Zone.

BUSINESS EXPENSE DEDUCTION

This provision can make start-up or expansion less expensive by allowing you to expense out the cost of equipment in the first year it is placed in service, rather than depreciating the cost of the property over its useful life. Enterprise Zone businesses may elect to treat 40% of the eligible cost of qualified property as a business expense rather than a capital expense.

Eligible property includes those items that you would expect to depreciate: tangible personal property (excluding buildings) and most equipment and furnishings purchased for exclusive use within the enterprise zone. Office supplies and small nondepreciable items are not included.

Once the property has been put into service within the enterprise zone, you must wait a minimum of two years before selling it or removing it from the zone. You must elect to expense the property during the first year the property was placed in service. If the cost of the item exceeds the maximum expense amount, you may expense up to the cap, and then depreciate the remainder in subsequent years.

NET OPERATING LOSS CARRYOVER

Businesses located in the Enterprise Zone have the option of carrying over 100 percent of the business’s net operating losses over 15 years on their state taxes.

Net operating losses occur when your business deductions exceed your business income, resulting in a net loss for the company. As your business recovers in succeeding years, you can recover the amount of the loss by deducting it from your state taxes. There are just a couple of limitations:

• The NOL can be carried forward but not back; and
• If you elect the enterprise zone NOL deduction, you are prohibited from carrying over any other type of NOL from the same year.

DEDUCTION FOR LENDERS

The net interest deduction for lenders was created to encourage loans in areas that might otherwise be avoided. A deduction from income is allowed on the amount of “net interest” earned on loans made to a business located in the enterprise zone. “Net interest” means the full amount of the interest, less any direct expenses incurred in making the loan.

While the deduction is for the lender, not the business, the business benefits indirectly by receiving a loan that might otherwise have been turned down.

Eligible loans may be used for inventory, buildings, equipment, and working capital. The trade or business receiving the loan must be located solely within the enterprise zone, and the funds must be used exclusively for activities in the zone. The deduction is available to noncommercial lenders as well as commercial, however, the lender may not have equity or other ownership interest in the business.

PREFERENCE POINTS ON STATE CONTRACTS

The Enterprise Zone Act (EZA) provides a 5 percent bid preference on service and commodity contracts valued at more than $100,000 if the business work site is located in an enterprise zone. Bid preferences do not apply to construction or other contracts where the provisions of the State’s contract fix the work site.

The EZA allows state contracting officials to give California based companies the bid preference when 50% of the labor required to perform a commodities contracts or 90% of the labor for services contracts is performed at the approved EZA work site(s). To receive a contract award based on preferences, the company must certify under penalty of perjury that the required contract labor shall be accomplished at the approved work site.

Companies qualifying for the 5 percent work site preference may request an additional 1 to 4 percent workforce preference by certifying to hire a specified percent of their contract workforce labor hours from a targeted employment area, or from enterprise zone eligible employees.

For more information click here.

Here’s a piece from today’s KHTS News in Santa Clarita:

The city of Santa Clarita has received state approval to expand their Enterprise Zone designation, which offers California tax credits for businesses who meet certain standards of hiring or purchasing.

The Enterprise zone was first granted by the state to our area in 2007, and the latest addition will qualify businesses in Bridgeport Marketplace, Granary Square, and Baywood at Bridgeport.

“The Enterprise Zone continues to be one of Santa Clarita’s most successful business retention and attraction tools and we are thrilled that our expansion request was approved by the State,” said Santa Clarita Mayor Laurene Weste. “We encourage all businesses in the new expansion areas and throughout the City to take advantage of this opportunity to realize significant tax savings.”

So far over 150 businesses are taking advantage of tax credits through the program, however since 98% of all local non-residential businesses qualify, the City is pushing for more participation. This expansion was first approved by the City Council in April, and it was part of a two-pronged attack to promote and grow the program as part of a larger 21-point economic stimulus plan.

“One of the points of that was to make sure that every business that can take advantage of this enterprise zone, does,” said Jason Crawford, economic development director for Santa Clarita. “And also expanding the enterprise zone to reach as many businesses as possible, so that everyone can take advantage of the benefits.”

Enterprise zones offer a variety of benefits to businesses, including hiring tax credits, sales and use tax credits, income tax credits for employees, and more. Click here for full benefits list.

Amid the celebration for City Hall comes some potentially sour news. Newly appointed Speaker of the California Assembly John Perez has introduced AB 1139, which proposes restricting enterprise zones’ qualified wage tax credits. If passed, the bill would only allow businesses to accept the tax credit if they pay for 80% of their qualifying employees’ healthcare plans and those employees work over 35 hours per week.

Crawford says that adding such a restriction would be harmful to our economic recovery.

“To me, this is absolutely not the time to be doing that. What we need to see is businesses expanding, being successful, hiring people…that’s what’s going to get us out of the economic times we’re in,” he said. “Doing things that hamstring the enterprise zone is not going to get us there.”

The bill is still in Assembly committee and has not yet been brought to a vote.

The Santa Clarita Enterprise Zone covers 97% of all commercial, business, and industrial zoned land within the City of Santa Clarita. July 2008 marked the 1 year anniversary for the Santa Clarita Enterprise Zone which received its official designation from the State of California back on July 1, 2007.

Are You in the Zone?

If your business is located in the City of Santa Clarita or you plan to move your business to Santa Clarita, you should check to see if you are within the Santa Clarita Enterprise Zone boundaries – making your business eligible for significant savings through tax credits and deductions.

Please review the Santa Clarita Enterprise Zone map or list of street ranges to determine if your business is located within the qualified area.

Want to Learn More about the Available Benefits?

The Enterprise Zone program offers special tax incentives to businesses located within the Zone. Click here for information on available benefits including hiring tax credits, sales and use tax credits, business expense deductions, net interest deductions, and net operating loss carryover deductions.

Want to Know if an Employee is Eligible for the Hiring Tax Credit?

Companies located in the Enterprise Zone can receive a tax credit for hiring individuals meeting certain qualifications.

For employee vouchering instructions please click here for the Complete Employer Voucher Application Packet which includes instructions and a sample Hiring Tax Credit Voucher.

Where Are the Santa Clarita Targeted Employment Areas (TEAs)?

To determine if an applicant resides in one of Santa Clarita’s TEAs, please click here

Porterville has the distinction of being one of California’s first Enterprise Zones. The Enterprise Zone boundaries are roughly described as Highway 65 east to Plano Street, from Olive Avenue south to Gibbons Avenue.  Companies located in the Enterprise Zone are eligible to receive the following tax credits and benefits:

• Hiring Credits
• Sales or Use Tax Credit
• Business Expense Deduction
• Net Operating Loss Carryover (NOL)
• Net Interest Deduction for Lenders
• Preference Points on State Contracts
• Preference Points on Industrial Development Bonds
• Expeditious processing of plans and permits
• 10 year, 0% payment plan for permits and development fees

BUSINESS INCENTIVE ZONE

California’s only targeted tax area, Porterville is part of Tulare County’s Business Incentive Zone (“The BIZ”).  BIZ boundaries encompass the entire City of Porterville and offers many of the same benefits available through the Enterprise Zone program.  Businesses qualify for BIZ advantages based on the Standard
Industrial Codes (SIC).  Qualifying SIC codes are as follows:

2000 – 2099 Food Processing
2200 – 3999 Certain Other Manufacturing
4200 – 4299 Motor Freight Transportation & Warehousing
4500 – 4599 Transportation by Air
4700 – 5199 Transportation Service & Wholesale Trade

Small businesses in Santa Clarita have a new partner in their success. The Power Media Group, a local advertising agency, is helping companies around the area get through the recession.

Direct Sales News had this to say about the program, “The goal is also to help small businesses, which might be standing on the brink of collapsing, to re-think strategies and revive business through strategic marketing and advertising campaigns. Patricia also plans to fully promote businesses online through the Center’s Web site, and to support the operations through Power Women Business Center memberships of $250, $500 and $750 per month, which will grant women entrepreneurs access to the Center’s facilities and business consulting services.”

So how does the Santa Clarita enterprise zone play into the overall strategy? “Since the center will be located in the city’s Enterprise Zone, many of the small businesses hosted there may potentially qualify for enterprise zone credits, which constitutes a state income tax savings opportunity,” said Laura Biery, administrative analyst with the City of Santa Clarita’s Economic Development Division. Biery welcomed Patricia’s initiative. “The women’s business center will complement our other programs we have in the city very well.”

Santa Clarita wins top honors for cities with populations greater than 50,000, while Vernon wins for cities with less than 50,000 residents.

The Los Angeles County Economic Development Corporation (LAEDC) today announced the cities of Santa Clarita and Vernon as the winners of its annual “Most Business-Friendly City in Los Angeles County” competition at its 13th Annual Eddy Awards on November 17, 2008. The Eddy Awards are attended by more than 700 leaders from the business, government, and education communities.

The City of Santa Clarita emerged as the most business-friendly city in LA County for the cities with more than 50,000 residents. Santa Clarita does not assess a utility user tax, allowing businesses to save up to five percent or more on their electric, telephone, water, and gas bills, and it has recently been designated as a State of California Enterprise Zone. Santa Clarita offers its businesses and residents a highly educated workforce, available land for development, site selection assistance, and expedited plan reviews and permit processing.

Click here for the full article and award details from CitySpur: Santa Clarita and Vernon Named Los Angeles County’s Most Business-friendly Cities

This is a geographic area within the City of Santa Clarita that provides tax incentives to business to revive the local economy! Santa Clarita is located just 20 minutes north of Los Angeles. The Santa Clarita Enterprise Zone covers 97% of all commercial, business, and industrial zoned land within the City of Santa Clarita.

The city of Santa Clarita has recently completed a long-term comparitive study regarding whether it is more beneficial for surrounding communities to annex into Santa Clarita or to found their own cities. The report completed in time to educate voters prior to the November 3rd election, which will guide the future planning of the region. Below are some of the report details:

Taxes:

Burr estimates that residents in the studied areas would save money on taxes if they annexed into the City. This is based on information that indicates solid waste charges are an average of $43 more expensive per home in the County versus the City. Additionally, LA County levies a utility tax of approximately $151 per home. The City does not impose such a tax.

However, several additional City taxes will bite into that savings. These include a stormwater fee, increased streetlight assessments and a $26 per-year open space fee. Overall, Burr predicts that the average homeowner would save about $93 per year.

The study forecasts a better picture for businesses. If annexation occurs, the Burr report anticipates several tax decreases. The County’s 4.5 percent utility tax is not mirrored by the City, and hotel taxes are only 10 percent in Santa Clarita, compared to 12 percent in unincorporated areas. Furthermore the City’s designation as a State Enterprise Zone could offer greater tax incentives for businesses if annexation takes place.

Developers currently pay much higher fees for parkland development in the City than in the County, and therefore that industry would be impacted to a greater extent if annexation were approved.

Governance:

Currently, Stevenson Ranch, West Ranch, Castaic and Tesoro are governed by Los Angeles County officials, who meet in downtown Los Angeles. At the top of this structure are five La County Supervisors, elected by district. In our local district, Michael Antonovich is the elected Supervisor. Although voters in the studied unincorporated areas do get to vote for their supervisor, they make up only two percent of the constituency for the District 5 seat.

If annexed into the city of Santa Clarita, residents would be governed by five City Council members elected at large. All Council members would be local residents.

Public Services:

Overall, the Burr study found that residents would receive a greater level of service if they were to approve annexation into the City. While Los Angeles County contracts with the LA County Sheriff’s Department for public safety in the unincorporated areas, the City does so on a larger level. This, the study assumes, would provide additional law enforcement services such as COBRA (a gang detail unit), the Business Alliance program, and Community Interaction Team. Additionally, unincorporated areas currently rely on the California Highway Patrol for traffic enforcement. The Study anticipates that by annexing the areas would then benefit from Sheriff’s traffic enforcement and investigation on City streets. Note: these benefits could also be attained if the areas formed their own City, provided that the chosen leaders contracted for said services.

Both the County and City have varying attributes when it comes to Code enforcement. While both respond to emergency code violations in the same time frame, the City was found to respond faster on non-emergency calls. However, the County operates regular code sweeps whereas the City only responds to complaints. The Study did note that the City operates a neighborhood makeover program which reaches out to violating neighborhoods.

Park space was found to be comparable in the studied unincorporated areas.

From the City side:

From a governmental standpoint, the Burr report predicts that the annexation would be a positive move for the City of Santa Clarita. While the City would have to pay some form of mitigating fees to the County for at least 7 years, local economic recovery and growth is expected to make the entire City function at a sustainable rate.

Voters in the unincorporated areas will chose from the following options in the November 3 election, selecting their preference for the future: incorporate a brand new city, stay exactly the same, or annex into the City of Santa Clarita. The vote is only meant to gauge what the residents prefer. The results will guide future actions towards the most popular option.

Of course these estimations can vary widely, depending on a host of circumstances. For example, the November 3rd vote might reflect interest in annexation from only a portion of the studied areas. If that is the case, each area’s fiscal benefits and detracting factors could force different results. Furthermore, if a majority of the studied areas do support annexation proceedings, and the City moves forward, the Local Agency Formation Commission (which has the ultimate approval over annexations provided less than 15% of registered voters in the affected areas don’t formally oppose) could alter the annexation area and/or County mitigation payments.

Both of the conducted studies represent the political infancy of this issue, and the resident vote will be the next major milestone.

The next community meeting to discuss these will be Thursday September 24, from 6:30 – 8:00 p.m. at Castaic Middle School located at 28900 Hillcrest Parkway in Castaic.