News coming out of Stockton this week reveals the perspective of the SBA Chief, Jim O’Neal. At the Stockton Summit, O’Neal discussed the opportunities and challenges that the economy offers small businesses in California. Despite the fact that there are quite a few difficult obstacles such as: lower consumer spending and hesitant banks; there are also a number of opportunites that businesses can take advantage of. Some of the keys that O’Neal discussed were:

• A rich workforce to pull employees from
• Lowered prices for inventory
• Lower real estate costs

In addition to these helpful benefits, companies can also take advantage of their local enterprise zone program, which could be saving your company a considerable portion of the your tax expenditures. Contact us today if you are interested in seeing what the state has allocated to you.

Franchise Tax Board (FTB) today announced it has begun contacting more than 35,000 companies that did business in California in 2007, but failed to file a state tax return for that year. FTB annually reviews more than 5 million income records from government agencies and financial institutions, and matches them against tax records filed to determine whether some businesses have yet to file. As part of this annual effort, FTB collected approximately $31 million last year from businesses that failed to file tax returns.

Businesses contacted by FTB will have 30 days to file their delinquent tax return or show why one is not due. If no action is taken, FTB will issue a tax assessment that may include penalties and fees. With the state’s automatic seven-month extension, companies doing business in California are provided up to 10 and one half months to timely file their California state tax return.

Failure to file tax returns is one part of the tax gap that is defined as the difference between taxes owed and taxes paid. California estimates its annual tax gap to be $6.5 billion per year.

For those receiving notices, information is available by calling 866.204.7902. Callers should be prepared to provide the 15 digit notice number.

The 6th annual Oxnard Economic Outlook event speakers are predicting a slow road to recovery for the region. “Clearly we’re at the bottom,” said Chris Thornberg, of Beacon Economics, who made the presentation as part of UC Santa Barbara’s Economic Forecast Project which did the research for the economic outlook.

Thornberg has a moderate view of the economic recovery, he believes the worst is over, however he also is estimating a considerably long rebound for businesses. During his speech, he did reveal that the city of Oxnard has fared better than many other California cities.

Scott Hadly, from the Ventura County Star, reported, “The data he used, from 2008, showed that employment fell by just .03 percent in the city while countywide employment dropped by 2 percent. More recent numbers, however, show that while the nation as a whole is seeing unemployment rates of 9.8 percent as of September, California’s rate was 12.2 percent. Ventura County’s unemployment rate was 11.2 percent. Oxnard’s rate was 15.1 percent in August.”

California Enterprise Zone Program: A Review and Analysis

Thursday, October 8, 2009 from 10:30 a.m. to 2:00 p.m.

Roosevelt Community Center
901 East Santa Clara Street
San Jose, California 95116

DRAFT AGENDA

This is the second in a series of hearings being held by the Assembly Committee on Jobs, Economic Development, and the Economy on the California Enterprise Zone Program and other geographically- targeted economic development area (G-TEDA) programs. Collectively, the G-TEDA programs represent one of the state’s primary economic and workforce development initiatives.

This hearing will focus on California as a world leader in industries that rely on innovation to remain competitive. Presentations will discuss the changing global economic landscape and the potential and current role of the G-TEDA programs in advancing the state’s competitiveness in the areas of innovation and manufacturing.

Welcome, Introductions and Opening Statements

Chairman Pérez and Members of the Assembly Committee on Jobs, Economic Development, and the Economy will give opening statements and frame the key issues to be examined during the hearing. Mr. Chuck Reed Mayor of San Jose will give a few welcoming remarks.

II. California’s Global Competitiveness: Re-establishing the State’s Innovation Edge

Sean Randolph, Bay Area Council Economic Institute (invited)
Louise Auerhahn, Working Partnerships USA
Representative from Lockheed Martin (invited)
Alissa Anderson, Deputy Director, California Budget Project (invited)

The G-TEDA programs operate within a larger economic and workforce development network. Presentations during this panel will give information on how these programs are used or could be used as part of the state’s larger economic development strategy to re-establish itself within a global marketplace.

III. Economic Development: Focus on Manufacturing
John Weis, Deputy Executive Director San Jose Redevelopment Agency
Neil Struthers, Santa Clara Building Trades Association (invited)
Representative from the Silicon Valley Leadership Group (invited)
Jeff Farano, Owner, SA Recycling (invited)
Representative from Siesman, a global manufacturing company located in an enterprise zone (invited)
Representative from the International Brotherhood of Electrical Workers (invited)

Statute provides legislative intent that clearly states that the purpose of the enterprise zone program is to “stimulate business and industrial growth in depressed areas of the State.” Presentations during this panel will discuss how the G-TEDA programs in conjunction with other programs are used or could be better used to meet this statutory intent and advance competitive manufacturing opportunities.

IV. Public Comment

Anyone interested in addressing the Committee may sign up to speak during the public comment period. A sign-up sheet is located at the back of the hearing room.

V. Summation of Key Concepts and Closing Remarks

Assembly Members will highlight key issues and provide recommendations on further actions by the Assembly Committee on Jobs, Economic Development, and the Economy.

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.

Although payroll job losses slowed significantly, the state unemployment rate continued to climb in August, rising three-tenths to 12.2 percent, its highest level since 1940’s record 14.7 percent. From a survey of 5500 households, the state Employment Development Dept reported that 14 California counties now have jobless rates of 15 percent or more, and nearly 30 percent of the state’s unemployed workers have been jobless for over six months. However, EDD’s employer payroll survey showed substantial improvement, with 12,300 jobs lost in August, compared to 38,900 in July and an average of 73,700 for the previous six months. California’s trade, transportation & utilities sector and the construction industry suffered the biggest declines last month, down 7100 and 7000 jobs respectively, followed by manufacturing (-2800). Educational and health services added 6000 positions, along with information (3400) and government (2000).

The Business Forecasting Center at the University of the Pacific predicts that California’s unemployment rate will remain above 12 percent for all of 2010, peaking at 12.6 percent next spring. A return to the state’s pre-recession unemployment levels (under 6 percent) may not happen before 2013. UCLA’s Anderson Forecast is slightly more optimistic, projecting a peak of 12.2 percent and double-digit unemployment until sometime in 2011.

The Recession’s Uncounted Casualties

They’re not a factor in the unemployment rate, but they are either out of work or stymied by the recession into working fewer hours than they’d like, often at reduced wages. The Bureau of Labor Statistics reports that California’s underemployment rate – a broader index which includes unemployed people as well as people forced to take part-time or odd jobs, and those who have quit job hunting out of discouragement – is currently at 18.5 percent, up from 11.7 percent one year ago. An estimated 1.7 million Californians are working part time because full-time positions aren’t available, and about 34,000 would-be workers have grown too discouraged to continue job hunting.

California’s Enterprise Zones need to be expanded to create job incentives.

Despite previous reports, it appears that several cities pursuing Enterprise Zone designations in California may still be in the running. Specifically the cities of Needles and Anaheim are looking to combine their efforts to gain the tax advantages offered by the program.

The Needles Daily Star reported that According to Sue Godnick, executive director of the Needles Chamber, Anaheim has invited the city to join a group effort proposing state legislation that will allow those cities not ranking high enough this year, plus an additional zone for an auto plant in Fremont, to be granted one-time enterprise zone statuses. The initiative is to be titled “100,000 New Jobs for Californians (11 New Enterprise Zones).”

Needles specifically is in need of the EZ program status due to its close proximity to Arizona, which has historically been more friendly to businesses. Without some sort of exemption, it will continue to be difficult to attract local companies to settle in the region.

San Joaquin received positive news for their economic development efforts, with the state of California extending their current enterprise zone to 656 square miles. The zone received conditional approval last year, however the final designation was key to establishing the region’s appeal to local businesses.

Most notably, this increase now includes several wineries and the General Mills facility in the city of Lodi.

If you are in the San Joaquin enterprise zone and are interested to see what tax credits you have available to you, please contact us for a free consultation.

From the Sacramento Bee:

IOUs take last ride
The state controller’s office announced this afternoon it sent out its last IOU — at least for now.

Hallye Jordan, spokeswoman for Controller John Chiang, said the lucky (?) recipient of the formally titled “registered warrant” was Yellow Cab of Sacramento. Jordan said the warrant was issued for an account with the cab company by an unidentified state agency.

The good news is that the IOU can be redeemed starting Friday.

California was forced to start paying vendors, counties and others with rubber checks in July, because of a severe cash flow shortage. The issuance marked only the second time since the Great Depression that warrants were used. (The other time was 1991.)

The IOUs totaled 449,241, worth $2,601,894,756.26.

Not including tip.

In good news for local businesses working for the California state government, State Controller John Chiang publicly announced that the IOU program will end on September 4th.  This is approximately one month prior to earlier estimations.  Chiang has received a wave of public support for this decision and credits the action to a slew of stress tests performed on the new State budget and cash flow analysis.

“The State of California owes a debt of gratitude to the thousands of individuals and businesses that were forced to bear the brunt of the State’s chronic fiscal mismanagement,” Chiang said. “Along with short-term loans that are routinely obtained in the fall, this spending plan should provide sufficient cash to meet all of California’s payment obligations through the fiscal year.”

For anyone not familiar with the situation, Chiang started the state IOU program last month during the budget shortfall.  The companies sent these IOUs (also known as registered warrants) have been vigorously fighting for the program to be brought to a conclusion due to the cash flow issues the IOU program was causing their own businesses.