The California Supreme Court has scheduled oral argument in the Dicon case for Tuesday, March 6, 2012 at 9:00 a.m. in San Francisco.

Brown’s budget released today only hints at future reform measures to the Enterprise Zone program.  Perhaps after getting rid of RDAs, the unions are a bit gunshy about outwardly attempting getting rid of another vehicle that has anything to do with jobs while the economy struggles.  Here is what the budget said about Enterprise Zones:

“The resulting stability from a balanced budget will give businesses the certainty and the reassurance they need to invest in California. In addition, the Administration will propose legislation to reform the enterprise zone program and move to a mandatory single sales factor for apportioning multistate business income. Such changes will allow the state to afford investments in manufacturing, business incentives, and other tax relief.”

Effective November 8, 2011, the SBVEC has expanded by about 4 square miles.  Read the full story.

Today the HCD issued this press release regarding implementation of new policies, including a moratorium on new zones.  The stated aim of the new policy memorandum is to make the EZ more accountable, efficient and consistent with the Governor’s May budget revise, i.e. a push by the unions to undercut the EZ program from within.  The legal analysis is beginning on the HCD’s claim that the law allows for “up to” 42 zones which if read in the correct light, means phasing out the program.   Read the memo here.

In today’s Daily Journal:

A bill intended to close a loophole in existing law that lets companies relocate to another city within the state to gain lucrative tax credits failed to pass out of a legislative committee yesterday.

Assembly Bill 1278, authored by Assemblyman Jerry Hill, D-San Mateo, was inspired by a company, VWR International, that is ditching Brisbane to relocate to an enterprise zone in the city of Visalia.

But Hill failed to get the four votes needed to move the bill past the committee stage.

“The bill was not supported by the chair. I thought I could do it now and was looking for one Republican to support it,” Hill said.

The state Assembly Committee on Jobs, Economic Development, and the Economy is chaired by Manuel Perez, D-Coachella. Perez’s Assembly District includes Imperial County, which officially opposed Hill’s legislation.

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Perez’s 80th Assembly District covers all of Imperial County and parts of Riverside County and the area’s high jobless figures prompted him to vote against Hill’s bill.

“Coming from a community with unemployment over 20 percent and that has historically suffered from a lack of private investment and jobs, I’m always concerned about the impacts of business closures on families and communities. My vote today does not reflect my lack of concern about this issue but rather the importance of pushing for a broader enterprise zone reform agenda,” Perez wrote to the Daily Journal in an email.

AB 1278 represented a piecemeal approach, which Perez believes would undermine efforts to reform the enterprise zone program.

“I initiated the reform conversation more than a year ago and the negotiation includes a number of issues such as business relocation and the tighter targeting of business incentives. Some of the reform proposals are in my bills, AB 231 and AB 1411. I hope my actions today will induce labor and business to come back to the table,” he continued in the email.

So says Republican Assemblyman Allan Mansoor.  He calls the governor’s proposal to eliminate Enterprise Zones a breach of contract. 

Read his letter.

From the Santa Clarita Signal:

Santa Clarita Valley officials said Wednesday that they’re skeptical of Gov. Jerry Brown’s latest budget proposals that plan to scale back a program that gives tax breaks to local businesses.

“The governor certainly wants to find Republican votes, but he’s going to have to do more than what’s come out of the May revisions,” Smyth said. “Enterprise zones should be left alone.”

The Governor’s May budget revision significantly reduces the credit available to businesses.    Essentially, the credit will be reduced to $5,000 per employee.  Below is the section that discusses Enterprise Zones.

Reform Enterprise Zones — The purpose of enterprise zones is to encourage economic activity for particular geographic regions. However, there are two significant failings in the way the current tax incentives are structured. First, the Enterprise Zone hiring credit encourages the hiring of employees. It does not encourage the creation of new jobs. A business that lays off five employees and hires one at $50,000 per year, gets the same credit as a business that expands its number of employees and hires an employee at $50,000 per year. In fact, if the employee in the first case meets one of the vouchering criteria — they live in the area — and the employee in the second case meets none of the vouchering criteria, the firm in the first case will receive a credit while the employer in the second case will not. Enterprise Zone programs should reward employers for creating new jobs. Second, employers can benefit from Enterprise Zone credits even when it is demonstrable that the existence of the credit had nothing to do with the fact that they have hired a new employee. This is evident by the existence of a phenomenon referred to as “retro-vouchering”. “Retro-vouchering” typically occurs when a private tax consultant makes contact with a business located in the zone and offers that business their services, on a contingency-fee basis, to determine if any of the employees hired by this firm within the last several years qualifies to be vouchered for the hiring credit. When this happens, clearly the hiring firm did not act based on the Enterprise Zone hiring credit as they were not even aware of the credit when they did the hiring.

Instead of repealing state tax benefits for Enterprise Zones, the May Revision proposes to reform Enterprise Zone hiring credits so that credits are only available to firms which actually increase their level of employment. Taxpayers would be eligible for a $5,000 credit for each incremental full-time equivalent employee that they hire. These credits would only be allowed if claimed on the taxpayer’s original return. Additionally, the May Revision proposal would not allow any new vouchers to be granted for tax years prior to 2011 when the application for that voucher was made more than 30 days after the date that the employee first begins employment. Additionally, to ensure that credits are creating incentives for relatively profitable, tax-paying businesses, the Enterprise Zone credits will be limited to a five-year carry-forward period.

The Democratic leadership responded to the Five Point Plan with this Letter.  Steinberg discusses the Enterprise Zone as follows:

You noted the need to fix redevelopment and enterprise zone programs, but you urge the Legislature to preserve their job generation capacity.  We agree.  We should point out, however, that both redevelopment and enterprise zone programs are major sources of the state’s fiscal problem (through additional state costs for schools and loss of state tax revenue).  Two respected non-partisan institutions, the Legislative Analyst and the Public Policy Institute of California, have raised serious questions about whether redevelopment and enterprise zones actually help with job creation and retention.

From the Sacramento Bee yesterday:

A business coalition pushed Wednesday for a grand state budget compromise that essentially merges Gov. Jerry Brown’s budget and GOPdemands for long-term pension and spending controls.The group of 12 — which dubs itself the Coalition for a California Financial Workout Plan — said voters should be allowed to decide on tax extensions as well as permanent fixes that address the “underlying conditions that got California in trouble.”

Members include the Silicon Valley Leadership Group, Los Angeles Chamber of Commerce, Bay Area Council and Sacramento Metro Chamber.

The coalition outlined a “Five-Point Plan” that includes tax extensions, a long-term spending control, reductions to public employee pensions, changes in the California Environmental Quality Act and a shift of responsibilities to local governments. The group also suggested that state leaders address abuses in redevelopment agencies and enterprise zones without eliminating them.

 Read the whole article here