Governor Brown released his 2013-2014 budget today which seeks to make it more difficult for businesses to utilize the Enterprise Zone credits.  At least a step up from last year when Brown proposed to eliminate the EZ program altogether, this year’s approach is more subtle.  Brown seeks to limit retroactive vouchering to one year, despite significant evidence and testimony that most of the businesses for which the credit is intended cannot process all their employee paperwork so quickly, i.e. the small businesses.  It seems that everyone but Brown recognizes that small businesses are the engine that runs California’s job market.  By making it more difficult for them, Brown is doing a disservice to the job market and to a large part of his constituency.

Brown also wants to require “third party” verification of employee residence in a TEA.  Assuming he means driver’s licenses instead of I-9s, again many of the lower income workers have no such third party verification and would thus be excluded from the credit.  The immediate result would be reduced hiring of those without California issued identification a result that I suspect Brown’s backers haven’t fully thought through yet.  Under Brown’s budget, there is a higher level of identification required for a tax credit than the law currently requires to allow someone to vote.  Perhaps an intended distinction….

Below is the full text of the Budget section discussing the Enterprise Zone:

Enterprise Zone Regulatory Reform

The Budget includes savings relating to new regulations for the Enterprise Zone program.  The proposed regulations will accomplish the following reforms:

Limit retrovouchering by requiring all voucher applications to be made within one year of the date of hire.

Require third party verification of employee residence within a Targeted Employment Area.

Streamline the vouchering process for hiring veterans and recipients of public assistance.

Create stricter zone audit procedures and audit failure procedures.

These regulatory reforms will primarily affect Corporation Tax revenue, but will also have an impact on Personal Income Tax revenue. The regulations, in total, are expected to increase General Fund revenue by $10 million in 2012‑13 and $50 million in 2013‑14. The Administration will be pursuing further Enterprise Zone reform through legislation.

Assemblyman Louis Alejo, who has been a big supporter of the EZ program over the last few years, has introduced a new bill, AB 484, to address the operation of expiring zones.   Assemblyman Alejo’s district includes Watsonville which is set to expire.  HCD has indicated that it will not be renewing expiring zones or designating new ones for now.  Alejo’s bill seeks to extend the expiring zones until new zones are designated.

Bill LaMarr, executive director of the California Small Business Alliance, deftly responds to the Bee’s Board about teh EZ:

In a press conference yesterday, Mayor Antonio Villaraigosa welcomed financial software provider BlackLine Systems to the City of Los Angeles.

As part of its relocation, BlackLine will receive the benefits of the ‘State Enterprise Zone Program’ and the ‘Business Tax Holiday’ which entitles the company to a rate discount from the Los Angeles Department of Water and Power, hiring tax credits and a 3-year exemption from the gross receipts tax, respectively.

“Blackline Systems’ move to Los Angeles highlights the larger trend of businesses moving to our city to take advantage of our competitive business policies such as the State Enterprise Zone Program and the Business Tax Holiday,” said Mayor Villaraigosa.

Read the full arrticle.

It’s not as good as you think.  Rather the reduction is a result of the expiration of the increase contained in the 2009-2010 budget.  All personal income tax brackets will go down by .025%.  Enjoy….until the 2011 crew buts it back on the ballot.

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 extended the R&D credits for another two years.   Because of the heavy burden in producing document and calculating the traditional fixed base percentage, many companies opt for the Alternative Simplified Method despite yielding a lower credit percentage.  There was a big push to increase the Alternative Simplified Credit percentage from 14% to 17%, but the Tax Act didn’t go that far.  For the next two years, taxpayers who choose to use the ASC method will have to live with the 14%.

This year’s CAEZ conference will feature prominent business consultant Larry Kosmont. 

Kosmont is an industry veteran who specializes in providing economic development, finance, and real estate advisory services to both public agencies and private corporations. As an economic development consultant Kosmont assists companies with finding business-friendly cities.

He established Encino-based Kosmont Companies in 1986 and is well known for founding The Kosmont – Rose Institute Cost of Doing Business Survey™, a national publication that compares taxes and incentives for more than 400 cities and counties nationwide.

Read the Highland News article here.

Brad Frost, Chairman of the Shasta County Economic Development Corporation, wrote an op-ed piece in today’s Redding Searchlight in which he praises the EZ as instrumental in improving economic conditions and creating jobs.  The piece quotes Bob Luddy, President of Captive Air, a large Shasta County employer, who had this to say:

The opening of the Redding facility enabled Captive Aire to provide quick deliveries at lower costs to our Pacific West customers.  In particular, the enterprise zone tax credits were a major consideration when deciding on this location. These tax credits resulted in significant tax savings which will greatly enhance our ability to sustain profits and thus ensure the stability of the California operations for the future.

It’s hard to argue against the hard facts attested to by those in the business community, especially when those opposed to the EZ are either politicians or unions, neither of which have impressive track records in running businesses and creating the jobs that everyone is talking about and that California so desperately needs.

 The full piece can be read here.

The Desert Sun reported on Mark Weber move into the Coachella Valley EZ manager.   Mark, who replaces Hal Joseph, seems to have significant expertise that should hopefully give him the tools he needs to lead the zone.  The full article can be read here.

The National City Chamber of Commerce issued its official stand in favor of California’s Enterprise Zone program.  The complete letter from Pres/CEO Jaqueline Reynoso can be viewed here.