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Leaders call on the Capitol

Five members of Santa Clarita Valley business community call on officials to protect Enterprise Zone

Posted: June 10, 2011 1:13 p.m.
Updated: June 10, 2011 1:13 p.m.
 

As Californians teeter on economic recovery, ranks of the under-employed and unemployed continue to attest to a dismal job market.

Recovery in past recessions has been marked by an increase in hiring and construction - neither of which has happened to a substantial degree in the past few years.

Housing permits in California remain 80 percent below peak levels. And, while the unemployment rate has dropped in 2011, not enough businesses are putting people back to work in large enough numbers to restore a steady confidence in the marketplace.

In response, five Santa Clarita Valley leaders urged state legislators this week to protect elements of the state's Enterprise Zone Program, preserving benefits that encourage local companies to continue putting people back to work.

Jonas Peterson, president and CEO of the Santa Clarita Valley Economic Development Corporation; Michael Murphy, inter-governmental relations officer with the city of Santa Clarita; Santa Clarita City Councilwoman Laurie Ender; Terri Kingery, CEO and president of the SCV Chamber of Commerce; and Damian Jones, the chamber's Legislative Analyst traveled to Sacramento on Tuesday for one day of lobbying state legislators.

Business climate

Historic numbers of the unemployed in California, resulting in enormous losses in state income and sales tax collections and a virtual halt in the new housing industry, contributed to the one of the largest government budget debts the state has ever seen.

The state's response? In January, Gov. Jerry Brown proposed elimination of the enterprise zone programs which encourage hiring to help close the state's budget gap.

The proposal came at a time when businesses could most use the benefits contained in the program to jump start the employment market.

City spokespeople, business leaders, chambers of commerce and economic development organizations across the state rallied to decry the loss of one tool to restoring economic activity.

California has been as the second to last in the Tax Foundation's list of states good for business.

California's ranking has steadily worsened since 2006.
Brown responded to petitioners in May with a compromise: enterprise zones would stay but with modifications.

"The Governor's proposed enterprise zone reforms ignore business retention and what businesses truly need to spur economic recovery," Peterson said.

The proposal

Brown's latest budget draft significantly cuts the hiring credit to businesses.

While some argue that enterprise zones in their current form do not result in a net increase in employees long-term, imagine the effect of even fewer employees in the work force business leaders say.

As businesses have struggled to stay afloat during the sour economy, some believe the enterprise zone credits have kept businesses from failing by granting smaller mid-size companies in this state an incentive - and benefit - for hiring.

Today a business has the potential of earning up to $37,440 in tax credits per qualifying employee over a five-year period. Under the new proposal, employers would only receive a one-time hiring credit of $5,000.

"The payroll tax credit is more than $5,000," said Michael Murphy, inter-governmental relations officer with the city of Santa Clarita. "As an employer that would have more value to me than the enterprise zone credit."

The proposed number of reforms to the program has the net effect of gutting the program, Murphy said.

Eliminating the multi-year hiring tax credit takes away the incentive for a business to not only hire, but retain, an employee.

In his review of the latest proposal, California State Board of Equalization member George Runner said in an opinion column published by The Signal that the proposal also represents a significant, retroactive tax increase on employers by eliminating all carry-forwards earned prior to 2006.

Petitioning

The five-member alliance from SCV joined the effort organized by the California Association of Enterprise Zones. This was the third trip to Sacramento organized by the association.

The local contingent joined with groups from around the state, forming teams in each of the visits to meet with each state Assembly and Senate member.

"We went to Sacramento to drive home that changes ignore job retention, what business truly needed to spur job recovery." Peterson said. "They will eliminate the original intention of the program."

The statewide effort to save enterprise programs has been going on for the past three months or so. Locally, business leaders have signed petitions, made calls and written letters on behalf of the program, Peterson said.

"Governor Brown's tax increase proposal, which changes the rules mid-game, sends the wrong message to any business looking to take advantage of state programs that spur economic recovery."

Some progress has been made, Peterson said. But he feels there is still a long way to go and that it is the business community's job to stay in front of the legislators and keep pressing the issue.

Some members of the Legislature are extremely receptive and others still have concerns, Murphy said.

"I'm hopeful some of the members with whom we met will go back and talk to the businesses in their districts where that have enterprise zones, and hear a little more about the day-to-day practical benefits of the program in their districts," Murphy said.

Some of the legislators know how they'd like to vote but have to face their constituents in areas where the program is not as popular. Imagine an urban area heavily favoring tax credits for agricultural communities and one can understand the dilemma.

Locally, state Senators Tony Strickland and Sharon Runner, and Assemblyman Cameron Smyth support the program, Murphy said.

Few incentives

In today's recovery period from the worst and longest recession since the Great Depression, business advocates say the timing is completely wrong to eliminate or make ineffective the enterprise zone program.

"The state has so few incentive programs to keep businesses in our state or to incentivize hiring," Murphy said. "Small business doesn't have enough money to fully pay for positions.

"But if they could take advantage of Enterprise Zone credits, small businesses might be able to hire."
jadkins@the-signal.com

 

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