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California’s Business Reputation Depends on Enterprise Zone Decisions

Columnist for SCVBJ

Posted: June 21, 2013 2:00 a.m.
Updated: June 21, 2013 2:00 a.m.
 

Just one year ago, California legislators expanded enterprise zones across the state, qualifying the majority of Santa Clarita Valley businesses for performance-based tax credits and other incentives.

Unfortunately, this economic program is now coming under fire by Gov. Jerry Brown, who wants to dissolve the 40 enterprise zones across the state and instead rely on statewide manufacturing equipment tax credits and expanded hiring credits to encourage economic development.

Both of these initiatives are central to improving California’s business reputation – in fact, California is only one of five states that does not offer such manufacturing credits. However, the Governor is wrong in his assumption that replacing one program with another creates a strong business climate.

In reality, California needs both the enterprise zones and other incentives to compete with other states.

Enterprise zones are important in that they have a regionally specific focus: They provide for growing business operations in specific high-need areas – be it a low-income area like the Antelope Valley or a young and ripe-for-development region like the SCV.

Doing away with enterprise zones puts a bad taste in the mouths of California-based and out-of-state business owners, who will view it as just another reason California is bad for business.

But the Valley Industry and Commerce Association (VICA) feels that state incentives need to take an all-inclusive approach, and enterprise zones must remain a central part of our efforts. Unlike specific credits, businesses large and small and of all kinds can qualify for many aspects of the enterprise zones. Incentives range from hiring tax credit — the program has credits for hiring veterans, employees from certain neighborhoods, people who have been laid off, and the disabled — to sales and use credits and business expense deductions.

The hiring credits of the Enterprise Zone Program have been particularly crucial to the state during the recession. The zones retained or created 118,000 jobs in 2010 and 124,000 in 2011. That equates to thousands of people who were taken off or kept off government aid and are paying taxes and contributing to their local economies. It is estimated that a single new hire can increase U.S. GDP by about $100,000.

You need not look any further than the SCV for proof of the impact of enterprise zones. Last year, AMS Fulfillment was honored by the California Association of Enterprise zones for hiring 100-plus employees that qualified for enterprise zone tax credits. AMS has also expanded its warehouse operation and greatly contributed to the region’s economy as a result. The company’s success shines a spotlight on California’s positive business benefits whenever AMS works with its clients across the country and the globe.

Part of creating a supportive state structure for business is to bring in new growth to provide instant economic development. But it is also important to cultivate a long-term reputation for supporting our existing businesses – a status California lost long ago.

If legislators decide to discontinue the enterprise zone program, we will be breaking a promise to companies that recently invested in these areas because of the incentive structure offered by the enterprise zone program.

VICA urges you to contact your legislators and tell them that a complete approach to business retention, expansion and attraction includes enterprise zones, as well as expanded hiring and manufacturing credits.

The Valley Industry and Commerce Association (VICA) is a business advocacy organization based in Sherman Oaks that represents employers throughout the Los Angeles County region at the local, state and federal levels of government.

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