EZ Policy Blog

Last week I reported on Senator Aanestad’s new bill, SB 939, which would enable businesses in the Oroville Enterprise Zone to sell their tax credits.

The following is a press release from the Senator which explains some of the rationale behind the concept:

Senator Sam Aanestad (R-Grass Valley) has introduced new legislation that is designed to create new jobs and new business opportunities in Northern California, by focusing on the tax advantages that already exist in the Enterprise Zone located within the Butte County City of Oroville. SB 939 would allow businesses located within the Oroville Enterprise Zone to sell employee tax credits they cannot use.

The sale of these credits would generate a steady cash income that can be used to expand business operations, hire additional employees, make additional equipment purchases or be used for any other business-related expenses.

“Many of the businesses located within the Enterprise Zone have been unable to use these employee tax credits because they have zero state income tax liability,” said Senator Aanestad. “These credits only work if the business in question generates enough of a profit to have a state income tax liability. Many of them do not.”

Senator Aanestad says the sale of these credits would result in a win-win proposition for not only the seller – but also the purchaser.

“The sale of these credits will allow businesses within the Oroville Enterprise Zone to gain extra income they ordinarily would not receive, which will result in new employment opportunities,” said Senator Aanestad. “At the same time – the businesses purchasing these credits would receive tax breaks from the State of California – allowing the purchaser to invest the savings into business expansion efforts.”

The Oroville Enterprise Zone was first established in 1991 and re-designated in 2006. Businesses located within the zone can take advantage of five tax-related incentives: the hiring tax credit, the sales and use tax credit, business expense deduction for business property, net operating loss carryover deduction and net interest deduction for lenders.

“Oroville Vice-Mayor Jamie Johansson and Redevelopment Coordinator Tom Fitzpatrick have already indicated to me that some of the city’s largest manufacturers are so heavily capitalized that they can write off equipment depreciation to the point where they have absolutely no state income tax liability,” said Senator Aanestad. “We have a natural advantage in tax credits that we cannot use – and those credits can be used to create badly needed jobs.”

Senator Aanestad says the Governor has already indicated that jobs and job creation will be the first order of business during this Legislative Session and is hopeful that SB 939 will be received favorably in the Legislature.

“We need to get people working again,” said Senator Aanestad. “This is a positive step that government can take to create the new jobs and businesses that Northern California desperately needs.”

A commentary in the San Diego Business Journal by Dan Dufrense, director of government relations for Epsilon Systems Solutions Inc. (a business that employs people):

Here we go again.

California is strapped with more than $20 billion of deficit, a 12.3 percent unemployment rate and a staggering decline in home values. Faced with these daunting economic indicators, the outlook of the California Legislative Analyst’s Office for the 2010-2011 budget suggested that one way to repair our state’s unfortunate economic plight is to eliminate or reduce the California Enterprise Zone, or EZ, Program. Unfortunately, the Legislative Analyst’s Office’s recommendation will almost certainly hurt, not help, California’s struggling economy.

Through hiring tax credit incentives and manufacturing accelerated depreciation schedules, the California EZ Program encourages businesses to locate in historically economically challenged areas and hire employees who often face high barriers to employment.

Several areas of the country have experienced “corporate flight,” whereby companies relocate from an inner city neighborhood to a suburban community. Detroit and Buffalo, N.Y., are prime examples of how “corporate flight” ultimately results in increased unemployment, chronic homelessness, and elevated crime rates. The California EZ Program was designed to help prevent this type of devastating business exodus and the numbers demonstrate that the program continues to be a great success.

Stimulus For Change

By providing corporate tax incentives and expanding employment opportunities, the California EZ Program continues to transform economically challenged areas into thriving business hubs. National City and Otay Mesa, both of which are located within a California Enterprise Zone, are two local examples of this positive trend. Companies from throughout the San Diego region are now looking to National City and Otay Mesa as viable locations for the expansion of a lasting corporate footprint.

For example, Epsilon Systems Solutions Inc., a government contractor based in San Diego, has two locations in the San Diego Regional Enterprise Zone — one in National City and the other in Otay Mesa. Epsilon Systems’ work is focused on offering technical support for government agencies such as the Department of Defense and Department of Energy. Whether it is pipe fitting, welding or manufacturing, Epsilon Systems’ National City and Otay Mesa facilities draw from the local populous to fill its expanding hiring needs. Epsilon Systems reinvests the tax savings it realizes from participating in the California EZ Program to provide new hires with an abundance of training opportunities.

Tools To Be Competitive

The California EZ Program has also contributed to Epsilon Systems’ ability to offer its employees access to an employer-subsidized medical, dental, life and disability plan, a Stock Ownership Plan, Profit Sharing Plan, and matched 401(k) retirement plan. While other companies are closing their doors, Epsilon Systems has remained competitive.

As lawmakers tackle one of the toughest budget years, they should not be shortsighted and cut back a proven job creation tool. California needs the Enterprise Zone Program now more than ever — by creating good-paying jobs we will take pressure off of government assistance programs and generate more individual and corporate tax revenue to fill the state’s coffers. Enterprise zones help businesses survive and flourish and that is one of the best ways to ensure economic recovery.

Northern California Senator Sam Aanestad has proposed a new bill SB 939 which would allow businesses specifically in the Oroville Enterprise Zone to sell the credits they generate:

SB 939, as introduced, Aanestad. Income and corporation tax credits: Oroville enterprise zone.

The Personal Income Tax Law and the Corporation Tax Law allow a taxpayer to claim certain tax incentives for activities conducted in an enterprise zone, including a credit in an amount equal to the specified percentage of wages paid during the taxable year to a qualified employee, as defined, who is employed by the taxpayer during the taxable year in an enterprise zone.

This bill would authorize the sale of a tax credit by a taxpayer where that credit is attributable to the percentage of wages paid by a taxpayer during a taxable year to a qualified employee employed in the City of Oroville enterprise zone, to an unrelated party.

This bill would make legislative findings and declarations as to the necessity of a special statute for the City of Oroville.

This bill would take effect immediately as a tax levy.

CAEZ is launching a letter writing campaign in support of the Enterprise Zone program. From the CAEZ.org website:

DATED: Wednesday, February 3, 2010

URGENT! State Legislators are discussing possible cuts to or total elimination of the Enterprise Zone Program. Time is critical, decisions will be made within the next few weeks.

CALL TO ACTION - Write Letters to Assembly Member Manuel Perez. As you know, Asm. Manuel Perez held special Enterprise Zone hearings last year and also was a keynote speaker at the CAEZ Training Conference in November. His office is assisting us with coordinating the Save the Enterprise Zone Program campaign. Please forward this information to your local elected officials, your lobbyist and your EZ Businesses. It is especially important that Sacramento hears from businesses of every size. Please ask them to write letters. Because a quick response is needed, we have drafted a sample letter to make it as easy as possible. Click here for the sample letter.

Please send copies of your letters to action@caez.org
Any questions, please call: (530) 830-CAEZ (2239) or email: action@caez.org

On Feb. 2 Arizona House of Representatives Speaker Kirk Adams appeared on the national Hugh Hewitt radio show to discuss what Arizona is doing to create jobs. Listen to the audio here:

The takeaway line is when Rep. Adams says, “We want to take advantage of the problems California is having.”

The Arizona House has just passed sweeping tax cuts for business as described in this article from The Arizona Republic:

Hoping to boost the state’s economic recovery by spurring job creation, House Republicans on Thursday rushed through legislation that cuts taxes and creates other incentives to attract employers.

The vote came over the objections of Democrats, who complained the bill would hike property taxes on residential owners and worsen the state’s budget deficit by cutting taxes without any guarantee of new jobs.

ut House Speaker Kirk Adams, who championed House Bill 2250, said the legislation will broaden Arizona’s tax base and attract manufacturing jobs.

“It is time, it is past time, that we relied only on population growth and housing,” said Adams, R-Mesa.

The bill now heads to the Senate, where President Bob Burns, R-Peoria, said it will wait in the wings while lawmakers tackle the budget.

“It’s second priority,” Burns said of the bill, which he is co-sponsoring. “It is a priority. But our primary problem right now is our budget.”

Burns said he and legislative leaders are working toward a special session, tentatively slated to begin Monday, that would refer a temporary 1-cent sales-tax increase to the May 18 ballot. The three-day session also would include other moves to boost state revenue, such as delaying K-12 and university payments, holding another sale of state buildings to investors and authorizing a new state lottery. The state would then borrow against lottery proceeds.

The Job Recovery Act passed the House on a party line 34-25 vote. Rep. Doug Quelland, R-Phoenix, was the only Republican to break ranks and vote “no” along with the Democrats. He said the bill was too focused on business to the detriment of individual taxpayers.

The wide-ranging legislation includes $250 million in property-tax breaks through the repeal of the state equalization tax and at least $400 million in tax cuts through a 10 percent reduction in the personal income tax as well as a 14 percent cut in the corporate income tax. The reductions would be phased in over four years beginning Jan. 1.

It also contains other incentives, such as tax credits and reductions in the withholding tax, for businesses that meet certain criteria for creating jobs that pay at least a third more than the median wage in a given county. Those incentives would be paid for by the new tax money generated by the jobs.

A “deal-closing fund” would help economic-development officials provide another boost for an employer contemplating a move to Arizona.

Governor Schwarzenegger has been talking about his jobs package and especially his proposal to offer tax credits for “green tech” manufacturing equipment. Yesterday, the Governor held an event at battery manufacturer Quallion to again tout the proposal. The Governor’s website has a transcript of all the speeches, and here is the video of the entire event:

One of the presenters specifically promoted the Enterprise Zone program. Bill Allen, President of the Los Angeles Economic Development Corporation. Here is the video of his remarks:

And I want to thank the Governor in particular for his leadership, unveiling his package of proposals to create more jobs and foster a more business friendly environment for our state. First and foremost, California needs jobs and the Governor well understands it is businesses that create those jobs. In today’s globally competitive economy where businesses can locate anywhere, California must be as welcoming as possible to businesses. The Governor’s package of proposals recognizes that we must establish and promote a business-friendly environment to attract, retain and grow businesses and the jobs and the tax revenue that they bring.

Specifically, this requires that we must not only strengthen our commitment to existing incentive programs in this state, such as our Enterprise Zone Program, which has brought so many jobs throughout the state, particularly to our underserved communities in recent years. But we must build on those incentives to create new tools, such as the Governor’s proposal to eliminate sales taxes on green tech manufacturing equipment as a way to encourage our businesses to locate here, stay here and grow here in California.

Here is the February 2010 edition of the FTB’s “Tax News” newsletter.

Here is a nice news story from NBC affiliate KMIR 6 news in the Coachella Valley:

And here is a related article in the Desert Sun.

From the Sacramento Bee:

In a showdown over generating new tax revenue, the Assembly today passed by a razor-thin margin legislation touted as closing a tax loophole benefiting multinational corporations.

Assembly Bill 1178 targets an exemption for corporations that benefit financially from doing business in California but are able to avoid paying some state income taxes by locating an office outside U.S. boundaries.

Today’s heated floor debate over the bill is likely to be the first of many skirmishes over how best to create, and spend, new revenue at a time when the states faces a potential $20 billion shortfall by July 2011.

To avoid having to pass AB 1178 by a two-thirds supermajority, the bill’s author, Democratic Assemblyman Marty Block of San Diego, offset the measure’s projected tax revenue of about $120 million per with an identical cut in sales taxes for college books and supplies.

Republicans painted AB 1178 as a new burden on businesses, a blow to job creation at a time of economic recession, and an ill-advised attempt by Democrats to sidestep the supermajority requirement for raising taxes.

“What we’re going to do today is live up to our reputation of being hostile to business,” Republican Assemblyman Dan Logue of Linda said in scolding the Democratic-controlled house.

Democratic supporters of AB 1178 countered that it would not raise taxes but simply keep corporations from evading their “fair share” of taxes.

Proponents also characterized AB 1178 as a fair way to pump new money into a cash-strapped college system that is depended upon to train California’s future workforce.

“This is a no-brainer,” said Assemblyman Charles Calderon, D-Whittier.

Because of a split within the Assembly’s Democratic Caucus, AB 1178 failed passage on the floor Wednesday and was approved today by the bare-minimum number of votes, 41-28, after an initial roll call fell three votes short.

Some Democrats objected to tying any revenues earned from the bill specifically to higher education, rather than to medical care for low-income families or to in-home support services for people with disabilities.

Assemblyman Felipe Fuentes, D-Sylmar, said he cast one of the deciding votes for passage only after receiving a commitment that AB 1178 will be amended in the Senate to link its revenues to another high-priority need.

As reported in Capitol Alert:

The Republican governor had his staff install outside his office a repeating video loop of President Barack Obama telling ABC News on Monday, “I can guarantee that the worst thing we could do would be to raise taxes when the economy is still this weak.” The display is in a case titled “State of California,” next to the displays for California counties in the State Capitol.

Here is the transcript from Diane Sawyer’s interview on ABC:

SAWYER: To all the people terrified about the deficit, $1.5 trillion more this year than taken in expected next year. Can you guarantee them still that there will be no taxes on anybody who makes under $250,000 a year? That’s still the absolute rule?

OBAMA: I can guarantee that the worst thing we could do would be to raise taxes when the economy is still this weak.

San Diego ABC affiliate 10 News reported on the potential fate of the Enterprise Zone program in the current budget mess.

Here is the video of the televised report:

Here is the accompanying story:

SAN DIEGO — A program that has put almost 2,000 San Diegans to work could be eliminated by the state in order to save money, 10News reported.

Alex Bratter is happy he found a job when he left the U.S. Navy, especially when so many veterans are unemployed.

“You know, they spend a year or so looking for a job and there’s just no real advantage except for the weather to be here,” said Bratter, who now programs electronics for Navy submarines for Epsilon Systems in Otay Mesa.

Epsilon received up to $37,000 in tax credits for hiring Bratter as part of the state’s Enterprise Zone program. The program credits companies for hiring veterans, recently unemployed workers or people living in low-income areas. More than 1,800 San Diegans have been hired through the program. The program also rewards businesses for operating within the “Enterprise Zone,” which includes parts of San Diego, National City, Chula Vista and San Ysidro.

Alejandra Mier y Teran of the Otay Mesa Chamber of Commerce told 10News, “I mean, from $100,000 to $20,000. Really, there’s no limit.”

“We’re able to hire more people, generate more jobs and create a direct benefit into the community here in Otay Mesa,” said Dan Dufresne of Epsilon Systems.

Unfortunately, other companies may not be able to do the same because the state could eliminate the program to balance this year’s budget.

“It’s not a good idea, certainly not a good idea for Epsilon Systems and it’s not a good idea for the state in general,” said Dufresne.

E&E Enterprises in Chollas View received more than $60,000 in tax credits that allowed them to purchase new vehicles for their mechanics.

“And it was just like a jolt of income and interest and pride in our company,” said Vicki Garcia-Golden of E&E Enterprises.

If the Enterprise Zone Program goes away, millions in tax credits could be lost for local businesses and veterans like Bratter may be forced to look elsewhere for work.

“Right there, so many people would want to move away,” said Bratter.

Gov. Arnold Schwarzenegger has not included the Enterprise Zone Program in his budget cuts.

However, a bill has been introduced in the state Assembly that could diminish or eliminate the program.

There is an educational item in Capitol Weekly by John Howard examining the issue of how various things are “scored” for their value in the State budget. Very often items are deemed to be worth one thing for the purpose of the budget, but turn out to be worth a very different amount in reality:

The use of funny money is not new. Earlier administrations did the same thing.

One memorable example: The sale of Agnews State Hospital in the Silicon Valley, scored in successive budgets as a revenue producer, finally was sold. “It was a classic. They must have scored Agnews seven times before it sold, and each time it went up and got more valuable,” said one fiscal expert familiar with the issue. The 81-plus acres finally sold for $51 million in the mid-1990s.

The administration several months ago sought to sell off a piece of the State Compensation Insurance Fund to capture $1 billion, a move that fiscal analysts in and out of government said was poorly thought out and unworkable even before the ink was dry on the proposal. Workable or not, the sale can’t go proceed now because of litigation.

“We were ready to go forward and have been prepared to go forward, but there is a lawsuit challenging the ability of the state to do so,” Palmer noted.

The governor, several times, inflated the level of tribal gaming revenues on the General Fund by potentially hundreds of millions of dollars. He fruitlessly sought to privatize the Ed Fund – the repository of student-loan payments – and wildly overestimated its value at $1 billion.

He sought to privatize the lottery, unsuccessfully, despite expert advice that the move was not feasible, and earlier in his governorship he factored $450 million in revenue into his spending proposal based on the state’s projected share of punitive damage award dollars – money that never arrived. An LAO assessment at the time estimated the state’s potential take at $60 million – less than a one-seventh the figure predicted by Schwarzenegger. But even that estimate was wildly optimistic.

He sought to sell and then lease back state office buildings, and scored the savings at $300 million; the plan died, but is in the works again this year, probably closer to $200 million In his latest budget, he wants to save perhaps $200 million by releasing imprisoned, undocumented immigrants because the federal government isn’t paying fore their incarceration.

He had counted on $100 million a year from a hotly contested offshore oil-drilling project that has been turned down by the State Lands Commission, thrice opposed by his own choice for lieutenant governor, Sen. Abel Maldonado, R-Santa Maria, and disliked in the Legislature. The administration would like to see the project reconsidered and approved by the State Lands Commission, or given the go-ahead in a bill approved by the Legislature. Last year, legislation to do that made it through one house.

One plan, to receive upfront a share of tobacco settlement money due to California did work out. It remains an example of successful, creative financing, worth more than $1 billion.
“Some of these revenue proposals have worked out but lots of them haven’t, based on either being too optimistic or too complicated for the state to ultimately pull them off,” said Michael Cohen, deputy legislative analyst.

When evaluate recommendations to eliminate the Enterprise Zone program and use those funds for something else, it is important to keep in mind that there is no bank account with funds sitting in it for the EZ program. Since the “cost” of the program is a function of how much less in taxes profitable companies will be paying, it should be very difficult to get an accurate “score” for the budget, especially in a down economy. If the loss of an Enterprise Zone results in the loss of businesses and jobs, it’s likely to cost the budget much more revenue than it gains.

From The San Bernardino Sun:

To strengthen “green” manufacturing in California, Gov. Arnold Schwarzenegger has introduced a plan to make businesses that make clean technology exempt from paying sales tax on their equipment.

Although some experts agree that it is a first step in jump-starting the state’s manufacturing industry, more incentives may need to be considered.

The proposal is one of five components to Schwarzenegger’s California Jobs Initiative to create jobs and expand business in the state.

“This will help California attract and retain green businesses and jobs like this,” Schwarzenegger said. “It will help us create jobs for the future. If it is in the area of developing alternative fuels or building solar panels or building wind turbines or building clean cars, in all of these areas it will be very helpful.”

In 2009, an agreement was made with Tesla Motors and the California Alternative Energy and Advanced Transportation Financing Authority to give them exemption from paying sales tax on the equipment they purchase to produce zero-emissions vehicles.

The governor’s proposal will expand the Tesla exemption to include other advanced transportation, renewable energy and green-technology projects.

This will be based on a bill by Assemblyman Sam Blakeslee, R-San Luis Obispo. The bill is expected to be introduced to the Legislature next month, according to members of Blakeslee’s staff.

State Sen. Bob Dutton, R-Rancho Cucamonga, said he agrees with the exemption, but the term “green” is vague.
“This whole idea is great, but define `green’ for me,” Dutton said. “I’m fine with the program, but I personally would have a sales-tax exemption on all manufacturing equipment, green or otherwise. I don’t care what color it is.”

California has lost 600,000 manufacturing jobs since 2000, which equals 32 percent of the state’s industrial base, according to the California Manufacturers and Technology Association.

California is one of the only states in the country that taxes manufacturing equipment purchases, association spokesman Gino DiCaro said.

“As for today, certainly green sales-tax exemption is helpful, but 47 other states don’t tax the purchases at all,” DiCaro said. “They don’t necessarily pick and choose select industries. They understand that economic growth and active production is needed.”

DiCaro said the association would like to see all manufacturing equipment purchases in California exempt from sales tax, not just “green” technology manufacturers.

Economically distressed areas have been designated “Enterprise Zones,” offering businesses in those areas incentives to encourage investment and promote the creation of new jobs, according to the program’s Web site.

Enterprise Zones started in 1984, and no more than 42 zones may be created in California.

Parts of San Bernardino County are in such a zone, and businesses receive incentives and tax credits.

Blakeslee’s staff expects the new exemptions to apply within the zones as well as the rest of the state.

Brithinee Electric, a Colton- based company that specializes in electric motors and control-panel systems, is in an Enterprise Zone and already gets sales-tax refunds on the equipment it buys.

“The sales-tax rebate or refund is a modest incentive to us. It is a slight incentive but is not enough to make us go out and say, `We’re going to buy a lot of equipment based on that,”‘ said Wally Brithinee, who owns the company with his brother Donald.

The company has also ventured into the clean and renewable energy field, specifically wind turbines.

Wally Brithinee said he is unsure how the new exemption for “green” technology would work because his company already receives tax incentives.

“Is it enough to make you go out and buy another piece of equipment or add production or add employees?” Brithinee said. “There are other issues in the economy that are more troubling for us.”

Joe Mendoza, founder of Ontario-based Revvo Lighting Systems, which designs and manufactures solar and induction lighting, said he supports incentives to generate more revenue. But customers have to be willing to buy his product to make the incentives worthwhile.

“You could put whatever you want on the table. If I don’t get people to buy my product, I can’t manufacture it, and right now people aren’t spending money,” Mendoza said.

Schwarzenegger outlined two more components to his California Jobs Initiative. The first would allocate $500 million from the Unemployment Compensation Disability Fund to train up to 140,000 people and create up to 100,000 new or retained jobs. He also proposed a $10,000 tax credit to people who buy homes in California.

Assembly Member De La Torre has just introduced AB 1657 to create an Enterprise Zone in the City of Downey:

7073.2. (a) Notwithstanding any other law, the department shall, upon application by the Downey City Council, designate one enterprise zone within the geographic area of the City of Downey pursuant to this section.

(b) For purposes of applying any provision of the Revenue and Taxation Code, the enterprise zone designated pursuant to this section shall be deemed to have been designated pursuant to this chapter.

(c) The enterprise zone designated under this section shall not be included in the calculation of the overall number of enterprise zones authorized under this chapter.

SEC. 2. Due to the unique circumstances of the City of Downey, with respect to the need for sustained employment and business development in the area, the Legislature hereby finds and declares that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution. Therefore, the special legislation contained in Section 1 of this act is necessarily applicable only to the City of Downey.

SEC. 3. This act addresses the fiscal emergency declared by the Governor by proclamation on December 19, 2008, pursuant to subdivision (f) of Section 10 of Article IV of the California Constitution.

The Salinas Valley Enterprise Zone has been at the forefront of trying to use the Enterprise Zone as a tool to help its community’s gang problem. As reported in The Californian, this approach is being formalized in a new local program:

Paul Edmond of Salinas wants a job, but says he wants a safer Salinas even more.

So Edmond says he has no problem with the new Ceasefire program, which aims at reducing violence by giving gang members better employment opportunities and job training. Even if it means giving up a chance at a job for himself.

“You got to think about the kids,” Edmond said Tuesday outside the Monterey County Department of Social and Employment Services’ One Stop Center on South Main Street. “[Giving Ceasefire participants jobs] would be a good thing, because it stops gang members from committing violence.”

The new initiative gives gang members an ultimatum: Give up their criminal ways — and accept help finding jobs — or face prosecution and hard time.

Today, at least 10 large businesses in the Salinas Valley will hear a presentation by Salinas police and other officials about the potential benefits that Ceasefire can bring to prospective employers.

Those attending the meeting are expected to obtain more information on the potential benefits of participating, including tax credits and subsidies that cover part of a participant’s salary. The presentation will be held at Sysco Food Service, 1622 Moffett St., but is not open to the public.

Andrew Myrick, manager of the Salinas Valley Enterprise Zone, said eligible businesses taking part in Ceasefire could benefit from state-funded tax credits that pay up to 50 percent of employees’ wages. To qualify, however, the businesses must lie in the enterprise zones of Salinas, Gonzales, Greenfield or King City.

Ceasefire participants must also fulfill one of 18 criteria before their employers can receive the tax credit.

Salinas has been designated as one of 42 California Enterprise Zones and a targeted employment area, allowing its businesses to become eligible for “hiring tax credits.”

Salinas Mayor Dennis Donohue has said the city reached out to about 10 of the city’s largest employers, including Salinas Valley Memorial Healthcare System, HSBC credit services and major agricultural companies.

HSBC is declining to comment about any involvement in Ceasefire, spokesman Neil Brazil said Tuesday.

While some businesses support the program, representatives said they need more information before they can decide whether to participate.

Adrienne Laurent, spokeswoman for SVMH, said the hospital is sending a few representatives today to the Ceasefire presentation. According to hospital policy, however, SVMH cannot directly employ any Ceasefire participants who have a criminal background.

“We certainly support the mayor’s efforts to build a safer community,” she said. “That’s definite.”

Lorri Koster, co-chairwoman of Salinas-based agricultural company Mann Packing, said the company supports the city’s goals. At least one Mann representative will attend to hear officials’ message, Koster said.

She said it’s important that businesses help efforts to reduce gang violence in the city.

“There is a stigma that this is not a safe community,” Koster said. “[We have to be] willing to do our part, to step up and try to fix it. You can’t just sit back and do nothing — you can’t.”

That doesn’t mean any jobs will necessarily be forthcoming during the winter season, when the agricultural labor market is as dormant as the Salinas Valley fields.

“We want to help,” she said. “Unfortunately, we are laying off employees right now.”

Some residents, according to comments left on The Salinas Californian’s Web site, oppose giving gang members a helping hand in this manner — frustrated that scarce jobs will go to criminals instead of law-abiding citizens.

Others said that while Ceasefire is a good program, they are skeptical it can succeed during an economic climate with high unemployment. Salinas’ jobless rate reached 17 percent in November.

“I think it is OK for them to get jobs to keep them busy, but it is hard because we would have to trust them,” said resident Jasmin Reyes, interviewed in east Salinas on Wednesday.

Still, after the city’s record-breaking 29 homicides last year, some are ready to support any efforts at progress.

“I think it’s worth trying,” said resident Jenny Lopes at an Oldtown Salinas coffee shop, but added that unemployed people who aren’t involved with gangs should have a fair chance at finding work.

The headline given to Dan Walter’s column in yesterday’s Sacramento Bee was “Schwarzenegger’s job programs same old stuff.” In the piece Walters suggests:

Even when there are evaluations that question the efficacy of “job creation” subsidies, those who benefit from them resist any effort to erase them.

A case in point are the several dozen “enterprise zones” that local governments created with state permission. In theory, employers locating within the zones receive various tax breaks for hiring the unemployed. In fact, the loopholes cost the public treasury about a half-billion dollars a year, or just about what Schwarzenegger wants to spend on his new scheme.

Last year, the Public Policy Institute of California released a landmark study of California enterprise zones, saying that despite their cost, they generated “no statistically significant effect on employment.”

“The state can ill-afford to continue the enterprise zone program without clearer evidence of its benefits or a well-defined plan to make it more effective,” Jed Kolko, co-author of the PPIC study, said.

And what was the response? Schwarzenegger’s administration shortly thereafter authorized creation of new enterprise zones and the business community launched a public relations drive to support the program.

Here’s a novel thought: If Schwarzenegger and the Legislature want to give new subsidies to employers for jobs that would cost $500 million, why don’t they pay for it by erasing an enterprise zone program that already costs $500 million and isn’t working?

The choice of headline is ironic, since Walters himself is just repeating the “same old stuff.” Back on November 9 Walters wrote a piece using the PPIC study to blast the Enterprise Zone program. There was a good amount of reaction to this article: From USC Professor Chuck Swenson, in the Sacramento Bee by CAEZ President Craig Johnson, and from Deidre F. Kelsey, chairwoman of the Merced County Board of Supervisors in the Merced Sun-Star.

I’m in Sacramento this week, and it is very clear that folks in the Capitol read Dan Walters. It’s a shame that Walters doesn’t take his analysis seriously enough to deal with some of the very good points made on the other side of the argument.

At yesterday’s meeting, the CAEZ Board received an update from HCD’s John Nunn. The first piece of good news is that HCD has added one new staff member to work with the Enterprise Zones, they are still looking at candidates to fill two more positions.

Mr. Nunn reported that they are receiving a fair number of applications from zone for expansions, and that some of these applications are pushing the envelope of acceptability. He said that we should expect to see a management memo detailing the guidelines for expansions. He also said that there are another four management memos on a variety of policy issues in the works to be released in the near future.

There are two zones that will be expiring over the next year. HCD is placing a significant focus on releasing a new application to streamline the next round of new zone applications. Based on feedback they have received, Mr. Nunn anticipates that with only two slots open, there will be intense competition. The new application is scheduled to be released on Feb. 15 and they will be due on Aug. 15 with new zone announcements some time in October or November 2010. HCD anticipates that there will be a series of workshops about the application at locations around the State.

Vouchering workshops in the the works as well as “new zone orientations” for the four new zones that will be receiving designation shortly. In fact, Mr. Nunn explained that Hesperia is very close to receiving its final designation and the others will follow close behind.

From The Wall Street Journal:

Northrop Grumman Corp. said Monday it plans to move its headquarters to the Washington, D.C., area from Los Angeles, marking the departure of the last major aerospace firm from the industry’s birthplace in Southern California.

The shift will put Northrop’s top executives near its biggest U.S. military and intelligence customers and the congressional holders of the military’s purse strings.

“We are a global security company and when you look at where our largest customer base is located, it’s in the Washington, D.C., region,” said Wesley Bush, Northrop’s chief executive and president. Mr. Bush took over as CEO on Jan. 1.

The company will relocate about 300 jobs, though it will still have more than 20,000 employees in the Los Angeles area, according to local officials.

Still, Northrop’s move underscores a broader struggle for Los Angeles: It is the nation’s second-largest city with 13 million people in its metropolitan area, but has suffered a growing exodus of corporations. In addition to defense and aerospace industries, there has been a steady erosion of its other iconic trade, the movie business, as states lure away film productions with rich tax incentives.

In a fascinating interview with Capitol Weekly’s Anthony York, the new Assembly Speaker equates restructuring the Enterprise Zone program with job creation:

Other than the budget, what’s on your priority list?

I came up here to do job creation stuff, and last year was a really bad year for that. I have a bill that looks at restructuring the way we use enterprise zones. I think we under-utilize the half-a-billion dollars a year we have in enterprise zones, to leverage for new jobs that wouldn’t otherwise exist or maintain jobs that otherwise would leave.

Here is the January 2010 edition of the FTB’s “Tax News” newsletter. It includes this item about the Enterprise Zone Program:

In our June 2009 issue of Tax News we asked the question, “Are you familiar with California’s Enterprise Zones?”

We now ask, “Are you aware some taxpayers who work in an Enterprise Zone may be entitled to a credit for the wages they earned?”

The Enterprise Zone tax incentive programs were created to help local businesses, and encourage outside businesses to locate in economically depressed areas. Also, the programs have a provision that allows low income individuals working within an Enterprise Zone to claim a credit that may help eliminate their California tax liability.

The Enterprise Zone Employee Credit is five percent of the wages attributable to employment within an enterprise zone up to $10,500. The maximum credit per zone is $525. The Enterprise Zone Employee Credit is reduced by nine cents ($0.09) for every dollar the taxpayer receives in excess of $10,500 and any unused credit is lost (no carryover is allowed).

The Enterprise Zone Employee Credit is claimed on form FTB 3553 and the taxpayer must file a Form 540 or the Long Form 540NR to claim this credit. The Enterprise Zone Employee Credit can only be used to offset the tax attributable to employment within the enterprise zone. If a taxpayer earned wages in more than one zone, a separate form FTB 3553 is needed for each zone.

The following business-related tax incentives are also potentially available to a taxpayer doing business in an Enterprise Zone, so you may want to see if your clients are doing business within one of the state’s many Enterprise Zones.

Hiring credit.
Sales or use tax credit.
Business expense deduction.
Net interest deduction for lenders.

Enterprise Zone tax incentives apply only to business activities and investments that take place in an Enterprise Zone that has received final designation.

While these Enterprise Zone incentives have been around for quite some time, there have been recent changes to the zones.

For a listing of all Enterprise Zones, expired, active and conditional, or to check if any of your clients work or have a business located within an Enterprise Zone, go to the California Department of Housing and Community Development (HCD) website at www.hcd.ca.gov/fa/cdbg/ez/.

For more information on the Enterprise Zone incentives and the Enterprise Zone Employee Credit, please call our Enterprise Zone Hotline at 916.845.3464.

I think there is a mistake here. The article state, “Enterprise Zone tax incentives apply only to business activities and investments that take place in an Enterprise Zone that has received final designation.” However, AB 1550 explicitly enabled taxpayers to utilize the benefits of the program even before a conditionally designated zone receives its final designation:

Section 7074.2(c) Notwithstanding any other provision of law, an expiring enterprise zone that applies for a new enterprise zone designation pursuant to Section 7073 or 7073.1, and receives a conditional designation letter from the department, may offer, and a taxpayer doing business within the geographic boundaries of the new zone referenced in the conditional designation letter shall be eligible to receive, all enterprise zone benefits until the department makes a final designation or declines to redesignate the zone. The department shall make the effective date of the new zone the date of expiration of the previous designation and the term of the new zone shall begin on that date.