Since their advent in the mid-80s, enterprise zones have sparked economic development. But, in some cases, these geographic areas that provide companies a litany of tax breaks have also granted corporations a chance to game the system.
San Jose became an enterprise zone in 1986, among the first in California, and it’s now looking to oppose legislation to eventually eliminate the classification and instead support a reform bill.
Lawmakers created enterprise zone designations in 1984 to spur job growth, encourage business in economically embattled communities and help disadvantaged groups, like military veterans and welfare recipients, find work. Over time, that purpose became corrupted, say state Senator Jerry Hill (D-San Mateo), who introduced legislation this session that aims to close loopholes in the enterprise zone system.
Instead of helping those who need it, the program has turned into a multi-million dollar giveaway, with tax experts helping corporations get the most from the state at the expense of workers, according to critics.
Hill’s SB 434 proposes reforms that would sunset the zones by 2019, change the formula for calculating tax credit to make it less profitable the first year and focus job credit on just new hires.
The revisions proposed by Hill would hurt current users of enterprise zones “and reduce the benefit for small businesses who generally are cash-strapped in the start-up or early years,” says San Jose’s Economic Development Director Kim Walesh.
California has 40 such zones “in which companies receive a myriad of tax breaks—even when they don’t create new jobs,” Hill says. The largest, a hiring credit, cost the state $700 million this year. Costs are projected to grow by about 30 percent annually.
The city has long benefitted from enterprise zones, Walesh argues, despite the abuses and cost that led Hill and other lawmakers to recommend reform or doing away with them altogether.
These cloisters have “been an invaluable tool for economic development to retain and stimulate business activity in San Jose,” according to a memo Walesh submitted to the Rules and Open Government Committee for Wednesday’s agenda,. The memo opposes Hill’s bill and endorses AB 28, which was authored by Assemblyman Manuel Perez (D-Coachella). Walesh asks the Rules Committee to rally support for the bill, which proposes enterprise zone reforms over elimination.
San Jose’s zone, one of the state’s smallest, has helped more than 1,000 businesses and doled out more than 20,000 voucher certificates, Walesh writes. Most recently, it offered the zone’s $37,000-per-hire tax break to lure in Samsung to set up its North American headquarters here in San Jose.
Perez argues that it’s especially important to preserve enterprise zones given the dissolution of Redevelopment Agencies (RDA).
Read Manuel Perez’s AB 28.
Read Jerry Hill’s SB 434.
• A group of homeowners asked the city to stop sending certified mail related to petitions for rent increases, according to the public record. Certified mail costs too much and becomes a hassle if the receiver misses the delivery and has to go to the post office to sign for it, says Homeowners Organized to Maintain Equity (HOME, naturally).
The group estimates the city spent $4,900 on certified mail informing the folks at Colonial Mobile Manor of a public hearing on rent increases last year. Yikes.
But email’s out of the question, apparently, since people reported problems last year with electronic notices, like messages getting diverted to spam folders, and other technical difficulties.
• Instead of replacing a pedestrian bridge at Three Creeks and Los Gatos trails, the city should look at how much it would cost to simply fortify the Willow Glen trestle, according to Councilman Pierluigi Oliverio.
Oliverio suggests that the City Council renege on a unanimous March vote to replace the bridge in his Willow Glen district, and instead commission a second engineering survey. The move could save the city some of the $1.67 million grant allocated to upgrade the bridge and the trails it connects.
WHAT: Rules and Open Government Committee
WHEN: 2pm Wednesday
WHERE: City Hall, 200 E. Santa Clara St., San Jose