Valley Business Leaders Fight Enterprise Zone Changes

The California Enterprise Zone program’s hiring tax credit could be stripped down, causing local business organizations to ban together against the bill that would make the change. On June 3, the State Senate passed Senate Bill 974, which would replace part of the zone’s hiring tax credit with the Career Pathways Investment Credit. The new credit would offer incentives to businesses for partnering with local education agency programs to provide job skill training for youth. The bill, introduced by Senate President Pro Tem Darrell Steinberg on Feb. 8, would narrow the eligibility criteria of hard-to-hire employees, such as ex-offenders, that a business could claim for the hiring tax. It would also eliminate retro-active vouchering for the credit and would remove the credit’s focus on targeted employment areas. The bill is now being considered by the State Assembly’s Committee on Jobs, Economic Development, and the Economy. If passed by the Assembly, the bill would take effect Jan. 1, 2011. Meanwhile, business organizations in the San Fernando Valley are joining a coalition of groups against the legislation, which they say will hurt local businesses and discourage economic growth in an already tough economy. “Taking away the enterprise zone (hiring tax credit) or altering it in any way would be a deathblow to keep businesses in California,” said Bruce Ackerman, president and CEO of the Valley Economic Alliance. “We’ve been dealt a nasty hand just in the fact that this is the most expensive state to do business in.” Jobs or training? VICA President Stuart Waldman said the shift to an education credit distracts from what will best serve the economy. “The economy needs jobs, not training for jobs,” Waldman said, adding that limiting the hiring tax credit would especially affect individuals in economically distressed areas. “When (businesses) make the decision to move into an enterprise zone, they’re taking a chance,” he added. “They’re hiring individuals that they wouldn’t otherwise normally hire. … That business will create jobs and then pump money into the local economy.” Both organizations are planning to meet with state legislators and recruit business owners to testify how they have been benefited by the hiring tax credit. The drive behind the move to scale back the hiring tax credit is largely based on studies that have determined the hiring tax credit to be ineffective. The bill cites findings of a study conducted by the Public Policy Institute of California, which state that the enterprise zone’s tax credit program has not led to overall improvement in job creation or the employment of hard-to-hire individuals. “This is really a way of putting an ineffective tax credit to a better use in creating a new tax credit that would encourage California-based companies to team up with local middle and high schools,” said Alicia Trost, Steinberg’s press secretary. The change would also help address problems with California’s steep school dropout rates, she added. Ackerman called the study flawed. “Anyone who’s familiar with how tax incentives work could pick that study apart,” Ackerman said, adding that it appeared to use a limited selection of businesses. He also said the study used very “out-of-the-ordinary” examples of businesses that did not use the tax credit correctly. Trost said the institute’s report was a comprehensive study that compared all enterprise zone areas to non-enterprise zone areas. The consideration the change was also based on numerous other studies that show similar findings, she added. Trost said the proposed legislation is part of the Agenda 2010 plan, a package of 27 bills presented by the Senate’s Majority Caucus that focus on job creation in California. Supporters of the bill include the Los Angeles Unified School District, California Regional Occupational Centers and Programs and other education-related organizations, according to the bill’s analysis report. Opponents listed on the report include VICA, California Taxpayers Association, California Chamber of Commerce and numerous industry organizations.