NR-233-Enterprise Zone__Op_Ed

Enterprise Zones… Too Valuable to Cut

Working for a leading California economic development organization, I am often asked about the state of our economy and my thoughts on how we can get it back on track. Clearly, this is a top concern to citizens here in California and across the country.

We’ve seen a recent federal housing bill, federal bank bailouts, and a lot of posturing on how to improve the economy from elected officials in Washington, D.C. as well as from those campaigning for elected office. No question that with the struggling economy, steep energy prices, and dramatic job declines, our federally-elected officials must support policies that spur business growth and stimulate the U.S. economy.

Like their federal counterparts, our state officials need to enact policies that support economic development and growth. Similarly, state leaders must safeguard successful programs that have been shown to generate jobs, reduce poverty levels and support local economies – this must be part of any rational stimulus program.

So why then would our state legislators be considering phasing-out or suspending the California Enterprise Zone program, which for almost 25 years has proven invaluable to creating thousands of jobs, decreasing poverty, and revitalizing entire communities?

This is not a program that should be cut to help manage our state’s budget crisis. Just the opposite. Even so, due to the current state budget deficit, the program is under fire in Sacramento and may face severe reductions or outright elimination without swift intervention.

In these hard economic times, the California Enterprise Zone Program plays a key role in revitalizing economically-challenged areas of the state, encourages development in blighted neighborhoods and creates economically-stable communities by embracing entrepreneurship and private sector market forces to stimulate local economies. California’s Enterprise Zones remain one of the only dependable statewide tax incentives that local areas can use to encourage businesses to stay or locate in-state.

These zones provide tax incentives for businesses in economically-distressed areas to hire workers who face barriers to employment. Returning veterans, laid-off workers, government assistance recipients and other physically, mentally and economically-challenged job seekers are all eligible for preferred hiring in Enterprise Zone regions. What’s more, the working poor (single taxpayers making less than $16,334 or joint filers making less than $32,668) employed at an Enterprise Zone business can obtain a state tax credit of up to $525 per year.

The program’s success rate is undeniable. It has been fairly well-publicized that Enterprise Zones perform dramatically better than their surrounding areas after designation. In fact, a recent Department on Housing and Community Development report confirmed that California Enterprise Zones have outperformed the rest of the state in several key areas: poverty decreased by 7.35 percent more than in the rest of the state, unemployment rates fell by 1.2 percent more than the rest of the state, household incomes grew 7.1 percent faster, and wages and salary levels increased 3.5 percent more than the rest of the state.[*]

Here in Los Angeles County, we have nine Enterprise Zones that deliver numerous benefits for employees and employers and create economic growth and stability. These zones have been instrumental in helping attract and retain scores of businesses in areas that would not ordinarily have the capacity to do so.

In L.A. County, zones range from economically-depressed urban environments in the cities of Los Angeles and Long Beach to the more rural locales of the Antelope Valley and Santa Clarita. Without an Enterprise Zone designation in these once neglected communities, opportunities for local residents to achieve financial security and self-sufficiency would have vanished. That’s not to mention the social benefits which would have been lost to these communities; indeed, I don’t know of a more successful social program than providing someone with a well-paying job.

Terminating or suspending the Enterprise Zone Program to meet state budget cuts would be exactly the wrong prescription for fixing our ailing economy. Eliminating these zones would almost certainly make things worse in already stressed areas, which would suffer further job losses, economic decline and diminished quality of life.

If anything, the state should strengthen its commitment to the Enterprise Zone Program in these difficult economic times as a key mechanism to revitalize economically-challenged areas by providing incentives that create high-wage jobs and investment in these communities. By responsibly doing so, state officials would not only strengthen local economies, but strengthen the state’s long-term economic foundation as well.

Too many of our state and local residents desperately need jobs. Until such time when this is no longer the case, there will always be a critical role for Enterprise Zones. This is one program our elected officials cannot ethically afford to eliminate.

William “Bill” Allen

President and CEO, LAEDC

[*] Enterprise Zone data from: “Report to the California Department of Housing and Community Development on Enterprise Zones”, Nonprofit Management Solutions and Tax Technology Research, LLC, California Department on Housing and Community Development (HCD), dated: 2006.