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HomeMy WebLinkAbout2013-05-14 - AGENDA REPORTS - ENTERPRISE ZONES (2)CONSENT CALENDAR DATE: SUBJECT: DEPARTMENT: Agenda Item• 4 CITY OF SANTA CLARITA AGENDA REPORT City Manager Approval: Item to be presented by: May 14, 2013 7�/ - -24��4 2 Michael P. Murphy STATE LEGISLATION: ENTERPRISE ZONES City Manager's Office RECOMMENDED ACTION City Council approve the recommendations of the City Council Legislative Committee: 1. Adopt an "oppose" position to administration or legislative efforts to eliminate the Enterprise Zone program in California. 2. Adopt a "support" position for administrative action or legislation which seeks to reform or enhance the Enterprise Zone program to make it more effective or increase participation by businesses located within the Santa Clarita Valley Enterprise Zone. BACKGROUND There are currently 40 Enterprise Zones designated throughout the State of California. The central purpose of the program is to provide incentives for employers within the zones to hire individuals with barriers to employment. Some general categories of persons identified as having "barriers to employment" include: economically disadvantaged individuals, disabled individuals, dislocated workers, ex -offenders, individuals eligible to receive public assistance, and persons residing within targeted employment areas. In 2007, the State of California designated areas within the City of Santa Clarita as an Enterprise Zone. In 2010, the original zone designation was terminated and a new Santa Clarita Valley Enterprise Zone was established, including both incorporated and unincorporated areas of the community. The local Enterprise Zone term runs through January 1, 2026. Supporters of the Enterprise Zone program believe that it is one of the few remaining incentive programs designed to attract and retain businesses in California. For example, many California F E I manufacturing businesses, including some in Santa Clarita, are regularly contacted by economic development interests in other states offering generous incentives for relocating to their communities. The incentives offered under the Enterprise Zone program often mean the difference between the businesses remaining in California or relocating to another state. Additionally, local businesses participating in the program acknowledge that they are able to hire new employees, retain current employees, and invest in capital equipment as a result of the tax incentives received under the program. The Santa Clarita Valley Enterprise Zone is demonstrating success. In 2012, 201 employers participated in the Santa Clarita Valley Enterprise Zone program. In addition, 381 local employees were qualified for the Enterprise Zone program under New Job Creation, with an additional 1,420 local employees qualified under Employee Retention Efforts. Over the past two years, Governor Edmund G. Brown, Jr., has sought to eliminate the Enterprise Zone program. Governor Brown argues that the tax incentives offered by the state do not, on the whole, lead to the creation of new jobs in California and actual job retention is difficult to quantify. He notes that some employers within Enterprise Zones are hiring new employees without being aware of the program and take advantage of the program after the fact, without the program having been a factor in the hiring decision. The Governor also expresses concern that some California companies are moving from areas without Enterprise Zones to other areas within California that do have Enterprise Zones, thus benefiting from the tax incentives, while not creating any new net California jobs. It is acknowledged by the California Association of Enterprise Zones, the League of California Cities and legislative supporters of the program that reforms are needed to some parts of the program. For example, current law allows for an employer to claim a tax credit up to four years after a qualifying employee is hired. Reform advocates acknowledge that a shorter time period of between 12-24 months is more appropriate. Assembly Member V. Manuel Perez (D -Coachella), a longtime supporter of the Enterprise Zone program, has authored a number of bills over the years, aimed at reforming and improving the program. This year, he has introduced Assembly Bill 28. There are several other bills that also deal with program reforms and enhancements. City staff has been working with the Santa Clarita Valley Chamber of Commerce and Santa Clarita Valley Economic Development Corporation to ensure that state legislators, California Association of Enterprise Zones and League of California Cities are aware of the local impacts of the California Enterprise Zone Program, as well as keeping them updated on the recent audit of the Santa Clarita Valley Enterprise Zone. It is widely anticipated that Governor Brown will include proposed Enterprise Zone legislative or regulatory reforms, or possibly total program elimination, as part of his state budget May Revise. As the Governor's approach has not yet been announced and as there are a number of bills in the Legislature currently dealing with Enterprise Zone issues, the City Council Legislative Committee is recommending that the City Council adopt broader policy concepts to allow for more timely reaction to anticipated proposals and legislative actions. At their meeting of April 19, 2013, the City Council Legislative Committee voted to recommend the following to the City Council: 1. Adopt an 'oppose" position to administration or legislative efforts to eliminate the Enterprise Zone program in California. 2. Adopt a "support" position for administrative action or legislation which seeks to reform or enhance the Enterprise Zone program to make it more effective or increase participation by businesses located within the Santa Clarita Valley Enterprise Zone. ALTERNATIVE ACTIONS 1. Take no position on Enterprise Zone program administration actions or legislation 2. Support elimination of Enterprise Zone program throughout California 3. Refer the issue back to the City Council Legislative Committee 4. Other actions as determined by the City Council FISCAL IMPACT No additional resources beyond those already included in the adopted FY 12/13 City budget are required for implementation of the recommended action. 3