By: Stuart Waldman
The announcement of Gov. Jerry Brown’s budget proposal set off panic alarms throughout the business community. A key portion of the plan is a historic restructuring of the state and local government fiscal relationship that would eliminate state enterprise zone tax credits and community redevelopment agencies.
Reorganizing the current funding structure leaves local governments responsible for bearing the financial burden of many more services without the support of state dollars. We do not yet know the extent of the detrimental effects this proposal could have on local governments, but we do know the consequences are particularly dire for business.
The loss of these important economic stimulators would be a substantial blow to the business community. Both programs are vital to companies and the community as a whole by helping to reinvigorate blighted neighborhoods and boost the economy.
VICA recently worked with other business groups and the City of Los Angeles to expand local enterprise zones so that more Valley communities could reap the benefits of targeted economic investment. During the past year, state enterprise zones were expanded in the San Fernando Valley, East Los Angeles and the area surrounding LAX; resulting in the creation and retention of 4,000 jobs in the City of Los Angeles.
Unfortunately, this is not the first time valuable enterprise zones have been under scrutiny by the state. Last year, a bill by Senate President Pro Tem Darrell Steinberg (SB 974) threatened to strip the program of all the components that make it successful. Ultimately, the bill was defeated and enterprise zones have been allowed to continue creating jobs and improving local economies.
Some of the benefits businesses receive for operating in state enterprise zones include hiring tax credits, reduced utility rates, tax credits on the purchase of machinery and equipment, lending benefits and priority bidding on state procurement contracts. In return, blighted communities are revitalized and local jobs are created in areas where investment would have been unlikely.
Community redevelopment agencies (CRAs) are another powerful tool that local governments have at their disposal to support businesses and build the economy. The loss of these crucial and self-sustaining redevelopment zones would be devastating to local economies.
CRAs work by identifying blighted project areas in need of development and then supporting projects in these neighborhoods. The tax dollars generated by these development zones are then reinvested in the communities where they originated, continuing to grow the local economy.
The numbers demonstrate the important role that CRAs play in the state’s economy. Statewide, redevelopment supports 304,000 full- and part-time private sector jobs each year, including 170,600 construction jobs, and contributes more than $40 billion annually to California’s economy. Additionally, redevelopment construction generates $2 billion in state and local taxes a year.
Locally, redevelopment activities support nearly 75,000 jobs in Los Angeles County. While business leaders understand the realities of budget deficits and the necessity for cuts better than most, Brown’s elimination of CRAs would kill jobs and economic expansion at a time when we need them the most.
Enterprise zones and CRAs are the few tools local governments have for economic development. Together these programs represent hundreds of thousands of jobs for the state and billions of dollars in economic investment.
No one denies that massive reductions in spending are necessary, but the cutbacks need to be considered strategically. California is already expected to recover slower than the rest of the nation, according to predictions from economists, and eliminating enterprise zones and CRAs would further hurt the state’s ability to pull itself out of the recession.
Stuart Waldman is president of the Valley Industry and Commerce Association (VICA). VICA is a business advocacy organization that represents employers throughout the Los Angeles County region at the local, state and federal levels of government.