BILL ANALYSIS
SB 341
Page A
Date of Hearing: July 3, 2007
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Juan Arambula, Chair
SB 341 (Lowenthal) - As Amended: April 11, 2007
SENATE VOTE : 39-0
NATURAL RESOURCES 9-0
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|Ayes:|Aghazarian, Brownley, | | |
| |Fuentes, Fuller, Hancock, | | |
| |Keene, Laird, Salda?a, | | |
| |Wolk | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
| | | | |
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SUBJECT : Geographically-Targeted Economic Development Areas
(G-TEDA) and the California Environmental Quality Act (CEQA)
SUMMARY : Expands the ways in which a local government applying
for an enterprise zone (EZ) designation may meet the
requirements of CEQA, while eliminating the ability of these
jurisdictions to limit subsequent environmental reviews based on
the contents of the initial CEQA documents. Specifically, this
bill :
1)Expands the options a finalist for an EZ designation may use
to address potential environmental impacts of the proposed EZ
to include a negative declaration and a mitigated negative
declaration, in addition to the full environmental impact
report (EIR), which is provided for in existing law.
2)Deletes the CEQA exemption authority on future projects within
an EZ, if the effects of the projects were identified in the
EIR prepared as part of the final application procedure, as
specified.
EXISTING LAW :
1)Provides for the establishment of G-TEDA programs to stimulate
business and create jobs in depressed areas of the state
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including authorization for:
a) A maximum of 42 EZs, each designated for an initial
15-year period by the Department of Housing and Community
Development (HCD).
b) A maximum of eight Local Area Military Base Recovery
Areas (LAMBRAs), each designated for an eight-year period
by HCD.
c) A maximum of two Manufactured Enhancement Areas (MEAs)
designated for a 14-year period by HCD. Limits MEA
designation to impoverished areas along the
California-Mexico border.
d) One Targeted Tax Area (TTA) within the County of Tulare
for a 15-year period.
2)Requires the lead agency in an EZ application, to file an
initial study with HCD, the Governor's Office of Planning and
Research, and all responsible agencies at the time that the EZ
application is submitted to HCD.
3)Requires local governments that receive preliminary EZ
designations to prepare an EIR prior to final enterprise zone
designation.
4)Provides that no additional EIRs be required for projects
within an EZ, if the effects of the project were:
a) Mitigated or avoided as a result of the EIR prepared for
the area;
b) Examined in sufficient detail in the EIR to enable those
effects to be mitigated or avoided by specific site
revisions, the imposition of conditions, or other means in
connection with the designation of the area; or,
c) Identified in the final EIR, and the lead agency made
written findings that specific economic, social, or other
considerations made the mitigation measures or project
alternatives identified in the EIR unfeasible.
FISCAL EFFECT : Implementation of this bill has no significant
state costs or financial impact. SB 341 was referred from the
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Senate Appropriations Committee under Senate Rule 28.8, based on
the Chair's determination that the bill does not have any
significant costs nor will it cause a serious reduction in
revenues.
COMMENTS :
1)Purpose of the bill : EZs play a key role in developing
communities, while CEQA plays a key role in protecting the
environment. This bill is important because it creates
efficiency in the EZ designation process and upholds CEQA
standards.
According to the California Association of Enterprise Zones,
an EZ designation related EIR can cost a community upwards of
$100,000 and does not necessarily provide any additional
environmental protection to the area.
2)California's G-TEDA programs : The four G-TEDA programs (EZ,
LAMBRA, MEA, and TTA) comprise the second largest state
investment in economic development. The G-TEDA programs are
based on the economic principle that targeting significant
incentives to lower income communities allows these
communities to more effectively compete for new businesses and
retain existing businesses, which results in increased tax
revenues, less reliance on social services, and lower public
safety costs. Residents and businesses also directly benefit
from these more sustainable economic conditions through
improved neighborhoods, business expansion, and job creation.
Under the G-TEDA programs, businesses and other entities
located within the area are eligible for a variety of local
and state incentives. Local government incentives can include
writing down the costs of development, funding related
infrastructure improvements, providing job training to
prospective employees, or establishing streamlined processes
for obtaining permits. The state also offers a number of
incentives, including: tax credits, special tax provisions,
priority notification in the sale of state surplus lands,
access to certain Brownfield clean-up programs, and
preferential treatment for state contracts.
Below is a chart comparing the state tax incentives offered to
businesses located in a G-TEDA.
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------------------------------------------------------------
| Comparison of State Tax Benefits by Targeted Area (2005) |
------------------------------------------------------------
|---------+--------+---------+---------+----------+----------|
| | Hiring | Longer | Sales |Accelerate| Lender |
| | Credit | NOL<1> | and Use | d | Interest |
| | | Carry- | Tax |Depreciati|Deduction |
| | | Forward | Credit | on | |
| | | Period | | | |
|---------+--------+---------+---------+----------+----------|
|Enterpris| X | X | X | X | X |
| e Zone | | | | | |
|---------+--------+---------+---------+----------+----------|
|Manufactu| X | | | | |
| ring | | | | | |
|Enhanceme| | | | | |
| nt Zone | | | | | |
|---------+--------+---------+---------+----------+----------|
|Targeted | X | X | X | X | |
|Tax Area | | | | | |
|---------+--------+---------+---------+----------+----------|
| Local | X | X | X | X | |
| Agency | | | | | |
|Military | | | | | |
| Base | | | | | |
|Recovery | | | | | |
| Area | | | | | |
------------------------------------------------------------
------------------------------------------------------------
|Source: Legislative Analyst's Office |
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By far, the largest G-TEDA business incentive is the income
tax credit given for hiring certain targeted employment
populations. According to the California Budget Project
(CBP), in 2003, businesses located within an EZ claimed $299.3
million in hiring, and sales and use credits. Approximately
$1.5 billion in tax credits and deductions have been claimed
since 1986. CBP estimates that claims of G-TEDA related
credits grew 19-fold between 1993 and 2003.
According to the Legislative Analyst's Office, approximately
60% of the hiring credits are filed by small and medium-sized
--------------------------
<1> NOL= Net Operating Loss
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businesses - businesses with assets under $5 million .
However, approximately 65% of the total value of the credits
claimed are from businesses with assets over $1 billion .
Similarly, approximately 50% of the total value of the credits
claimed went to companies with receipts of over $1 billion .
3)CEQA and EZ designation : Applying for an EZ designation is
considered a discretionary act under CEQA. As such,
applicants are required to evaluate the potential
environmental impacts of the action prior to engaging in the
actual activity.
Under CEQA, the lead agency is responsible for undertaking an
initial study to determine whether a project, (i.e.
designation as an EZ), would have a significant adverse effect
on the environment. If during the initial review, the lead
agency determines a project will result in a significant
adverse impact on the environment, an EIR must be prepared.
In general, an EIR describes the proposed project, identifies
and analyzes each significant environmental impact resulting
from the project, and identifies possible mitigation measures
to reduce the potential environmental adverse impacts.
Sometimes, however, the initial study identifies no adverse
effects of the project, and under general CEQA law in the
Public Resources Code, the lead agency may adopt a Negative
Declaration. CEQA law also authorizes the adoption of a
Mitigated Negative Declaration when the initial study
determines that the potential effect of the project could be
significant, but the impacts can be reduced to a level that is
less than significant through project revisions.
Contrary to CEQA law in the Public Resources Code, the EZ
Program requires the preparation of an EIR, regardless of
whether the designation of the EZ would result in a negative
environmental impact, or whether those impacts could be
appropriately mitigated.
It is not entirely clear on how this contrary application of
CEQA was established. One theory is that the mandatory EIR
was a public policy accommodation for allowing local
jurisdictions to comply with CEQA in two phases: submittal of
an initial study with the initial application and the EIR at
the time of the final application. As the EZ designation
process was designed to be very competitive, it is conceivable
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that the compromise would save unsuccessful applicants from
meeting the full requirements of CEQA review.
Another theory is that the EZ Program's environmental review
requirements were an early version of the 1994 policy
innovation of the Master EIR authority under CEQA, which
provides detailed environmental review of plans upon which the
analysis of subsequent related development projects could be
based. To the greatest extent feasible, the Master EIR
evaluates the cumulative impacts, growth inducing impacts, and
irreversible effects of subsequent projects. In theory,
future projects can move forward more quickly thereby saving
time and money during the implementation stage of a project.
While the origins of the EZ Program requirements for an EIR
are unclear, it is clear that EZ administrators, consultants,
and businesses are very interested meeting the general
requirements of CEQA rather than the alternative process. The
language in this bill was carefully developed in consultation
with senior policy staff in the Senate with responsibility for
CEQA related legislation. There is no known opposition to
this bill.
4)G-TEDA Reforms : In the winter of 2005, the Assembly
Committees on Revenue and Taxation, and Jobs, Economic
Development, and the Economy (JEDE) held a series of hearings
on the G-TEDA programs. A summary of these hearings,
including background materials, are available on the JEDE
Committee website at www.assembly.ca.gov
During the course of these hearings, the Committees reviewed
current and best practices related to designation, management
and monitoring, and use of business incentives available
through the G-TEDA programs. As a result of these hearings,
JEDE developed a list of 47 recommendations on how to improve
the overall G-TEDA programs. SB 341 addresses concerns raised
during the hearings and puts forward an innovative solution to
the recommendations on modifying the environmental review
process.
5)EIRs and Other G-TEDAs : In developing a package of 2006
reforms, JEDE recommended that differences between the
operation and management of the different G-TEDA programs be
eliminated, unless the programmatic difference was necessary
to accomplish a specific public purpose. This bill proposes
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to make important changes to the EZ CEQA compliance portions
of the G-TEDA programs, but is silent on its application to
the MEA, TTA, and LAMBRA programs.
6)Proposed amendments : Staff understands that the author will
request amendments in Committee to add an urgency clause and
specify that the provisions in this bill apply to EZ
applications submitted on or after October 1, 2007.
REGISTERED SUPPORT / OPPOSITION :
Support
California Building Industry Association
California Business Properties Association
California Chamber of Commerce
California Retailers Association
City of Santa Ana
City of Live Oak
City of Marysville
City of Yuba City
Long Beach Chamber of Commerce
Siskiyou County
Santa Ana Enterprise Zone
Stanislaus County
Wine Institute
Yuba-Sutter Enterprise Zone
1 Individual
Opposition
None known
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090