BILL ANALYSIS                                                                                                                                                                                                    




                                                                 SB 974
                                                                 Page A
         Date of Hearing:   June 30, 2010

          ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
                               V. Manuel Perez, Chair
                   SB 974 (Steinberg) - As Amended:  June 15, 2010

          SENATE VOTE  :   21-16
          
         SUBJECT  :   Career Technical Education Credit and the California  
         Enterprise Zone Program

          SUMMARY  :   Establishes a new Career Pathways Investment Credit,  
         administered by the Superintendent of Public Instruction (SPI), to  
         qualifying business entities that partner with local        
         education agency (LEA) programs to develop and support career  
         pathway programs, as specified.  Funding for the credit is  
         provided by eliminating a portion of an existing enterprise zone  
         hiring credit.  Specifically,  this bill  : 

         1)Makes a number of findings, including, but not limited to, how  
           California's deep recession requires a timely response and  
           strategic investments in order to educate and prepare the  
           workforce for the next stage in the state's economic growth.

         2)Provides legislative intent that, among other things, the  
           Legislature shall evaluate the state's tax expenditures as  
           rigorously as it evaluates the state's spending programs and  
           establish fiscal incentives that encourage California businesses  
           to enter into partnership with schools to connect pupils and  
           teachers to real-world experiences that strengthen middle and  
           high school education statewide.  

         3)Establishes and authorizes the reservation and allocation of up  
           to $78 million in tax credits in calendar year 2011 and $100  
           million in credits for 2012, and each calendar year thereafter,  
           as adjusted by the Franchise Tax Board to reflect inflation or  
           deflation.  Credits may be reserved for up to five calendar  
           years per application.  The amount reserved in any calendar year  
           is limited to 50% of the qualified expenditures, as defined.   
           Value of any unallocated credits from a prior year may be rolled  
           forward.  Allocation of credits only occurs after the Department  
           of Education audits and verifies that the qualified expenditures  
           have been made in the manner consistent with what was  
           represented in the application.

         4)Requires the SPI to annually provide Franchise Tax Board (FTB)  








                                                                 SB 974
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           with a list of qualified tax payers for whom the career pathways  
           credits are reserved or allocated.

         5)Authorizes the SPI to charge a fee for the submission of an  
           application for allocation and reservation of the credit, as  
           specified.  Fees are required to be deposited in the Career  
           Pathways Investment Credit Fund, which is established in this  
           bill.  Loans are authorized to cover administration of the  
           program until sufficient fees are collected.

         6)Requires the SPI to establish procedures for reserving and  
           auditing the Career Pathways Investment Credit that, at a  
           minimum, do the following:

            a)   Provide credit reservation only to applicants that agree  
              to enter into an enforceable contract or memorandum of  
              understanding (MOU) with the Department of Education, as  
              specified.

            b)   Implement a reserve criteria that awards applicants that  
              demonstrate that either the applicant or the LEA meets the  
              following criteria:

              i)     The effectiveness of the career pathways program  
                toward preparing students for productive, high-wage  
                employment in growing or high need-sectors of the  
                California economy.  Cost effectiveness criteria includes,  
                completion rates, high school graduation rates, percentages  
                of students attaining an industry certification,  
                percentages of students transitioning successfully to  
                postsecondary education and employment and earnings after  
                high school.

              ii)    The level of the applicant's investment in, oversight  
                of and ability to leverage and sustain current career  
                pathways programs and current career technical education  
                programs.

         7)Requires that the application include, at a minimum:

            a)   A copy of the contract or MOU between the applicant and  
              the LEA that includes a clear and comprehensive plan for each  
              middle school or high school program that creates career  
              pathways and the budget for the career pathways investment  
              program over the period for which the applicant is applying  
              for credits;








                                                                 SB 974
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            b)   Details regarding the strength and relevance of the  
              education plan to the needs of industry for qualified  
              technical employees;

            c)   Projections of program enrollment; and

            d)   The method by which accountability for program participant  
              enrollments and outcomes will be maintained.

         8)Sets certain priorities for allocating credits including:

            a)   Requiring priority allocation in each of the following  
              circumstances:

              i)     The applicant has entered into an MOU or contract with  
                LEA that is located in a community with an unemployment  
                rate above the statewide average, as specified, and has  
                high school graduation rate lower than the statewide  
                average.  

              ii)    The applicant has entered into an MOU or contract with  
                LEA that provides for a private to public funding ratio  
                that exceeds the minimum one-for-one public to private  
                dollars.

              iii)   The applicant has entered into an MOU or contract with  
                LEA that is articulated with postsecondary certificate and  
                degree programs in the region.

              iv)    The applicant is not seeking tax credits for existing  
                activities.

            b)   Specifying that to the maximum extent practical and  
              consistent with the above priorities, give priority to  
              applicants serving socioeconomically diverse populations and  
              on a geographically equitable basis.

            c)   Providing that priority not be given on the basis of date  
              the application is submitted, unless necessary to allocate  
              credits where two or more applicants have the same rating.

         9)Defines a qualified expenditure to include the following:

              i)     Purchase of equipment or instructional materials;









                                                                 SB 974
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              ii)    Authorizing employees to provide instruction, in  
                partnership with credentialed teachers employed by the  
                school district at the school site;

              iii)   Providing paid jobs or internships;

              iv)    Offering teacher externships; and 

              v)     Making contributions to programs administered by  
                postsecondary institutions that provide support for middle  
                or high school programs that create career pathways.

         10)Defines a qualified tax payer as an applicant that receives an  
           allocation pursuant to the requirements above and who is either  
           a sole owner, if an individual, partners, if the tax payer is in  
           a partnership; or a shareholder if the tax payer is an "S"  
           corporation; or a tax payer subject to the corporate tax code.

         11)Authorizes a tax payer to carry forward any unused credits  
           until the credit is exhausted.  Conversely, if the taxpayer  
           fails to meet the requirements of this bill, the credit is  
           disallowed, and assessed and collected until the requirements  
           are satisfied.  A disallowed credit would be treated as a math  
           error, as specified.

         12)Eliminates the ability of businesses located in an enterprise  
           zone from qualifying an employee for the enterprise hiring  
           credit based on them living in a targeted employment area (TEA).  


         13)Reduces the time from four years to 42 days for the businesses  
           located in an enterprise zone to obtain certification of its  
           worker as a qualified worker under the hiring credit.   
           Applications for certification are required to be submitted  
           within 28 days of the employee being hired.

         14)Makes other technical changes to the enterprise zone hiring  
           credit.

          EXISTING LAW  :

          1)Purpose of enterprise zone program  :  Establishes the California  
           Enterprise Zone Program, administered by California Department  
           of Housing and Community Development (HCD) to stimulate business  
           and industrial growth in depressed areas of the state.   
           Legislative intent states that it is in the economic interest of  








                                                                 SB 974
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           the state to have one strong, combined, and business-friendly  
           incentive program to help attract business and industry to the  
           state, to help retain and expand existing state business and  
           industry, and to create increased job opportunities for all  
           Californians.  A maximum of 42 enterprise zones are authorized  
           at any one time.  Designations are for a period of 15 years, as  
           specified.  
          
          1)Hiring Credit  :  Authorizes an income tax credit for businesses  
           in an enterprise zone that hire certain "qualified employees."   
           Among other qualifying criteria, which are described in (6) and  
           (7) below, the qualified employee must be certified that he or  
           she meets meet one of nearly a dozen categories of eligible  
           individuals, including living within a TEA.  

          2)Purpose of the TEA  :  Specifies that the purpose of a "targeted  
           employment area" is to encourage businesses in an enterprise  
           zone to hire eligible local residents.  A TEA may include, but  
           is not required to include, all or part of the boundaries of the  
           enterprise zone.  Further, the TEA does not need to encompass  
           all eligible areas, but may include only those areas that the  
           local government determines have residents who are in the most  
           need of this employment targeting. 

          3)Definition of a TEA  :  Defines a TEA to mean an area within a  
           city, county, or city and county that is composed solely of  
           those census tracts designated by the U.S. Department of Housing  
           and Urban Development as having at least 51% of its residents of  
           low- or moderate-income levels, using either the most recent  
           U.S. Department of Census data available at the time of the  
           original enterprise zone application or the most recent census  
           data available at the time the targeted employment area is  
           designated to determine eligibility.

          4)Update of TEA  :  Requires local governments to update the  
           boundaries of their TEA's to reflect new census data within 180  
           days of the data becoming available.

          5)Definition of a qualified employee  :  Limits the enterprise zone  
           hiring credit to be awarded to only those employees that meet  
           the following requirements:  

            a)   The employee provides service to an employer where at  
              least 90% of those services within a taxable year are  
              directly related to the conduct of a taxpayers business or  
              trade located in an enterprise zone; 








                                                                 SB 974
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            b)   The employee performs at least 50% of his/her service for  
              the taxpayer during the taxable year in an enterprise zone;

            c)   The employee is hired after the date of the enterprise  
              zone designation; and

            d)   The employer has received a voucher for the employee that  
              certifies that the employee, immediately preceding employment  
              with this employer, met one of 12 eligibility categories.   
              The employee was or is:

              i)     A resident of a TEA, as specified;

              ii)    Eligible for services under the federal Job Training  
                Partnership Act, or its successor;

              iii)   Eligible to be a voluntary or mandatory registrant  
                under Greater Avenues for Independence Act of 1985, or its  
                successor;

              iv)    An economically disadvantaged individual 14 years or  
                older;

              v)     A dislocated worker, as specified;

              vi)    A disabled individual who is eligible for, enrolled  
                in, or has completed a state rehabilitation plan; 

              vii)   A service-connected disabled veteran, veteran of  
                Vietnam, or veteran who has been recently separated from  
                military service;

              viii)  An ex-offender, as specified;

              ix)    Eligible to receive specified social services  
                benefits, including Federal Supplemental Security Income  
                benefits, Aid to Families with Dependent Children, food  
                stamps, or state and local general assistance;

              x)     A member of a federally recognized Indian tribe, band,  
                or other group of Native American descent; or

              xi)    A member of a targeted group, as defined by the  
                Internal Revenue Service for the purposes of the Work  
                Opportunity Tax Credit (WOTC), which includes a qualified  








                                                                 SB 974
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                IV-A recipient, a qualified veteran, a qualified ex-felon,  
                a high-risk youth, a vocational rehabilitation referral, a  
                qualified summer youth employee, a qualified food stamp  
                recipient, a qualified Supplemental Security Income  
                recipient, or a long-term family assistance recipient.

          6)Further Hiring Credit Requirements  :  Requires "qualified  
           employees" to be retained in employment for a minimum of 270  
           days (approximately 9 months) in order to qualify for hiring  
           credit vouchering.  The value of the hiring credit incentive  
           totals 50% of the employee's wages in the first year, 40% in the  
           second, 30% in the third, 20% in the fourth, and 10% in the  
           fifth year.  Although employees can be paid more, the maximum  
           wage rate used to calculate the credit is 150% of minimum wage.   
           Aircraft manufacturers in Long Beach may calculate the credit  
           based on 202% of minimum wage.  The hiring credit may only be  
           applied to offset tax liability attributable to revenues  
           received from activities located within the EZ where the  
           employee is primarily working.  While not every employer is able  
           to fully utilize the maximum value of the credit, it could be as  
           high as $37,700 over five years.  

          FISCAL EFFECT  :  According to the Senate Appropriations Committee  
         analysis, this measure is revenue neutral.  Reductions to the  
         hiring credit correspond to the estimated loss in state revenues  
         attributable to the new career technical education credit.  The  
         estimated start-up costs for the FTB and the Board of Equalization  
         (BOE) are expected to be covered through a newly authorized fee.

          COMMENTS  :   

          1)Author's purpose  :  "SB 974 authorizes the Career Pathways  
           Investment Tax Credit for businesses that partner with public  
           schools to build "career pathway" programs that connect learning  
           to real-world experience and keep students engaged and on track  
           to graduation, further education and productive careers.  

           SB 974 funds the new the credit by enacting two long overdue  
           reforms to the Enterprise Zone program: first, this bill  
           eliminates the practice of "retrovouchering" enterprise zone  
           hiring credits; and second, this bill repeals the Targeted  
           Employment Area (TEA) criterion for the hiring credit  
           eligibility.  Retroactive credits, by definition, simply provide  
           bonuses for past actions, but do not encourage businesses to  
           increase employment in future years and thus do not promote job  
           creation.  TEA boundaries typically include parts of Enterprise  








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           Zones but also other areas, and do not need to be updated, even  
           if robust economic growth has occurred and parts of the TEA are  
           no longer economically distressed.  TEA residency allows  
           employers to claim tax credits based solely on where a worker  
           lives and not on any objective measure of whether that  
           individual faces a barrier to employment.

           Thus, SB 974 reflects author's priorities in tax policy: first,  
           that we pay for any new tax credits or expenditure that we  
           authorize - which is essential, given our budget situation - and  
           second, that we critically evaluate the tax credit programs we  
           already have on the books, to make sure that they are maximizing  
           the program benefits of our tax credits."

          2)Policy questions  :  To the extent that this measure proposes to  
           limit one tax expenditure in order to establish another, SB 974  
           raises the following two central policy questions.  
          
             a)   First, what is the equity proposition for removing $100  
              million in tax credit authority from businesses located in  
              some of the poorest areas of the state (enterprise zones) in  
              order to finance a new credit for businesses located in all  
              areas of the state?

            b)   Second, what is the appropriate balance between supporting  
              the direct hiring of workers and the preparation of the  
              state's future workforce?  

          3)California's current and future economy:   California is one of  
           the largest and most diversified economies in the world, with a  
           state gross domestic product of over $1.8 trillion in 2008.  The  
           efforts of its 38 million people resulted in having the eighth  
           largest economy in the world, ahead of such countries as Spain  
           ($1.4 trillion), Canada ($1.3 trillion), and Brazil ($1.3  
           trillion).   

           Historically, the state's businesses and workers have played  
           significant roles in the global marketplace.  Some of  
           California's strongest economic qualities include its strategic  
           west coast location; its economically diverse regional  
           economies; its access to a wide variety of venture and other  
           private capital; its broad base of small- and medium-sized  
           businesses; its culture of innovation and entrepreneurship; and  
           its large, ethnically diverse population, representing both a  
           ready workforce and significant consumer base.   









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           The chart above, prepared by the California Employment  
           Development Department, provides detail on California's largest  
           industry sectors in 2008 including the total number of jobs and  
           percentage of state employment.    

           Businesses in this century face increasing challenges to  
           maintaining global and domestic competitiveness, including  
           providing a skilled workforce to support the changing needs of  
           commerce and maintaining cost-effective productivity in the face  
           of lower safety and wage standards in emerging foreign markets.   


           Workers and communities are being affected from both the direct  
           and indirect impact of loss of jobs and, in some instances, the  
           potential shift of entire industry sub-sectors out of  
           California, as in the 18,800 jobs at-risk with the closure of  
           NUMMI automotive assembly plant in May 2010.  

           In 2008, 14.6% of the population lived in a household with an  
           annual income below the federal poverty line of $22,000.  This  
           reflects a statistically significant increase from 2007 when  
           12.7% of Californians were reported to be living in poverty.   
           The chart to the left further illustrates the change in job  
           growth between certain industry sectors and the relevance of  
           those shifts to worker wage rates since the beginning of the  
           century. 
            
           Significant drops in consumer spending during the recession have  
           also led to greater workforce reductions and business  
           bankruptcies across the state.  For much of 2009, the number of  
           unemployed workers rose 40,000 to 60,000 per month, and the year  
           ended with 2.25 million people officially identified as  
           unemployed (excludes those that have stopped looking for work,  
           among others).  In May 2010 the seasonally adjusted state  
           unemployment rate was 12.4%, a slight improvement over April's  
           unemployment rate of 12.5%, but still representing 2.28 million  
           unemployed California workers.   Within the state, however,  
           unemployment ranges from 27.5% in Imperial County and Sutter  
           County at 20% to Marin County with 7.9% and Santa Barbara at  
           8.3% unemployment. 

           While some economists believe California may have emerged from  
           the recession, there is little disagreement among economic  
           forecasters that unemployment in the state is expected to remain  
           above double digits throughout 2010, 2011 and into the first  
           quarter of 2012.  Jobs are expected to recover to their  








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           pre-recession peak in the first half of 2013; however,  
           unemployment rates are likely to remain above 8% in the state  
           through much of 2014.  

           In designing an economic recovery strategy, public policy makers  
           are challenged in providing sufficient support to particularly  
           economically troubled areas, such as those designated as  
           enterprise zones, and the need to prepare the next generation of  
           workers and entrepreneurs.  This bill poses the policy question  
           in a very direct manner by proposing to limit enterprise zone  
           credits and replace them with new career technology credits.  Is  
           policy best served pursuing one to the detriment of the other?

          4)Career pathways to prosperity and self sufficiency  :   
           California's future is dependent upon the state's education  
           system in delivering a quality workforce that supports its  
           current and emerging industries.  While California cannot  
           reasonably compete as the cheapest place to do businesses, the  
           state has historically held a comparative advantage over other  
           states and nations based on quality and productivity of its  
           workforce and entrepreneurial environment.
          
            Maintaining this advantage, however, is challenging and many  
           policy makers believe that fundamental change needs to occur  
           within the state's education and workforce training framework.   
           Increasing concerns regarding high school drop out rates,  
           student academic achievement and changing demographics are just  
           some of the drivers of a renewed push toward greater integration  
           of career tech/work-based learning programs and college  
           preparation.

           Implementation of SB 974 would offer a new tax credit for  
           businesses that make meaningful contributions, also known as  
           qualified contributions, to programs that can demonstrate they  
           meet certain criteria and conditions, such as having systems for  
           measuring the program's success in assisting students prepare  
           for high-wage employment in growing or high-need industry  
                                            sectors.  

           Approved programs could be delivered through a variety of  
           educational delivery systems including high schools, regional  
           occupation centers, California Partnership Academies and other  
           career academies, alternative education programs and adult  
           education programs.  The distinguishing quality of these  
           programs is that they integrate academic and technical learning.  
            Eligible programs must include core academic courses that  








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           replicate real world work environments, while remaining aligned  
           with the State Board of Education's approved career technical  
           education standards.

           The author's office provided multiple examples of programs that  
           could potentially qualify as an eligible LEA partner under this  
           bill.  Below are four of those examples.  

            a)   The Central County Occupational Center (San Jose, CA), in  
              existence for 40 years, is one of the largest centers in  
              California.  In 2009, the Center served about 2,200 students  
              in the day program and 600 in the evening program.  It is  
              part of the Metropolitan Education District, a joint powers  
              agency created by six school districts to provide CTE and  
              Adult Ed in central Santa Clara County. 

            b)   The AYES/NATEF Auto Program at Ontario High School  
              (Ontario, CA) is a thriving program at a Title I school.  It  
              has solid local dealership support and strong academic  
              reinforcement.  The program is comprised of a district  
              operated ROP and the Baldy View ROP.  The program provides a  
              pathway into Chaffey College with articulated college credit  
              for high school students. 

            c)   Arthur A. Benjamin Health Professions High School  
              (Sacramento, CA) opened fall 2005 with a mission "to provide  
              students with an outstanding education, rich with relevant  
              academic, application and leadership experiences" - using  
              healthcare as a theme.   Partners provide key resources to  
              the school from internships to collegiate mentors that are  
              currently enrolled in post-secondary healthcare programs.   
              Current partners include Kaiser, Mercy, Shriners, Sutter,  
              U.C. Davis Medical Center, Sacramento State, U.C. Davis,  
              Stanford University and the Bill and Melinda Gates  
              Foundation.

            d)   The Coachella Valley Economic Partnership's Career  
              Pathways Initiative, established in 2005, partners more than  
              250 industry, economic development and education  
              professionals along with students across nine cities in the  
              Coachella Valley of eastern Riverside County.  Its objective  
              is to transform teaching and learning for 70,000 PreK-12th  
              grade students; empower educators to engage students in  
              perfecting critical thinking and communication skills through  
              real-world, rigorous, inquiry-based learning; and partner  
              employers in developing their next-generation talent  








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              pipeline.

           Research demonstrates that work-based learning increases  
           outcomes both in helping to keep students in school and in  
           longer term outcomes that extend beyond school.  As an example,  
           in Career Academies: A Proven Strategy to Prepare High School  
           Students for college and Careers (February 2010), the report  
           found conclusive evidence that career academies were effective  
           in improving outcomes for students citing a number of academic  
           studies including the following:

               High school drop out rates in academies averaged 7 to 8%  
             over the three years, which is about half the rate in the  
             general population of California students (Dayton 1997).

               Academy 10th graders were more likely to have passed both  
             sections of the California High School Exit Examination;  
             Academy 12th graders were more likely to graduate at the end  
             of the year; and Academy graduates were more likely to have  
             completed the 15 "A to G" courses required for admission to  
             the University of California or California State University  
             (Bradby and others 2007). 

               Academy graduates were at least as likely to be enrolled in  
             post secondary education as their non-academy schoolmates one  
             or two years after high schools.  However, at the same time,  
             they also had more hours of paid employment (Stern, Raby and  
             Dayton 1992).

           The James Irvine Foundation funded a broader study, "Work-Based  
           Learning in California, Opportunities and Models for Expansion"  
           ( November 2009), which closely examined the key elements and  
           conditions of using a multiple pathways model to increase the  
           number of low-income students in California who complete high  
           school on time and attain a post secondary credential by age 25.  
            Their model uses the same basic elements required in SB 974 of  
           academics linked to real world work experiences.  Their research  
           found that combining a student's career interest with practical  
           job preparation, supported by related academic work, contributed  
           to higher graduation rates, increased college enrollment and  
           higher earning potential. 

          1)The California Enterprise Zone Program  :  Existing law authorizes  
           the creation of up to 42 enterprise zones based on a statutory  
           list of criteria related to poverty and economic dislocation.   
           The EZ program is based on the economic principle that targeting  








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           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. 

           Enterprise zones are located in portions of 54 Assembly  
           Districts and 35 Senate Districts.  They range in size from one  
           square mile to 70 square miles and in geographic locations  
           ranging from Eureka and Shasta Valley near the Oregon border to  
           San Diego and Calexico along the Mexican border.  

           Under the enterprise zone program, businesses and other entities  
           located within the area are eligible for a variety of local and  
           state incentives.  In its application, a prospective enterprise  
           zone is required to identify specific local government  
           incentives that will be made available to businesses located in  
           the proposed enterprise zone.  The local incentives can, among  
           other things, 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 an enterprise zone and other  
           geographically targeted economic development areas (G-TEDA).


               ------------------------------------------------------------ 
              |    Comparison of State Tax Benefits by Targeted Area       |
               ------------------------------------------------------------ 
              |-----------+------+---------+---------+----------+----------|
              |           |Hiring|Longer   |Sales    |Accelerate|Lender    |
              |           |      |NOL<1>   |and Use  |d         |Interest  |
              |           |Credit|Carry-   |Tax      |Depreciati|Deduction |
              |           |      |Forward  |Credit   |on        |          |
              |           |      |Period   |         |          |          |
              |-----------+------+---------+---------+----------+----------|
              |Enterprise |  X   |    X    |    X    |    X     |    X     |


         -----------------------------
         <1> NOL= Net Operating Loss







                                                                 SB 974
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              |Zone       |      |         |         |          |          |
              |-----------+------+---------+---------+----------+----------|
              |Manufacturi|  X   |         |         |          |          |
              |ng         |      |         |         |          |          |
              |Enhancement|      |         |         |          |          |
              | Zone      |      |         |         |          |          |
              |-----------+------+---------+---------+----------+----------|
              |Targeted   |  X   |    X    |    X    |    X     |          |
              |Tax Area   |      |         |         |          |          |
              |-----------+------+---------+---------+----------+----------|
              |Local      |  X   |    X    |    X    |    X     |          |
              |Agency     |      |         |         |          |          |
              |Military   |      |         |         |          |          |
              |Base       |      |         |         |          |          |
              |Recovery   |      |         |         |          |          |
              |Area       |      |         |         |          |          |
               ------------------------------------------------------------ 
               ------------------------------------------------------------ 
              |Source:  Legislative Analyst's Office                       |
               ------------------------------------------------------------ 

           FTB reported that in 2007 - the most current data available -  
           $481 million in G-TEDA credits and deductions were claimed  
           through corporate and personal income tax (PIT) returns.   
           Additionally, FTB reports hundreds of millions in carryover  
           credits have been earned by businesses located in G-TEDAs, but  
           have not been claimed.  Below is a chart that displays the  
           dollar amount of G-TEDA incentives claimed through each of the  
           tax incentives.  


          ------------------------------------------------------------ 
         |          Claimed G-TEDA Incentives 2004 to 2007            |
          ------------------------------------------------------------ 
         |----------------------+---------+---------+---------+---------|
         |                      |  2004   |  2005   |  2006   |  2007   |
         |                      |         |         |         |         |
         |----------------------+---------+---------+---------+---------|
         |Hiring and Sales Tax  | $349,127| $362,620| $385,677| $430,934|
         |Credit                |         |         |         |         |
         |----------------------+---------+---------+---------+---------|
         |NOL Deductions        |  $72,326|  $74,024| $126,106| $207,993|
         |----------------------+---------+---------+---------+---------|
         |Tax Impact            |   $5,171|   $5,966|  $11,351|  $15,807|
         |----------------------+---------+---------+---------+---------|
         |Net Interest          | $432,867| $490,129| $517,310| $520,372|








                                                                 SB 974
                                                                 Page O
         |Deductions            |         |         |         |         |
         |----------------------+---------+---------+---------+---------|
         |Tax Impact            |  $29,103|  $32,395|  $34,156|  $34,438|
         |----------------------+---------+---------+---------+---------|
         |Business Expense      |   $4,387|   $4,770|   $4,463|   $5,136|
         |Deductions            |         |         |         |         |
         |----------------------+---------+---------+---------+---------|
         |Tax Impact            |     $222|     $200|     $188|     $197|
         |----------------------+---------+---------+---------+---------|
         |Total Tax Impact      | $383,624| $401,181| $431,371| $481,376|
          -------------------------------------------------------------- 
          ------------------------------------------------------------ 
         |Data Provided by the Franchise Tax Board                    |
         |11/9/09                                                     |
         |                                                            |
          ------------------------------------------------------------ 

           Across the U.S., 37 other states have G-TEDA type programs.   
           Economic developers have testified that the G-TEDA programs are  
           among the state's last remaining marketing tools for attracting  
           new businesses and investment to California.  Others, however,  
           remain unconvinced and have suggested that this level of tax  
           expenditure could be better spent elsewhere.

          2)Assessments of the California Enterprise Zone Program  :   
           Measurement of the success and failure of the enterprise zone  
           and the other G-TEDA programs has been central to the debate on  
           whether to expand or limit, as in the case of this measure, the  
           enterprise zone program.  Complicating the matter is that much  
           of the discussion around the relative successes or failures of  
           the G-TEDA programs and individual areas is anecdotal.  The  
           academic attempts to assess the state's G-TEDA programs have  
           produced mixed results.  Some of the variance among study  
           findings can be attributed to the limited access to good data  
           sets.  Research generally requires the development of a set of  
           assumptions in order to undertake the study.  The assumptions  
           made in the case of the G-TEDAs have, however, left most, if not  
           all, of the methodological approaches open to debate.  Moreover,  
           the problems in assessing the G-TEDA programs have been further  
           complicated by a lack of consensus on why the programs were  
           established and what objectives are trying to be achieved.

           Responding to the differing reports, HCD commissioned its own  
           study in 2006, which looked at the impact of the program on  
           neighborhood poverty, income, rents, and vacancy rates.  The  
           report showed that, on average, within enterprise zones between  








                                                                 SB 974
                                                                 Page P
           1990 and 2000:

           a)  Poverty rates declined 7.35% more than the rest of the  
             state; 

           b)  Unemployment rates declined 1.2% more than the rest of the  
             state; 

           c)  Household incomes increased 7.1% more than the rest of the  
             state; and

           d)  Wage and salary income increased 3.5% more than the rest of  
             the state.

           Since HCD's 2006 report, two additional reports have been  
           released.  One report also found favorable impacts of the  
           enterprise zone program and another found the program lacking in  
           its ability to stimulate jobs.

           In November 2008 and later revised and re-released in March  
           2009, economists from the University of Southern California  
           (USC) released a report with findings consistent to the HCD  
           report.  The USC study found that federal empowerment zone,  
           federal enterprise communities, and state enterprise zones have  
           "positive, statistically significant impacts on local labor  
           markets in terms of the unemployment rate, the poverty rate, the  
           fraction with wage and salary income, and employment."

           The Public Policy Institute of California (PPIC) released its  
           study of the enterprise zone program in June 2009, looking at  
           whether the EZ program had been successful in creating more jobs  
           than would have otherwise been established without the zone.   
           The main finding of the report was that, "Enterprise zones have  
           no statistically significant effect on either business creation  
           or employment growth rates."  

           The PPIC report also noted that the effects of the program  
           differed between zones, appearing to have a greater effect on  
           job creation in zones with lesser amounts of manufacturing and  
           those where the administrators spent greater amount of time on  
           marketing and outreach activities.  The report further stated  
           that PPIC encouraged a more critical evaluation of the program  
           overall and on individual zones using both employment and other  
           metrics such as poverty, unemployment, and property values.  

           It is important to note, however, that while the USC and PPIC  








                                                                 SB 974
                                                                 Page Q
           reports discussed above were released in 2008 and 2009, the  
           business development data used to form the statistical analyses  
           are from  2004  and earlier.  This date is significant, as both  
           HCD and the Legislature approved significant reforms to the  
           program in 2006 (discussed below), thus drawing into question  
           whether either of the studies accurately reflect the impact of  
           the enterprise zone program today.

          3)Oversight hearings drive reforms  :  While the G-TEDA programs  
           have been around for decades, it was not until the winter of  
           2005 that the first comprehensive legislative oversight hearings  
           were held.  Following the hearings, publication of a final  
           report and work group meetings, lead by the Assembly Committee  
           on Jobs, Economic Development and the Economy (JEDE),  
           legislation was negotiated and approved by the Senate and  
           Assembly floors on 40-0 and 77-0 votes [AB 1550 (Arambula and  
           Karnette), Chapter 718, Statutes of 2006].  

            G-TEDA issues again came to the forefront of the committee's  
           agenda in 2009 and JEDE initiated a thorough examination of how  
           the prior reforms were progressing and what additional areas  
           were in need of improvement.  During the course of its 2009  
           review, JEDE held three public hearings, met with a variety of  
           stakeholder groups, and produced an expanded white paper that  
           details the structure and activities of the G-TEDA program in  
           California, as well as in other states.  In addition to the  
           authors of the USC and PPIC reports, speakers included economic  
           development practioners, researchers, nonprofits, local  
           governments, labor, and business leaders.  
          
           At the first hearing, witnesses provided a general overview of  
           the G-TEDA programs including presentations on the most recent  
           program evaluation studies.  The second hearing focused on how  
           the G-TEDA programs help the state's innovation-based industries  
           - especially those in the manufacturing area.  At the third  
           hearing, presentations were arranged around three topics:  
           workforce training, small business development, and models for  
           measuring success.  

           A final report was issued by JEDE in January 2010 which included  
           summaries of each of the hearings, a comparative review of how  
           California's program stacked up against other state's enterprise  
           zone programs, and a list of the 100 recommendations developed  
           over the course of the hearings.  The JEDE report made five key  
           findings, including the need for more structure and  
           accountability mechanisms within the tax incentives and the need  








                                                                 SB 974
                                                                 Page R
           to better link workforce development into the overall G-TEDA  
           framework.

           In February of 2010 Speaker John A. P?rez asked JEDE Chairman V.  
           Manuel P?rez to convene a working group to review the final  
           report and develop a comprehensive set of reforms to the  
           enterprise zone program.  The work group has been meeting  
           several times a month since March 2010.  Members include  
           representatives from Democratic and Republican policy and fiscal  
           staff from both houses, labor organizations, business lobbyists,  
           and local government representatives and associations.  Key  
           program revisions under discussion include:

            a)   Increasing accountability of the program;

            b)   Better targeting of tax incentives to low and moderate  
              income households;

            c)   Reforms to structure of the hiring credit; and

            d)   Increased integration of the enterprise zone program with  
              other state and local community development programs,  
              including public programs that support workforce development  
              and job placement.

           This effort has captured the interest of the broad set of  
           enterprise zone stakeholders including local governments, labor  
           and the business community.  Concerns have been raised that  
           adoption of SB 974 could derail these larger programmatic reform  
           discussions.  Given the complexity of the program and the work  
           that has already been undertaken, the committee may wish to  
           consider whether the enterprise zone portions of this bill  
           should be removed and those issues be raised within the larger  
           context of the reform discussions. 
          
          4)Examining the enterprise zone hiring credit  :  Existing law  
           authorizes the establishment of a TEA as a means for encouraging  
           businesses within an enterprise zone to hire new workers that  
           live in and around the zone.  TEAs are designated based on the  
           most current U.S. Census data and can include areas both within  
           and adjacent to the zone.  

           The TEA is an especially important component to a  
           geographically-based program because it is the only category of  
           the 13 eligible employee categories that directly links the  
           people in and near the enterprise zone community with the hiring  








                                                                 SB 974
                                                                 Page S
           credit.  Another indicator of its importance is its high  
           frequency of use.  Well over half of the hiring credit  
           certificates, more commonly called vouchers, use the TEA  
           designation for qualifying employees.
          
            The high usage of the TEA designation is related to a number of  
           factors.  One of the most significant advantages of the TEA over  
           qualifying an employee under the other criteria is the  
           employer's ability to more easily access the appropriate  
           documentation for submitting the certificate application.  As an  
           example, to demonstrate that an employee qualifies as a resident  
           of a TEA, an employer has the option of submitting a copy of the  
           employee's driver's license or state identification card.

           By contrast, in order to demonstrate that an employee qualifies  
           for the other eligibility categories, employers have to ask  
           employees to provide them with copies of sometimes very personal  
           documents, such as bankruptcy documents, physician's statements,  
           letters from parole officers, and public assistance records.   
           Some employers have voiced concerns about asking an employee  
           questions regarding his or her personal history, as it could be  
           perceived as violating the employee's right to privacy.   

           Further clouding an accurate understanding of which employees  
           are being advantaged by the program is the fact that an employer  
           certifies an employee based on a single category of eligibility  
           - not multiple categories of worker eligibility.  This means  
                                                                                  that to the extent that an employee is living in a TEA, is a  
           Vietnam Veteran, a member of a federally recognized tribe, was  
           unemployed and receiving assistance at the local One-Stop Career  
           Centers at the time of employment in a company located in an  
           enterprise zone, the current data system only registers that  
           employee meets one category of eligibility - most likely that  
           being the employee lives in a TEA.  
          
            Beyond making the request for the documentation, employers face  
           challenges in accessing the documentation.  The chart below,  
           prepared as an example from the San Diego Enterprise Zone,  
           illustrates some of the timeframes and different entities to  
           which an employer would have to apply to receive the  
           documentation necessary to submit a hiring credit certificate to  
           the zone administrator for certification.


             --------------------------------------------------------------- 
            |          Example of Hiring Credit Documentation Time          |








                                                                 SB 974
                                                                 Page T
             --------------------------------------------------------------- 
            |----------+--------------+-----------------+------------------|
            |Enterprise|Required      |Agency           |Timeframe to      |
            | Zone     |Document      |                 |Obtain            |
            |Eligibilit|              |                 |Documentation     |
            |y         |              |                 |                  |
            |Category  |              |                 |                  |
            |----------+--------------+-----------------+------------------|
            |Low       |Income        |state Employment | At a minimum     |
            |Income    |Verification  |Development      |30 to 60 days     |
            |Dislocated|              |Department       |                  |
            | Worker   |              |                 |                  |
            |----------+--------------+-----------------+------------------|
            |Previously|Award letter  |County           |3 to 4 weeks      |
            | on       |              |                 |                  |
            |Public    |              |                 |                  |
            |Assistance|              |                 |                  |
            |          |              |                 |                  |
            |----------+--------------+-----------------+------------------|
            |Veterans  |DD14 or       |Federal          |In some cases up  |
            |          |verification  |Department of    |to 6 months       |
            |          |letter        |Veterans Affairs |(based on San     |
            |          |              |                 |Diego's           |
            |          |              |                 |experience)       |
            |          |              |                 |                  |
            |----------+--------------+-----------------+------------------|
            |Ex-Offende|Agency        |Background check |30-60 days        |
            |r         |confirmation  |through private  |                  |
            |          |letter or     |agency or        |                  |
            |          |print         |multi-agency     |                  |
            |          |out, if       |(County)         |                  |
            |          |available     |database         |                  |
            |----------+--------------+-----------------+------------------|
            |Eligible  |Certificate   |state Employment |Best case         |
            |for Work  |              |Development      |scenario is 5     |
            |Opportunit|              |Department       |months.  However, |
            |y Tax     |              |                 |it can take       |
            |Credit    |              |                 |upwards of 9      |
            |          |              |                 |months to a year  |
            |          |              |                 |depending on the  |
            |          |              |                 |department's      |
            |          |              |                 |workload. All     |
            |          |              |                 |certificates are  |
            |          |              |                 |issued from a     |
            |          |              |                 |single central    |
            |          |              |                 |office            |








                                                                 SB 974
                                                                 Page U
            |          |              |                 |                  |
             -------------------------------------------------------------- 
             --------------------------------------------------------------- 
            |Source:  San Diego Enterprise Zone, June                       |
            |2010                                                           |
            |                                                               |
             --------------------------------------------------------------- 

          5)Proposed changes to the hiring credit  :  SB 974 proposes to limit  
           the time to apply and receive certification of the employee's  
           eligibility to 28 and 42 days, respectively.  This alternative  
           timeline is based on the federal Work Opportunity Tax Credit  
           (WOTC) which has a 28-day timeline for submitting a  
           certification application to the Employment Development  
           Department (EDD).  

           The comparison of the state and federal programs is, however,  
           not well matched.  As an example, under the federal credit the  
           business has no meaningful documentation requirement as is  
           required under state law.  The business is only required to ask  
           a job applicant to sign a waiver that gives EDD permission to  
           check on whether the employee's background qualifies the  
           employer for a hiring credit.  EDD then has the responsibility  
           for researching and verifying eligibility.  Another difference  
           between the two systems is that under the federal credit,  
           submission of the certification application is free.  

           State law, however, permits the local zone and requires the  
           state to charge a fee on every voucher.  Local fees range from a  
           nominal cost to $100 per certificate application.  The state  
           charges a fee of $8 per certificate application, however,  
           pursuant to current budget discussions the fee is expected to be  
           increased to $15 resulting in 100% of HCD costs associated with  
           the program being covered.  Given the level of fees per  
           employee, some businesses choose to not apply for a certificate  
           until they know that both the employee is eligible and that the  
           credit is needed to apply to their tax return.  Existing law  
           allows tax payers, in general, to apply a hiring credit on an  
           initial or amended return. 

          Another timing issue is that state law requires that an employee  
          has worked at least 50% of the time in the zone during the year  
          and that 90% of his/her work be directly related to the  
          business's trade in the zone.  For companies with multiple  
          locations or for an employee that works out of the office, it is  
          not until the close of the tax year that eligibility can be  








                                                                 SB 974
                                                                 Page V
          established.  Another related state law requires that employees  
          be retained in the job for not less than nine months.  These  
          requirements suggest that employers are unable to know which  
          employees can meet the qualifications for credit eligibility  
          until the close of the calendar year.   

          The ease of the WOTC federal application process has perhaps also  
          led to a very inefficient program, from an administrative  
          standpoint.  In 2009, 125,777 requests for certification were  
          made to EDD; 43,223 certifications were issued and 50,292 were  
          denied.  Local enterprise zone administrators say that the state  
          program, requiring both documentation and fees prior to  
          submission of the certification application, results in a much  
          higher certificate approval rate and less waste of staff time  
          reviewing applications.

          Opposition to the current certificate process states that  
          convenience and cost to the business should be a minor  
          consideration in the administration and structure of the hiring  
          credit.  The public, who is foregoing state revenues, must be  
          confident that state tax expenditures are spent effectively and  
          achieve identifiable public benefits.  In determining an  
          appropriate timing for certifying an employee for a hiring  
          credit, opponents of the current process state that employers  
          need to be timely in their certificate application.

          The JEDE-led work group on enterprise zone reform has been  
          discussing a number of proposals to reform this process that  
          improve public accountability without rendering a credit that  
          fails to encourage a business to hire people in impacted  
          neighborhoods or others who face barriers to employment. 

          6)Issues related to administrative structure  :   Establishing a new  
           credit can be very challenging.  Below are a few issues the  
           author may wish to address as measure moves to its next  
           committee.

            a)   Offer pre-certification of qualifying career pathway  
              programs.  This bill limits the credit to only be available  
              to those businesses that enter into an MOU with a LEA that  
              administers or proposes to administer a career pathway  
              programs that meets certain criteria.  Most businesses would  
              have a difficult time knowing which LEAs were associated with  
              such programs and it may be more appropriate that the LEA be  
              held more statutorily responsible for those areas of the  
              career pathways programs that lie almost exclusively within  








                                                                 SB 974
                                                                 Page W
              their control.  

            b)   Clarify eligibility, threshold and priority rating and  
              ranking criteria.  Several sets of amendments have  
              potentially weakened the clarity of each of these elements.   
              Having these core elements more directly spelled out in the  
              bill will help the SPI in implementing the measure. 

            c)   Standardize or create models for the MOU between the  
              businesses and the LEA.  Significant detail is required in  
              the MOU between the business and the LEA.  Offering  
              flexibility can sometimes drive up the administrative costs  
              for the Department of Education.  Standardization could also  
              encourage other LEAs to more broadly market the program to  
              neighborhood businesses.

          7)Related legislation  :  The following is a list of related  
           legislation.

             a)   AB 121 (Maze) and AB 2709 (Maze) - Hiring Credit  
              Eligibility for Former Foster Youth  :  These bills would have  
              established a separate category of employee eligibility under  
              the California Enterprise Zone Program's hiring income tax  
              credit program to include a person who was a former foster  
              care recipient.  Status:  Held in Assembly Committee on  
              Revenue and Taxation during the 2007-08 Session.

             b)   AB 579 (Swanson) - LAMBRA Code Update  :  This bill would  
              have extended the official term of the designation of a  
              LAMBRA from eight to 15 years, except that the term may be  
              for 20 years if the Department of Housing and Community  
              Development determined that certain conditions existed in  
              year five.   Status:  Held in Assembly Committee on  
              Appropriations during the 2007-08 legislative session.

             c)   AB 1139 (John A. P?rez) - Enterprise Zone Hiring Credit  :   
              This bill proposed to make four changes to the G-TEDA  
              programs including:  

              i)     Establishing a two-tier hiring credit - one funding  
                level for jobs with health care and another for those  
                without;

              ii)    Requiring applications for hiring credit certification  
                to be submitted to the certifying agency within 21 days of  
                the commencement of employment;








                                                                 SB 974
                                                                 Page X

              iii)   Removing the targeted employment areas as an eligible  
                category for the issuance of hiring credits; and

              iv)    Requiring annual reporting from tax payers who have  
                vouchered an employee under the hiring credit.

              Status:  Held in JEDE in December 2010.
          
            d)   AB 1159 (V. Manuel P?rez) - Enhancement of Sales and Use  
              Credit for Cleantech Projects  :  This bill would have  
              established the California Cleantech Advantage Act of 2008  
              providing a targeted incentive to strengthen California's  
              competitive edge in the leading emerging clean technologies.   
              Status:  Held in Assembly Appropriations in May 2010.

             e)   AB 1550 (Arambula) - Final Enterprise Zone Reform Act from  
              2005-06 Session  :  This bill made a number of significant  
              changes to the management and oversight of the G-TEDA  
              programs.  This bill is the result of extensive oversight  
              hearings by JEDE and Revenue and Taxation, as well as  
              extended discussions with stakeholder groups.  Status:   
              Signed by the Governor, Chapter 718, Statutes of 2006.
         
             f)   AB 1766 (Dymally) - Initial Enterprise Reform Act from  
              2005-06 Session  :  This bill would have made a number of  
              significant changes to the G-TEDA Programs including  
              streamlining the selection criteria, authorizing  
              noncontiguous zones, extending certain zone designations, and  
              tightening up of the TEA.  Status:  Held on the Senate Floor  
              in the 2005-06 Session.

             g)   AB 2044 (Caballero) - Cap on Enterprise Zone Credits  :   
              This bill places annual caps on certain EZ related tax  
              credits and increases the basis for calculating the hiring  
              credit from 150% of minimum wage to 250%.  Status:  Author  
              chose to not pursue her own bill and is a joint author on AB  
              2476 (V. Manuel P?rez and Caballero).
          
            h)   AB 2589 (Runner) - Aggregate Credits to Offset Tax  
              Liability within Zones  :  This bill would have authorized a  
              business to use credits generated in an EZ to offset taxes  
              attributable to the business from any EZ.  Status:  Held in  
              the Assembly Committee on Revenue and Taxation during the  
              2005-06 Session.  









                                                                 SB 974
                                                                 Page Y
             i)   AB 2476 (V. Manuel P?rez) - Reform of TEA  :  This bill  
              would have tightened the criteria for designating a TEA for  
              the purposes of establishing one of thirteen worker  
              eligibility criteria under the EZ hiring tax credit  
              requirements.  Status:  Held in the Assembly Committee on  
              Appropriations in May 2010.
          
            j)   SB 1008 (Ducheny) - Initial Enterprise Reform Act from  
              2005-06 Session:   This bill would have made a number of  
              significant changes to the G-TEDA programs including  
              streamlining the selection criteria, authorizing  
              noncontiguous zones, extending certain zone designations, and  
              tightening up of the TEA.  Status:  Held in the Assembly  
              Committee on Jobs, Economic Development, and the Economy  
              during the 2005-06 Session.
          
            aa)  SB 341 (Lowenthal) - EZ CEQA Reform  :  This bill expanded  
              the ways in which a local government applying for an EZ  
              designation after October 1, 2007, may meet the requirements  
              of California Environmental Quality Act and eliminates the  
              ability of these jurisdictions to limit subsequent  
              environmental reviews based on the contents of the initial  
              CEQA documents.  Status:  Signed by the Governor, Chapter  
              643, Statutes of 2007.

             bb)  SB 763 (Lowenthal) - Voucher Fees  :  This bill expanded  
              HCD's fee authority for the purpose of offsetting the cost of  
              administering the geographically-targeted economic  
              development area programs.  Status:  Signed by the Governor,  
              Chapter 634, Statutes of 2006.

          8)Double Referral  :  The Assembly Committee on Rules has referred  
           this measure to JEDE and the Assembly Committee on Revenue and  
           Taxation (R&T).  Should SB 974 pass JEDE, it will be referred to  
           R&T for further consideration.

          REGISTERED SUPPORT / OPPOSITION  :

          Support 

          California Association School Business Officials
         Clovis Unified School District
         Los Angeles Unified School District
         Metropolitan Education District
         Metzer Farms
         San Diego Unified School District








                                                                 SB 974
                                                                 Page Z
         California Catholic Conference Inc.
          
           Opposition 
          


















































                                                                 SB 974
                                                                 Page A

           -------------------- 
          |7-Eleven Franchise  |
          |Owners of San Diego |
          |--------------------|
          |Ace Hardware, Long  |
          |Beach               |
          |--------------------|
          |ACE Parking         |
          |--------------------|
          |All American        |
          |Plastics, Inc.      |
          |--------------------|
          |Aloha Restaurants,  |
          |Inc.                |
          |--------------------|
          |Amazon Consultants  |
          |--------------------|
          |American Capital    |
          |and Money Centers   |
          |--------------------|
          |American National   |
          |Investments, Inc    |
          |--------------------|
          |Anderson & Doig     |
          |Structural          |
          |Engineers           |
          |--------------------|
          |Apex Advisors, Inc. |
          |--------------------|
          |Atlas               |
          |Transportation, LLC |
          |--------------------|
          |Atomic PR           |
          |--------------------|
          |Baja Mex Currency   |
          |Services, Inc.      |
          |--------------------|
          |Barbosa Cabinets,   |
          |Inc.                |
          |--------------------|
          |Basic Urban Kitchen |
          |--------------------|
          |BikeBandit.com      |
          |--------------------|









                                                                 SB 974
                                                                 Page B
          |Blum and Clark      |
          |Accounting Firm     |
          |--------------------|
          |Brawley Chamber of  |
          |Commerce            |
          |--------------------|
          |Brawley, City of    |
          |--------------------|
          |C&I Tax Consultants |
          |--------------------|
          |C&M Motors, Inc.    |
          |--------------------|
          |Caf? 222            |
          |--------------------|
          |Caf? Sevilla, Inc.  |
          |--------------------|
          |Cal Tax Group, Inc. |
          |--------------------|
          |California          |
          |Advocates, Inc.     |
          |--------------------|
          |California          |
          |Aerospace           |
          |Technology          |
          |Association         |
          |--------------------|
          |California          |
          |Association of      |
          |Enterprise Zones    |
          |--------------------|
          |California Bankers  |
          |Association         |
          |--------------------|
          |California Business |
          |Properties          |
          |Association         |
          |--------------------|
          |California Chamber  |
          |of Commerce         |
          |--------------------|
          |California          |
          |Employment          |
          |Opportunity Network |
          |--------------------|
          |California Grocers  |









                                                                 SB 974
                                                                 Page C
          |Association         |
          |--------------------|
          |California          |
          |Independent Grocers |
          |Association         |
          |--------------------|
          |California          |
          |Manufacturers and   |
          |Technology          |
          |Association         |
          |--------------------|
          |California          |
          |Retailers           |
          |Association         |
          |--------------------|
          |California Space    |
          |Authority           |
          |--------------------|
          |California          |
          |Taxpayers           |
          |Association         |
          |Carbon Tech Bio     |
          |Fuel & Bio          |
          |Generation          |
          |--------------------|
          |Caterpiller Inc.    |
          |--------------------|
          |Ceedub Construction |
          |--------------------|
          |Central California  |
          |Economic            |
          |Development         |
          |Corporation         |
          |--------------------|
          |Chabin Concept's    |
          |--------------------|
          |Chambers of         |
          |Commerce Alliance   |
          |of Ventura & Santa  |
          |Barbara Counties    |
          |--------------------|
          |Chula Vista, City   |
          |of                  |
          |--------------------|
          |Chung and Company,  |









                                                                 SB 974
                                                                 Page D
          |LLC                 |
          |--------------------|
          |CIBA Property       |
          |Management          |
          |--------------------|
          |Cinder Block, Inc.  |
          |--------------------|
          |City of Coalinga    |
          |--------------------|
          |City of Eureka      |
          |Enterprise Zone     |
          |--------------------|
          |City of Oroville    |
          |--------------------|
          |City of Porterville |
          |--------------------|
          |Citymark            |
          |Development, LLC    |
          |--------------------|
          |Clovis Chamber of   |
          |Commerce            |
          |--------------------|
          |Clovis, City of     |
          |--------------------|
          |Commercial          |
          |Transport Concepts, |
          |Inc.                |
          |--------------------|
          |Community Bank of   |
          |the Bay             |
          |--------------------|
          |Compete Consulting, |
          |LLC                 |
          |--------------------|
          |Contractors         |
          |Wardrobe, Inc.      |
          |--------------------|
          |County of Riverside |
          |--------------------|
          |Courtney Tires,     |
          |Inc.                |
          |--------------------|
          |Cowbay Star         |
          |--------------------|
          |Cozad Trailer       |









                                                                 SB 974
                                                                 Page E
          |Sales, LLC          |
          |--------------------|
          |Custom Woodworking  |
          |Products            |
          |--------------------|
          |CustomEyes          |
          |Optometry           |
          |--------------------|
          |Dairy Institute of  |
          |California          |
          |--------------------|
          |Dallo Enterprises,  |
          |Inc.                |
          |--------------------|
          |Dana Point Chamber  |
          |of Commerce         |
          |--------------------|
          |Del Monte Foods     |
          |--------------------|
          |Dillard's Inc.      |
          |E & E Industries    |
                   |--------------------|
          |Dos Amigos          |
          |Distribution. Inc.  |
          |--------------------|
          |Easy Cash Community |
          |Pawn Centers        |
          |--------------------|
          |Economic            |
          |Development         |
          |Corporation of      |
          |Oxnard              |
          |--------------------|
          |Economic            |
          |Development         |
          |Corporation serving |
          |Fresno County       |
          |--------------------|
          |Edgwater Grill      |
          |--------------------|
          |El Centro Chamber   |
          |of Commerce &       |
          |Visitors Bureau     |
          |--------------------|
          |Evapco West         |









                                                                 SB 974
                                                                 Page F
          |--------------------|
          |Exeter, City of     |
          |--------------------|
          |EZ Tax Credits, LLC |
          |--------------------|
          |Gateway Metro       |
          |Center LLC          |
          |--------------------|
          |Gatto, Pope &       |
          |Walwick, LLP        |
          |--------------------|
          |General Dynamics    |
          |NASSCO              |
          |--------------------|
          |Geological Technics |
          |Inc.                |
          |--------------------|
          |Golden Image Window |
          |Coverings           |
          |Gonzales, City of   |
          |--------------------|
          |Gourmet Fresh Pasta |
          |                    |
          |--------------------|
          |Greater Fresno Area |
          |Chamber of Commerce |
          |--------------------|
          |Grocery Outlet      |
          |--------------------|
          |Harbor House        |
          |Restaurant          |
          |--------------------|
          |Hassard Bonningtn   |
          |LLP                 |
          |--------------------|
          |HP Hood LLC         |
          |--------------------|
          |Indio Chamber of    |
          |Commerce            |
          |--------------------|
          |Integrated Marine   |
          |Services, Inc.      |
          |--------------------|
          |Interactive, Inc.   |
          |--------------------|









                                                                 SB 974
                                                                 Page G
          |International Paper |
          |--------------------|
          |International Surf  |
          |Ventures, Inc.      |
          |--------------------|
          |Jaylahn, LLC        |
          |--------------------|
          |Jillison & Roberts  |
          |--------------------|
          |Kieran Label Corp.  |
          |--------------------|
          |Kings County        |
          |Economic            |
          |Development         |
          |Corporation         |
          |--------------------|
          |Kuhler Associates   |
          |--------------------|
          |Leauge of           |
          |California Cities   |
          |Lemoore, City of    |
          |--------------------|
          |Lindsay, City of    |
          |--------------------|
          |Long Beach Area     |
          |Chamber of Commerce |
          |--------------------|
          |Long Beach Sierra   |
          |Associates          |
          |--------------------|
          |Los Angeles Area    |
          |Chamber of Commerce |
          |--------------------|
          |Los Angeles Cold    |
          |Storage Company     |
          |--------------------|
          |Lost Coast Brewery  |
          |& Caf?              |
          |--------------------|
          |Marcus & Millichap  |
          |--------------------|
          |Marine Service      |
          |Commercial Diving   |
          |--------------------|
          |Marza Consulting    |









                                                                 SB 974
                                                                 Page H
          |--------------------|
          |Mascarro Concrete   |
          |Construction Inc.   |
          |--------------------|
          |MD&CD, Inc.         |
          |--------------------|
          |Means and           |
          |Associates          |
          |--------------------|
          |Mejia's Ranchero,   |
          |Inc.                |
          |--------------------|
          |Merced County       |
          |--------------------|
          |Metal Supply Inc.   |
          |--------------------|
          |Michael L. Dworkin  |
          |and Associates      |
          |--------------------|
          |MIRA California USA |
          |Center, LLC         |
          |--------------------|
          |Mission Caf?        |
          |--------------------|
          |Modesto Chamber of  |
          |Commerce            |
          |--------------------|
          |Molina Healthcare   |
          |of California       |
          |--------------------|
          |Monterey County     |
          |Board of            |
          |Supervisors         |
          |--------------------|
          |Multimodal Esquer   |
          |--------------------|
          |National City       |
          |Chamber of Commerce |
          |--------------------|
          |National City, City |
          |of                  |
          |--------------------|
          |National Federation |
          |of Independent      |
          |Business            |









                                                                 SB 974
                                                                 Page I
          |--------------------|
          |National Mechanical |
          |Services            |
          |--------------------|
          |National Tax Credit |
          |Group, LLC          |
          |--------------------|
          |Noble & Company,    |
          |LLC                 |
          |--------------------|
          |Nor-Cal Foods, Inc. |
          |--------------------|
          |Oakland             |
          |Metropolitan        |
          |Chamber of Commerce |
          |--------------------|
          |O'Brothers          |
          |Restaurant          |
          |--------------------|
          |Orange County       |
          |Business Council    |
          |--------------------|
          |Otay Mesa Chamber   |
          |of Commerce         |
          |--------------------|
          |Overhead Door       |
          |--------------------|
          |Oxnard Chamber of   |
          |Commerce            |
          |--------------------|
          |Pacific Business    |
          |Centers             |
          |--------------------|
          |Pacific Credits     |
          |Group               |
          |--------------------|
          |Pacific Gas &       |
          |Electric            |
          |--------------------|
          |Pacific Lift and    |
          |Equipment           |
          |--------------------|
          |Pacific Real Estate |
          |--------------------|
          |Palm Desert Chamber |









                                                                 SB 974
                                                                 Page J
          |of Commerce         |
          |--------------------|
          |Paramount Windows   |
          |and Doors           |
          |--------------------|
          |Parlier, City of    |
          |--------------------|
          |Pasadena Enterprise |
          |Zone                |
          |--------------------|
          |Paul Mitchell       |
          |Partner Schools     |
          |--------------------|
          |Paul, Hastings,     |
          |Janofsky & Walker,  |
          |LLP                 |
          |--------------------|
          |Peppertree          |
          |Distributors, Inc.  |
          |--------------------|
          |Peterson, Slater,   |
          |Osborne Accountacy  |
          |Corporation         |
          |--------------------|
          |Pier Caf?           |
          |Pierson &           |
          |Associates          |
          |--------------------|
          |PJ's Desert         |
          |Trophies & Gifts ad |
          |McDowell Awards     |
          |--------------------|
          |Porterville Chamber |
          |of Commerce         |
          |--------------------|
          |Portfolio Realty    |
          |Management, Inc.    |
          |--------------------|
          |Professional        |
          |Solutions Group LLC |
          |--------------------|
          |Proper Gastropub    |
          |--------------------|
          |Rainbow Mart        |
          |--------------------|









                                                                 SB 974
                                                                 Page K
          |Reginal Economic    |
          |Association Leaders |
          |Coalition           |
          |--------------------|
          |Regional Economic   |
          |Association Leaders |
          |of California       |
          |--------------------|
          |Riverview Systems   |
          |Group, Inc.         |
          |--------------------|
          |SA Recycling        |
          |Salinas, City of    |
          |--------------------|
          |Salinas Valley      |
          |Enterprise Zone     |
          |--------------------|
          |San Diego Desserts  |
          |--------------------|
          |San Diego Pretzel   |
          |Co.                 |
          |--------------------|
          |San Diego Regional  |
          |Chamber of Commerce |
          |--------------------|
          |San Diego Workforce |
          |Partnership         |
          |--------------------|
          |San Francisco       |
          |Center for Economic |
          |Development         |
          |--------------------|
          |San Gabriel Valley  |
          |Economic            |
          |Partnership         |
          |--------------------|
          |San Jose, City of   |
          |--------------------|
          |San Ysidro Chamber  |
          |of Commerce         |
          |--------------------|
          |Sandicast           |
          |--------------------|
          |SC Design, Inc.     |
          |--------------------|









                                                                 SB 974
                                                                 Page L
          |Seat Advisors, Inc. |
          |--------------------|
          |Selma, City of      |
          |--------------------|
          |Sempra Energy       |
          |--------------------|
          |Seraplex            |
          |Biologicals         |
          |--------------------|
          |Sfparty             |
          |--------------------|
          |Side Bar            |
          |Silver Eagle        |
          |Construction        |
          |--------------------|
          |Sixth Avenue Bistro |
          |--------------------|
          |Skilled Healthcare  |
          |LLC                 |
          |--------------------|
          |Small Business      |
          |California          |
          |--------------------|
          |Sofia Hotel         |
          |Soledad, City of    |
          |--------------------|
          |South County        |
          |Economic            |
          |Development Council |
          |--------------------|
          |Southwest Airlines  |
          |--------------------|
          |Stingaree San Diego |
          |--------------------|
          |Stockton, City of   |
          |--------------------|
          |Summit Bank         |
          |--------------------|
          |Tactical Assault    |
          |Gear                |
          |--------------------|
          |Taft, City of       |
          |--------------------|
          |Targeted Management |
          |Company, Inc.       |









                                                                 SB 974
                                                                 Page M
          |--------------------|
          |Teasdale Quality    |
          |Foods               |
          |--------------------|
          |Tenacore Holdings   |
          |Inc.                |
          |--------------------|
          |The Enterprise Zone |
          |Co.                 |
          |--------------------|
          |The Fleetwood       |
          |--------------------|
          |The Incentives      |
          |Group               |
          |--------------------|
          |The Kebab Shop      |
          |--------------------|
          |The Tin Fish        |
          |--------------------|
          |The Walt Disney     |
          |Company             |
          |--------------------|
          |Tilted Kilt         |
          |--------------------|
          |Tittle & Company,   |
          |LLP                 |
          |--------------------|
          |Tooth Fairy Dental  |
          |Group               |
          |--------------------|
          |Troll Systems       |
          |Corporation         |
          |--------------------|
          |TUFF Acoustical and |
          |Thermal             |
          |--------------------|
          |Ultimate Beauty     |
          |Companies           |
          |--------------------|
          |Unity Forest        |
          |Products            |
          |--------------------|
          |Urban Industries    |
          |Embroidery          |
          |--------------------|









                                                                 SB 974
                                                                 Page N
          |Valley Industry &   |
          |Commerce            |
          |Association         |
          |--------------------|
          |Vermont Outlet,     |
          |Inc.                |
          |--------------------|
          |Visalia, City of    |
          |--------------------|
          |Walton Management   |
          |Services, Inc.      |
          |--------------------|
          |Waterfront Bar and  |
          |Grill               |
          |--------------------|
          |Watsonville, City   |
          |of                  |
          |--------------------|
          |Weir Floway, Inc    |
          |--------------------|
          |Western Growers     |
          |Association         |
          |--------------------|
          |Wincentive          |
          |Corporation         |
          |--------------------|
          |Windsor Mortgage    |
          |and Capital         |
          |--------------------|
          |Watsonville, City   |
          |of                  |
          |--------------------|
          |Wine Institute      |
          |--------------------|
          |Wine Steals         |
          |--------------------|
          |World Wide          |
          |Petroleum           |
          |--------------------|
          |WW Wholesale        |
          |--------------------|
          |Yreka Chamber of    |
          |Commerce            |
          |                    |
           -------------------- 









                                                                 SB 974
                                                                 Page O


           Analysis Prepared by  :    Toni Symonds / J., E.D. & E. / (916)  
          319-2090