BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 133|
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CONSENT
Bill No: SB 133
Author: DeSaulnier (D)
Amended: As introduced
Vote: 21
SENATE TRANSPORTATION & HOUSING COMMITTEE : 11-0, 4/2/13
AYES: DeSaulnier, Gaines, Beall, Cannella, Galgiani, Hueso,
Lara, Liu, Pavley, Roth, Wyland
SUBJECT : Enterprise Zone Act: applications
SOURCE : Author
DIGEST : This bill prohibits enterprise zone applications
submitted on or after January 1, 2014, from expanding or
aggregating of two existing enterprise zones by more than 15%.
ANALYSIS : The Legislature created the enterprise zone program
three decades ago to help grow jobs and businesses in the most
economically distressed areas of the state. The program intends
to help disadvantaged groups, such as veterans and public
benefit recipients, receive those jobs. The Department of
Housing and Community Development (HCD) designates geographic
areas as enterprise. HCD may designate up to 42 zones and each
zone is designated for 15 years.
Geographic areas are eligible based on factors such as
unemployment rates, free-lunch program participation, median
income, plant closures, or history of gang-related activity.
HCD selects enterprise zones through a competitive process based
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on the appropriateness of the applicant's proposed economic
development strategy and implementation plan. Additionally, HCD
awards bonus points for the most economically challenged areas.
Within an enterprise zone, cities, and counties can relax
government controls such as permit and development fees, provide
tax incentives, expand infrastructure, and target federal grants
for education, health and welfare, economic development,
vocational education, transportation, and housing. The state
provides a number of tax credits and deductions for businesses,
including credits for sales and use tax paid on manufacturing
equipment purchased, hiring credits for qualified employees,
100% net operating loss carryover for losses associated with
operations within the enterprise zone businesses, and election
to expense rather than amortize equipment used within the
enterprise zone.
The most significant of these tax credits is the hiring credit.
Employers within an enterprise zone may claim a credit of 50% of
the wages paid to a qualified employee in the first year, 40% in
the second year, 30% in the third year, 20% in the fourth year,
and 10% in the fifth year. In order to claim a hiring credit, a
business must obtain a voucher from the enterprise zone.
Existing law places a restriction on the expansion of an
existing enterprise zone during its 15 year term. An enterprise
zone may not expand more than 15% in size from its size on the
date of original designation, unless the zone is no greater than
13 square miles. In the latter case, the zone may increase no
more than 20% in size from its size on the date of original
designation. There is no limit on expansion when a zone applies
for redesignation at the end of its 15-year term.
This bill, for applications submitted on or after January 1,
2014:
1. Limits the ability to expand enterprise zones at
reapplication.
2. States that if any portion of the proposed zone is within,
or previously was within, the boundaries of a
previously-designated enterprise zone, then the aggregate
size of the proposed zone cannot exceed the size of the
previously-designated zone by 15%.
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3. States that if any portions of the proposed zones are
within, or previously were within, the boundaries of two or
more previously-designated zones, the aggregate size of the
proposed zone cannot exceed the size of the largest single
previously-designated zone by more than 15%.
Comments
Purpose of this bill . The author's office states that these
changes seek to ensure that the goals of the Enterprise Zone Act
are realized by targeting the most economically distressed areas
of California. When zones combine, the zone area increases.
This makes the zone less valuable and runs counter to the intent
of the program to serve distinct communities. Placing limits on
increases in zone growth helps to secure scarce state funding
for targeted areas to create jobs for disadvantaged groups and
grow businesses.
Increasing zone sizes . Data on enterprise zone re-approval has
shown that, as of June 1, 2010, HCD reapproved 28 enterprise
zones for 15 years. Of those, 12 zones have grown by more than
15%. Over the last decade, the average size of an enterprise
zone has increased almost 500%. Most of the increase is driven
by the expansion or combination of zones when they apply for
re-designation at the end of their original 15-year lifespan.
For example, the San Joaquin County zone has grown to 19 times
its original size. Additionally, San Diego, Los Angeles, and
Sacramento have increased in area by 11, 12, and 22 times,
respectively because in the reapplication, these cities
aggregated previously designated zones. Los Angeles decreased
from five to two zones, Sacramento decreased from three to one
zone, and San Diego decreased from two to one zone. Aggregating
zones allows for the increase in the cap on the number of zones
without legislative authorization.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 4/2/13)
City of Pittsburg
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JA:k 4/3/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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