BILL NUMBER: SB 511 CHAPTERED 09/24/00 CHAPTER 616 FILED WITH SECRETARY OF STATE SEPTEMBER 24, 2000 APPROVED BY GOVERNOR SEPTEMBER 23, 2000 PASSED THE SENATE AUGUST 30, 2000 PASSED THE ASSEMBLY AUGUST 29, 2000 AMENDED IN ASSEMBLY AUGUST 24, 2000 AMENDED IN ASSEMBLY AUGUST 18, 2000 AMENDED IN ASSEMBLY JUNE 19, 2000 AMENDED IN SENATE JANUARY 5, 2000 AMENDED IN SENATE JANUARY 3, 2000 AMENDED IN SENATE MAY 10, 1999 INTRODUCED BY Senator Alarcon (Principal coauthor: Assembly Member Havice) FEBRUARY 18, 1999 An act to amend Sections 7072 , 7073, and 7074 of, and to repeal Section 7073.3 of, the Government Code, relating to economic development. LEGISLATIVE COUNSEL'S DIGEST SB 511, Alarcon. Enterprise zones. The Enterprise Zone Act provides for the designation of enterprise zones by the Trade and Commerce Agency according to specified criteria, pursuant to which certain entities may receive regulatory, tax, and other incentives for private investment and employment. The act provides for the designation of enterprise zones by the Trade and Commerce Agency upon that agency's approval of applications from a city, county, or city and county. The act authorizes the expansion of existing enterprise zones based upon certain criteria. This bill would authorize additional criteria upon which an enterprise zone may be based, authorize a joint powers authority to administer an enterprise zone, and require the Trade and Commerce Agency to provide special consideration or bonus points, or both, to enterprise zone applications meeting at least 2 of specified demographic criteria. This bill would revise the criteria for the expansion of existing enterprise zones, as specified. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 7072 of the Government Code is amended to read: 7072. For purposes of this chapter, the following definitions shall apply: (a) "Agency" means the Trade and Commerce Agency. (b) "Date of original designation" means the earlier of the following: (1) The date the eligible area receives designation as an enterprise zone by the agency pursuant to this chapter. (2) In the case of an enterprise zone deemed designated pursuant to subdivision (e) of Section 7073, the date the enterprise zone or program area received original designation by the agency pursuant to Chapter 12.8 (commencing with Section 7070) or Chapter 12.9 (commencing with Section 7080), as those chapters read prior to January 1, 1997. (c) "Eligible area" means any of the following: (1) An area designated as an enterprise zone pursuant to Chapter 12.8 (commencing with Section 7070), as it read prior to January 1, 1997, or as a targeted economic development area, neighborhood development area, or program area pursuant to Chapter 12.9 (commencing with Section 7080), as it read prior to January 1, 1997. (2) A geographic area that, based upon the determination of the agency, fulfills at least one of the following: (A) The proposed geographic area meets the Urban Development Action Grant criteria of the United States Department of Housing and Urban Development. (B) The area within the proposed zone has experienced plant closures within the past two years affecting more than 100 workers. (C) The city or county has submitted material to the agency for a finding that the proposed geographic area meets criteria of economic distress related to those used in determining eligibility under the Urban Development Action Grant Program and is therefore an eligible area. (D) The area within the proposed zone has a history of gang-related activity, whether or not crimes of violence have been committed. (3) A geographic area that meets at least two of the following criteria: (A) The census tracts within the proposed zone have an unemployment rate not less than 3 percentage points above the statewide average for the most recent calendar year as determined by the Employment Development Department. (B) The county of the proposed zone has more than 70 percent of the children enrolled in public school participating in the federal free lunch program. (C) The median household income for a family of four within the census tracts of the proposed zone does not exceed 80 percent of the statewide median income for the most recently available calendar year. (d) "Enterprise zone" means any area within a city, county, or city and county that is designated as such by the agency in accordance with the provisions of Section 7073. (e) "Governing body" means a county board of supervisors or a city council, as appropriate. (f) "High technology industries" include, but are not limited to, the computer, biological engineering, electronics, and telecommunications industries. (g) "Resident," unless otherwise defined, means a person whose principal place of residence is within a targeted employment area. (h) "Targeted employment area" means an area within a city, county, or city and county that is composed solely of those census tracts designated by the United States Department of Housing and Urban Development as having at least 51 percent of its residents of low- or moderate-income levels, using either the most recent United States 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 that eligibility. The purpose of a "targeted employment area" is to encourage businesses in an enterprise zone to hire eligible residents of certain geographic areas within a city, county, or city and county. A targeted employment area may be, but is not required to be, the same as all or part of an enterprise zone. A targeted employment area's boundaries need not be contiguous. A targeted employment area does not need to encompass each eligible census tract within a city, county, or city and county. The governing body of each city, county or city and county that has jurisdiction of the enterprise zone shall identify those census tracts whose residents are in the most need of this employment targeting. Only those census tracts within the jurisdiction of the city, county, or city and county that has jurisdiction of the enterprise zone may be included in a targeted employment area. At least a part of each eligible census tract within a targeted employment area shall be within the territorial jurisdiction of the city, county, or city and county that has jurisdiction for an enterprise zone. If an eligible census tract encompasses the territorial jurisdiction of two or more local governmental entities, all of those entities shall be a party to the designation of a targeted employment area. However, any one or more of those entities, by resolution or ordinance, may specify that it shall not participate in the application as an applicant, but shall agree to complete all actions stated within the application that apply to its jurisdiction, if the area is designated. Each local governmental entity of each city, county, or city and county that has jurisdiction of an enterprise zone shall approve, by resolution or ordinance, the boundaries of its targeted employment area, regardless of whether a census tract within the proposed targeted employment area is outside the jurisdiction of the local governmental entity. SEC. 2. Section 7073 of the Government Code is amended to read: 7073. (a) Except as provided in subdivision (e), any city, county, or city and county with an eligible area within its jurisdiction may complete a preliminary application for designation as an enterprise zone. The applying entity shall establish definitive boundaries for the proposed enterprise zone and the targeted employment area. (b) (1) In designating enterprise zones, the agency shall select from the applications submitted those proposed enterprise zones that, upon a comparison of all of the applications submitted, indicate that they propose the most effective, innovative, and comprehensive regulatory, tax, program, and other incentives in attracting private sector investment in the zone proposed. (2) For purposes of this subdivision, regulatory incentives include, but are not limited to, all of the following: (A) The suspension or relaxation of locally originated or modified building codes, zoning laws, general development plans, or rent controls. (B) The elimination or reduction of fees for applications, permits, and local government services. (C) The establishment of a streamlined permit process. (3) For purposes of this subdivision, tax incentives include, but are not limited to, the elimination or reduction of construction taxes or business license taxes. (4) For the purposes of this subdivision, program and other incentives may include, but are not limited to, all of the following: (A) The provision or expansion of infrastructure. (B) The targeting of federal block grant moneys, including small cities, education, and health and welfare block grants. (C) The targeting of economic development grants and loan moneys, including grant and loan moneys provided by the federal Urban Development Action Grant program and the federal Economic Development Administration. (D) The targeting of state and federal job disadvantaged and vocational education grant moneys, including moneys provided by the federal Job Training Partnership Act of 1982 (P.L. 97-300). (E) The targeting of federal or state transportation grant moneys. (F) The targeting of federal or state low-income housing and rental assistance moneys. (G) The use of tax allocation bonds, special assessment bonds, bonds under the Mello-Roos Community Facilities Act of 1982 (Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5), industrial development bonds, revenue bonds, private activity bonds, housing bonds, bonds issued pursuant to the Marks-Roos Local Bond Pooling Act of 1985 (Article 4 (commencing with Section 6584) of Chapter 5), certificates of participation, hospital bonds, redevelopment bonds, school bonds, and all special provisions provided for under federal tax law for enterprise community or empowerment zone bonds. (5) In the process of designating new enterprise zones, the agency shall take into consideration the location of existing zones and make every effort to locate new zones in a manner that will not adversely affect any existing zones. (6) In designating new enterprise zones, the agency shall include in its criteria the fact that jurisdictions have been declared disaster areas by the President of the United States within the last seven years. (7) When reviewing and ranking new enterprise zone applications, the agency shall give special consideration or bonus points, or both, to applications from jurisdictions that meet at least two of the following criteria: (A) The percentage of households within the census tracts of the proposed enterprise zone area, the income of which is below the poverty level, is at least 17.5 percent. (B) The average unemployment rate for the census tracts of the proposed enterprise zone area was not less than five percentage points above the statewide average for the most recent calendar year as determined by the Employment Development Department. (C) The applicant jurisdiction has, and can document that it has, a unique distress factor affecting long-term economic development, including, but not limited to, resource depletion, plant closure, industry recession, natural disaster, or military base closure. (c) In evaluating applications for designation, the agency shall ensure that applications are not disqualified solely because of technical deficiencies, and shall provide applicants with an opportunity to correct the deficiencies. Applications shall be disqualified if the deficiencies are not corrected within two weeks. (d) (1) Except as provided in paragraph (2), or upon dedesignation pursuant to subdivision (c) of Section 7076.1 or Section 7076.2, a designation made by the agency shall be binding for a period of 15 years from the date of the original designation. (2) The designation period for any zone designated pursuant to either Section 7073 or 7085 prior to 1990 may total 20 years, subject to possible dedesignation pursuant to subdivision (c) of Section 7076.1 or Section 7076.2, if the following requirements are met: (A) The zone receives a superior or passing audit pursuant to subdivision (c) of Section 7076.1. (B) The local jurisdictions comprising the zone submit an updated economic development plan to the agency justifying the need for an additional five years by defining goals and objectives that still need to be achieved and indicating what actions are to be taken to achieve these goals and objectives. (e) (1) Notwithstanding any other provision of law, any area designated as an enterprise zone pursuant to Chapter 12.8 (commencing with Section 7070) as it read prior to January 1, 1997, or as a targeted economic development area, neighborhood economic development area, or program area pursuant to Chapter 12.9 (commencing with Section 7080) as it read prior to January 1, 1997, or any program area or part of a program area deemed designated as an enterprise zone pursuant to Section 7085.5 as it read prior to January 1, 1997, shall be deemed to be designated as an enterprise zone pursuant to this chapter. The effective date of designation of the enterprise zone shall be that of the original designation of the enterprise zone pursuant to Chapter 12.8 (commencing with Section 7070) as it read prior to January 1, 1997, or of the program area pursuant to Chapter 12.9 (commencing with Section 7080) as it read prior to January 1, 1997, and in no event may the total designation period exceed 15 years, except as provided in paragraph (2) of subdivision (d). (2) Notwithstanding any other provision of law, any enterprise zone authorized, but not designated, pursuant to Chapter 12.8 (commencing with Section 7070) as it read prior to January 1, 1997, shall be allowed to complete the application process started pursuant to that chapter, and to receive final designation as an enterprise zone pursuant to this chapter. (3) Notwithstanding any other provision of law, any expansion of a designated enterprise zone or program area authorized pursuant to Chapter 12.8 (commencing with Section 7070) as it read prior to January 1, 1997, or Chapter 12.9 (commencing with Section 7080) as it read prior to January 1, 1997, shall be deemed to be authorized as an expansion for a designated enterprise zone pursuant to this chapter. (4) No part of this chapter may be construed to require a new application for designation by an enterprise zone designated pursuant to Chapter 12.8 (commencing with Section 7070) as it read prior to January 1, 1997, or a targeted economic development area, neighborhood economic development area, or program area designated pursuant to Chapter 12.9 (commencing with Section 7080) as it read prior to January 1, 1997. (f) Notwithstanding any other provision of law, a city, county, or a city and county may designate a joint powers authority to administer the enterprise zone. (g) No more than 39 enterprise zones may be designated at any one time pursuant to this chapter, including those deemed designated pursuant to subdivision (e). Upon the expiration or termination of a designation, the agency is authorized to designate another enterprise zone to maintain a total of 39 enterprise zones. SEC. 3. Section 7073.3 of the Government Code is repealed. SEC. 4. Section 7074 of the Government Code is amended to read: 7074. (a) In the case of any enterprise zone, including an enterprise zone formerly designated as an enterprise zone pursuant to Chapter 12.8 (commencing with Section 7070) as it read prior to January 1, 1997, or as a program area pursuant to Chapter 12.9 (commencing with Section 7080) as it read prior to January 1, 1997, a city or county, or city and county may propose that the enterprise zone be expanded by 15 percent to include definitive boundaries that are contiguous to the enterprise zone. (b) The agency may approve an enterprise zone expansion proposed pursuant to this section based on the following criteria: (1) Each of the adjacent jurisdictions' governing bodies approves the expansion by adoption of an ordinance or resolution. (2) Land included within the proposed expansion is zoned for industrial or commercial use. (3) Basic infrastructure, including, but not limited to, gas, water, electrical service, and sewer systems, is available to the area that would be included in the expansion. (c) An enterprise zone may propose to use eligible expansion allotment to expand into an adjacent jurisdiction pursuant to this section if the agency finds that all of the following conditions exist: (1) The governing body of the local agency with jurisdiction over the existing enterprise zone and the governing body of the local agency with jurisdiction over the proposed expansion area each approve the expansion by adoption of an ordinance or resolution. The ordinance or resolution by the jurisdiction containing the proposed expansion area shall indicate that the jurisdiction will provide the same or equivalent local incentives as provided by the jurisdiction of the existing enterprise zone. (2) (A) Land included within the proposed expansion is zoned for industrial or commercial use. (B) An expansion area may contain noncommercial or nonindustrial land only if that land is a right-of-way and is needed to meet the requirement for a contiguous expansion between an existing enterprise zone and a proposed expansion area. (3) Basic infrastructure, including, but not limited to, gas, water, electrical service, and sewer systems, is available to the area that would be included in the expansion. (4) The expansion area is contiguous to the existing enterprise zone. (d) (1) Except as otherwise provided in paragraph (2), in no event shall an enterprise zone be permitted to expand more than 15 percent in size from its size on the date of original designation, including any expansion authorized pursuant to Chapter 12.8 (commencing with Section 7070), or Chapter 12.9 (commencing with Section 7080), as those chapters read prior to January 1, 1997. (2) If an enterprise zone, on the date of original designation, is no greater than 13 square miles, it may be permitted to expand up to 20 percent in size from its size on the date of original designation.