BILL ANALYSIS
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: AB 1554
SENATOR ALAN LOWENTHAL, CHAIRMAN AUTHOR: ASM JOBS
VERSION: 6/30/09
Analysis by: Mark Stivers FISCAL: Yes
Hearing date: July 7, 2009
SUBJECT:
Economic development area reports
DESCRIPTION:
This bill resets the date and frequency for the Department of
Housing and Community Development to report to the Legislature
on the effect of the enterprise zone program and makes other
technical changes to economic development area statutes.
ANALYSIS:
The state currently designates four types of economic
development areas (EDAs) intended to attract and retain
businesses in economically challenged communities. Within each
area, local governments provide business development incentives
and the state provides business tax incentives.
Under existing law, the Department of Housing and Community
Development (HCD) may designate up to 42 enterprise zones.
Within an enterprise zone, cities and counties can relax
regulatory controls such as permits 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,
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, deduction of interest
earned by lenders who loan money to enterprise zone businesses,
AB 1554 (ASSEM JOBS) Page 2
and an election to expense rather than amortize equipment used
within the enterprise zone.
The other three economic development area programs are the Local
Agency Military Base Recovery Area (LAMBRA) Program, the
Manufacturing Enterprise Areas (MEA) Program, and the Targeted
Tax Area (TTA) Program. There are currently eight LAMBRAs, two
MEAs, and one TTA. The four programs differ in the types of
businesses that are eligible for tax credits and the range of
available credits, but from an administrative perspective are
essentially the same. For each of the programs, HCD designates
new areas, acts upon requests for expansion or extension of a
particular zone, provides technical assistance, and ensures the
integrity of the hiring tax credit vouchering system.
Current law requires HCD to submit a report to the Legislature
every five years that evaluates the effect of the enterprise
zone program on employment, investment, incomes, and state and
local tax revenues in designated enterprise zones. The report
must also include a review of the progress and effectiveness of
each enterprise zone. This section of law goes back to the time
when the now-defunct Technology, Trade, and Commerce Agency
(TTCA) administered the program, and the law required TTCA to
submit these reports by January 1, 1998 and January 1, 2003.
HCD took over all EDA programs from TTCA on January 1, 2004.
State law required HCD to submit a report by January 1, 2008
even though it had administered the enterprise zone program for
less than five years and had very little data from TTCA for
prior years. As a result, HCD did not submit the report.
Current law also requires the governing board of any EDA to
report to HCD by October 1 of every even-numbered year on the
activities of the EDA during the previous two fiscal years and
its plans for the coming two years. The report must
specifically evaluate the EDA's progress toward the goals,
commitments, and objectives it agreed to in its memorandum of
understanding (MOU) with HCD and compare the level of financial
and in-kind support provided to the EDA with the commitments
made in the MOU. The legislative bodies of the entities making
up the EDA must review the progress of the EDA in meeting the
goals, commitments, and objectives of the MOU at least every two
years, either by itself or in conjunction with approval of the
EDA's work plan.
This bill :
AB 1554 (ASSEM JOBS) Page 3
Resets the dates by which HCD must report to the Legislature
on the effect of the enterprise zone program to December 31,
2010 and requires that first report to cover the time period
from January 1, 2004 when HCD took over administration of the
program until July 1, 2010. Thereafter, HCD shall report
every six years with information covering the previous six
fiscal years.
Requires that the six-year HCD report differentiate between
the progress of EDAs designated before January 1, 2007 and
those designated thereafter.
Deletes the requirement that the legislative bodies of the
local jurisdictions comprising an EDA review the progress of
the EDA every two years. (The governing board of the EDA must
still review and adopt the biennial report it submits to HCD,
which includes a description of the progress made by EDA.)
Corrects a number of mistaken cross-references.
COMMENTS:
Purpose of the bill . This bill is the Assembly Jobs, Economic
Development and the Economy's omnibus bill for issues related to
EDAs, which makes technical, non-controversial changes to the
statutes governing EDAs. The committee's policy is to remove
any item that becomes controversial. The most substantive of
the changes involves resetting the due date and frequency for
HCD's report to the Legislature on enterprise zones, so that HCD
can report on the full length of time since it assumed
administration of the program and so that subsequent reports can
build off the information submitted by EDAs every two years.
Assembly Votes:
Floor: 73-0
Appr: 16-0
Assembly Jobs: 7-0
POSITIONS: (Communicated to the Committee before noon on
Wednesday,
July 1, 2009)
SUPPORT: None received.
OPPOSED: None received.