BILL ANALYSIS
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THIRD READING
Bill No: AB 1554
Author: Assembly Jobs, Econ. Develop., and the Economy
Committee
Amended: 8/5/10 in Senate
Vote: 27 - Urgency
SENATE TRANSPORTATION & HOUSING COMMITTEE : 10-0, 7/7/09
AYES: Lowenthal, Huff, Ashburn, DeSaulnier, Harman,
Hollingsworth, Kehoe, Pavley, Simitian, Wolk
NO VOTE RECORDED: Oropeza
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 73-0, 5/14/09 (Consent) - See last page
for vote
SUBJECT : Economic development area reports
SOURCE : Author
DIGEST : This bill (1) 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, (2) makes other technical changes to
economic development area statutes, and (3) provides for a
15-year recapture provision for farmworker housing tax
credits.
Senate Floor Amendments of 9/4/09 add a new issue to the
bill by providing that farmworker housing tax credits
CONTINUED
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issued prior to 2009 (when the program was consolidated
into the larger low-income housing tax credit program) are
subject to recapture for failure to fulfill the obligations
of the program for 15 years from the first year in which
the credits are claimed, as opposed to 30 years as the law
previously required and add and urgency clause.
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 percent 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, 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.
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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:
1. 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.
2. Requires that the six-year HCD report differentiate
between the progress of EDAs designated before January
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1, 2007 and those designated thereafter.
3. Revises 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).
4. Corrects a number of mistaken cross-references.
5. Provides that farmworker housing tax credits issued
prior to 2009 are subject to recapture for failure to
fulfill the obligations of the program for 15 years from
the first year in which the credits are claimed, as
opposed to 30 years as the law previously required.
Background
This bill is the Assembly Jobs, Economic Development and
the Economy's Committee'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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
ASSEMBLY FLOOR :
AYES: Adams, Anderson, Arambula, Beall, Bill Berryhill,
Tom Berryhill, Blakeslee, Block, Blumenfield, Brownley,
Buchanan, Caballero, Charles Calderon, Carter, Chesbro,
Conway, Cook, Coto, Davis, De La Torre, De Leon, DeVore,
Duvall, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,
Fuller, Furutani, Galgiani, Gilmore, Hagman, Hall,
Harkey, Hayashi, Hernandez, Hill, Huber, Huffman,
Jeffries, Jones, Knight, Krekorian, Lieu, Logue, Bonnie
Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande,
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Niello, Nielsen, John A. Perez, V. Manuel Perez,
Portantino, Price, Ruskin, Salas, Silva, Skinner,
Solorio, Audra Strickland, Swanson, Torlakson, Torres,
Torrico, Tran, Villines, Yamada
NO VOTE RECORDED: Ammiano, Fuentes, Gaines, Garrick,
Saldana, Smyth, Bass
JJA:do 8/17/10 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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