BILL ANALYSIS �
AB 2673
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Date of Hearing: April 17, 2012
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
V. Manuel P�rez, Chair
AB 2673 (Jobs, Economic Development, and the Economy Committee)
- As Introduced: March 5, 2012
SUBJECT : Geographically Targeted Economic Development Areas
(G-TEDA)
SUMMARY : Increases reporting requirements for
Geographically-Targeted Economic Development Areas (G-TEDA) to
better capture the community impact of tax credits awarded
through the program. Specifically, this bill :
1)Requires the governing board of each G-TEDA to include in
their biannual report to the Department of General Services
(DGS) the state and federal resources assessed to serve the
residents, workers and businesses in the G-TEDA, including the
financial value of local incentives provided.
2)Requires the G-TEDA to report information based on the
certification applications approved in the zones relating to
the hiring credit including:
a) The number of jobs for which certifications have been
issued.
b) The number of new employees for whom certifications have
been issued.
c) The number of employees replacing previous employees for
whom certifications were issued.
d) The number of employees by qualified employee category
pursuant to Sections 17053.74 and 23622.7 of the Revenue
and Taxation Code.
e) The total range of, and the average, median, and mean,
employee wage rates that were certified.
f) The number of businesses obtaining certification for
qualified employees.
g) The industry classification, based on the North American
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Industry Classification System, of businesses obtaining
certification of qualified employees.
h) The distribution of employee certifications among
industry sectors based on the North American Industry
Classification System.
i) The distribution of employee certifications by the
annual receipts and asset value of the business obtaining
qualified employee certifications.
j) The number of state-certified small businesses that
submitted qualified employee certification applications.
aa) The number of state-certified, disabled veteran-owned
business enterprises that submitted applications.
EXISTING LAW: Establishes that the governing board of each
G-TEDA shall biennially report to DGS the activities of the
G-TEDA in the previous two fiscal years and its plans for the
current and following fiscal year, in addition to other
specified items.
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's purpose : According to the author, "AB 2673 makes a
number of key administrative changes to the G-TEDA code
including allowing the Housing and Community Development
Department (HCD) to use census block group data in lieu of
census track data.
Absent this change, HCD will be unable to use census block
group data when the US Census Bureau discontinues using census
track data later this year. The bill also expands the
reporting requirements of G-TEDAs to better capture the
community impact of tax credits awarded under the program.
These are non-controversial changes to current law that
improve the operation of the G-TEDA program."
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2)Overview of enterprise zones and other geographically-targeted
economic development areas : The California Enterprise Zone
Program and the other geographically-targeted economic
development areas (G-TEDAs) represent the state's primary
economic development programs in California. Eligibility for
G-TEDA designation is limited to areas within communities that
can demonstrate blighted conditions such as high poverty or
high unemployment rates.
The Department of Housing and Community Development (HCD)
administers four G-TEDA programs including: Enterprise Zones
(EZs), Manufacturing Enhancement Areas (MEAs), Local Agency
Military Base Realignment Areas (LAMBRAs), and the Targeted
Tax Area (TTA).
G-TEDA programs are based on the principle that targeting
significant economic incentives to low-income communities
allows these communities to more effectively compete for new
businesses and retain existing businesses, resulting in
increased tax revenues, less reliance on social services, and
lower public safety costs. Residents and businesses directly
benefit from these more sustainable economic conditions
through improved neighborhoods, business expansion, and job
creation.
The 42 EZs, eight LAMBRAs, two MEAs and one TTA are located in
portions of 54 Assembly Districts and 34 Senate Districts.
Each zone designation is for a period of 15 years, although
the initial zones were given an additional five years due to
the slow start-up of the program. No other extensions have
been authorized.
G-TEDAs range in size from one square mile to over 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. With the approval of the 2006
reforms (discussed in the next section), each designated area
is governed by a comprehensive economic strategy that details
local government commitments, benchmarks, and baselines.
3)The pursuit of comprehensive 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. The impetus for these hearings,
jointly held by Assembly Committee on Jobs, Economic
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Development and the Economy (JEDE) and the Assembly Committee
on Revenue and Taxation (R&T), was the introduction of several
comprehensive and controversial reform efforts in 2004.
During the course of these first oversight hearings, the
committees struggled to develop a framework for evaluating the
state's return on investment.
Due to the lack of clear data and the state's poor
administration of the program when it was overseen by the now
defunct Technology, Trade and Commerce Agency, JEDE's focus
shifted to improving the transparency and accountability of
the G-TEDA programs as a first step toward broader reform
efforts. Following the three hearings, publication of a final
report, and extended work group meetings led by 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].
The requirements of the 2006 reforms were just coming into
effect when there were new calls for further G-TEDA reforms in
2009. In preparing to vote on another set of comprehensive
reforms, JEDE initiated a second round of hearings, which
included an 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 updated report that detailed the
structure and activities of the G-TEDA programs. Speakers
included economic development practioners, researchers,
nonprofit organizations, local governments, labor, and
business leaders.
A final summary report of the proceedings was released by JEDE
in January 2010. It included a comparative review of how
California's program compared to other state's enterprise zone
programs, summaries of each hearing and a list of 100 reform
recommendations. The JEDE report made five key findings,
including the need for more structure and accountability
mechanisms within the tax incentives and the need to better
link workforce development into the overall G-TEDA framework.
In March 2010 Speaker John A. P�rez asked JEDE Chairman V.
Manuel P�rez to convene a working group to review the final
report recommendations and develop a comprehensive set of
reforms to the G-TEDA programs. The working group, comprised
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of representatives from local government, labor and the
business community, met extensively through the spring and
summer of 2010 on the premise that they would put forward a
consensus-based set of reforms. Key program revisions under
discussion included:
a) Increasing accountability of the program;
b) Tighter targeting of tax incentives to low and moderate
income households;
c) Reforms to the 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.
Ultimately, one of the primary stakeholder groups withdrew
from the negotiations based on its position that the overall
reform package must result in a substantially smaller program
and perhaps be only limited to the state's rural areas.
1)Census tracks : Discussions at the federal level indicate that
the U.S. Census Bureau will no longer be reporting median
family income through the decennial census by census tracts.
Policy makers are currently considering instead using a
one-to-five year snapshot of household income as determined by
the American Community Survey and reported by census block
groups. These discussions are ongoing but in anticipation of
a possible change, this bill authorizes the Housing and
Community Development Department (HCD) to use both census
track and census block group data.
2)Overview of national and California economic and employment
trends : Post-recession analysis traditionally divides the
economic cycle into two stages: recovery and expansion.
Recovery describes the period of GDP growth occurring after
the economy hits bottom, or the "trough, and gives way to
expansion when GDP growth surpasses its previous peak. Given
this definition, the national economy entered the expansion
phase of the economic cycle during the third quarter of 2011,
when annualized GDP reached $13.38 trillion, surpassing the
previous GDP peak of $13.36 trillion in the fourth quarter of
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2007. At a more practical level, the US economy added an
average 152,000 net new jobs a month in 2011. In December
2011 and January 2012, however, the economy added 203,000 and
243,000 net new jobs respectively, pushing national
unemployment down to 8.3%.
At the state level, the California economy has also been
improving at a steady pace. Between 2010 and 2011,
unemployment fell from a high of 12.4% to 11.8% in 2011. In
January 2012 the unemployment rate fell even further to 10.9%,
its lowest rate in three years. In terms of nonfarm jobs
gains from 2010 to 2011, the state outperformed the national
labor market with 1.4% growth compared to 1.2% nationally. In
fact, the state registered job growth across most industries
with the largest percentage gains coming from Information,
Education, and Administrative Support Services. Only Real
Estate and Leasing, Government, Management of Enterprises and
Other Services, saw continued job losses in 2011 but on a
small scale than previous years.
In terms of international trade, the state continued to see
sustained growth with the value of two-way trade increasing
11.9% from 2010 (based on year-to date data from January
through November 2011). The rate was slower than the increase
registered in 2010 when the value of two-way trade surged
21.6% over 2009. In 2011, however, the value of imports grew
by 11% while the value of exports through the state's custom
districts rose by 13.8%. It should be noted that while
exports only account for a third of the value of two-way
trade, they suffered a smaller decline through the recession
and have come back more strongly than imports as demand from
Asian trading partners continues to be strong.
According to the March 2012 UCLA Anderson Forecast, state
unemployment should improve to an average of 9.8% in 2013.
Overall, the Forecast calls for a steady decrease in the
California unemployment rate over the next two years,
following a slow trajectory towards single-digit unemployment
by the end of 2013 and reaching 7.7% by the end of 2014. In
addition, according to Chapman University's A. Gary Anderson
Center for Economic Research, the California Composite Index,
a measure of overall manufacturing activity, increased to 60.3
in the second quarter of 2012, up from 56.6 during the first
quarter. Historically, readings above 50 indicate expansion
in the manufacturing sector. This is significant because,
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according to an analysis by the Milken Institute, for every
job created in manufacturing, 2.5 jobs are created in other
sectors. At the upper bound, electronic computer
manufacturing has a multiplier effect of 16 jobs.
3)Related legislation : Below is a list of bills related to this
measure from the current and prior sessions.
a) AB 2630 (Hueso) Small Business Outreach : This bill will
require the Department of General Services, in preparing
its report on state contracting activity, to include a list
of activities and outcomes each state agency used to inform
small businesses of each of the existing preferences
available under state law, and an aggregate number of the
number of preferences used in bidding packages for the
year. Status: The bill will be heard on April 17th in the
Assembly Committee on Jobs, Economic Development, and the
Economy.
b) AB 2672 (JEDE) Procurement Omnibus: Requires each
awarding state agency to prepare and share a yearly report
to the Department of General Services on the level of
participation by enterprise zones in contracts with the
Housing and Community Development Department. Status: The
bill will be heard on April 17th in the Assembly Committee
on Jobs, Economic Development, and the Economy.
c) AB 1411 (V. Manuel Perez) Comprehensive Enterprise Zone
Reform : This bill reforms elements of the state's
Enterprise Zone Program to make it more transparent,
cost-effective, aligned to community development
objectives, and accountable to the public and the
communities it serves. Status: The bill is pending in the
Senate Committee on Appropriations.
REGISTERED SUPPORT / OPPOSITION :
Support
Assembly Committee on Jobs, Economic Development and the Economy
(Sponsor)
California Association of Enterprise Zones
Opposition
AB 2673
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None Received
Analysis Prepared by : Oracio Gonzalez / J., E.D. & E. / (916)
319-2090