The recent report by the Public Policy Institute of California, PPIC has created quite a stir
in the economic development community.  See articles at CalBizBlog, Enterprise Zones: To
Eliminate or not to Eliminate, that is the Question and Response to the Question. The
PPIC report acted as fire fodder for negative press when it identified that Enterprise Zones do
little to create jobs.  But, several economic developers have entered the fray creating the
economic development practitioners versus the media pundits in a debate on the subject.
While the media pundits decreed the elimination of the Zones as a waste of good tax dollar
monies, economic developers responded with positions of their own.

Three economic developers, Bill Bassitt executive director of the Stanislaus Economic
Development and Workforce Alliance and Bruce Stenslie President /CEO of the Ventura County 
Economic Development Collaborative along with Steve Kinney, President of the EDC of Oxnard
provide interesting insight in recent articles.

The following is an excerpt from an article in the July 2, 2009 edition of the Ventura Star - Enterprise
Zones, a boon for California’s Economy by Stenslie and Kinney.

“To understand why cities seek an enterprise-zone designation, and to evaluate its merits, it’s
important to understand how it works. Enterprise zones are tied to areas that suffer higher-than-average
unemployment and poverty. Businesses within an enterprise zone may receive tax credits for hiring
new workers, but only for workers who reside within the enterprise zone or who face serious barriers
to employment. The benefits for Oxnard are unique. We have high levels of joblessness in neighborhoods
near the city’s industrial and commercial districts, but a disconnect between employers and residents.
An enterprise-zone designation will place a premium on the skills developed by workers in the city,
by rewarding business with a tax incentive for training and hiring local workers.”

“Stories that are critical of enterprise zones conveniently leave out or downplay this point about worker
opportunity. The goal of an enterprise zone is not just to increase the bottom line of business; rather it
is to incentivize opportunity for local workers, creating pathways for workers to benefit from business
growth.”

Those gains for workers decrease tax outlays for public supports. The single most serious impact of
this recession is increasing unemployment. More than ever, we should be looking for ways to promote
jobs, particularly for those hardest hit by the recession, and that’s exactly what enterprise zones do.
On the subject of whether California is doing enough to promote economic development, we draw
readers’ attention to the Milken Institute report that documents how California is losing high-paying
manufacturing jobs to other states, precisely owing to our lack of any proactive agenda to retain them.”

“California’s economic future rests on our ability to retain business and promote entrepreneurship. When
we become truly dedicated to and effective at that, we’ll create jobs and opportunity for California’s workers.”

To view the full article, go to:
http://www.venturacountystar.com/news/2009/jul/02/enterprise-zones-a-boon-for-California-economy/

Additionally, Bill Bassitt wrote the following article: Enterprise Zone Working Well Here, which appeared
in the June 26, 2009 edition of the Modesto Bee.

For the record, the act that created enterprise zones speaks only of the creation of job opportunities
and says specifically, "it is declared to be the purpose of this chapter to stimulate business and industrial
growth in the depressed areas of the state by relaxing regulatory controls that impede private investment."

It states further, "It is in the interest of the state to have one strong, combined and business-friendly
incentive program to help attract business and industry to the state, to help retain and expand existing
state business and industry, and to create job opportunities for all Californians."

Short of a national industrial policy that prohibits states and localities from employing any type of incentive
program to attract businesses to locate in their areas, success will be afforded to those that recognize the
needs of business and respond with incentives that encourage expansion and growth that would not occur
without them.

There is a record number of unemployed in the state of Georgia. That state recently spent $96 million in
incentives to entice NCR to locate a corporate headquarters and a production facility with 2,120 jobs into
the state.

Connecticut, with a two-year billion-dollar budget deficit, is offering loans and tax credits to encourage
companies to expand or locate into the state. North Carolina has enacted legislation giving corporate
income tax relief to companies willing to locate in distressed areas. Most states have multiple incentive
programs for business.

California is the eighth largest economy in the world. Certainly lots of companies need to be here. But it
also is the sixth most expensive state for businesses.

For this state to be business competitive, incentives of a comparable nature must be offered to companies
who have a choice on their operational locations. The California Enterprise Zone program is one type of
incentive that businesses can use to help calculate the bottom line cost of operating in this state.

Zone 40, the original enterprise zone designated for Stanislaus County, was authorized in 2005.
Following several expansions to allow equal participation for all communities in the county, the zone
encompasses approximately 75,000 acres of predominately industrial- and commercial-zoned land.

In the past 18 months, 683 people have been employed in new positions with companies located in the
county. In that same period, 4,489 people have been hired for existing positions. More than 250 companies
have participated in hiring more than 5,000 county residents, employing many who could not have found
work without this program. This proves, in spite of the PPIC's claim, that the enterprise zone is working
well for Stanislaus County.

Others agree that enterprise zones work. A new study from USC professor John Ham and others reveals
that enterprise zones are bright spots in areas lagging in economic development and employment.
California's Housing and Community Development department commissioned a study shows that compared
to the rest of California, the enterprise zones had a 7.35 percent drop in poverty rates; a 7.1 percent increase
in household incomes; and a 3.5 percent increase in salaries. Further, they concluded that enterprise zones
increased employment by 2.2 percent. As we face double-digit unemployment, any increase in jobs looks
pretty good.

Do you agree or disagree?  This debate is probably not going away any time soon with the issue of the budget
and the deficit  let alone the need to keep California competitive.  What are your thoughts?

  
Tim Johnson
tjohnson@CaliforniaBusinessMinute.com