Enterprise zones don't create jobs in California, study says

 

As Gov. Jerry Brown tackles California's budget deficit, many programs that provide benefits to businesses are on the chopping block. Brown wants to eliminate both enterprise zones, which give businesses tax credits, and redevelopment agencies.

On Monday, a state assembly budget committee will hear testimony from supporters and detractors of enterprise zones, including the vice president of GREEN Vehicles Inc., a company located in Salinas, Calif., because of its enterprise zone.

But enterprise zones may be a good program to cut, according to an analysis released Monday by the California Budget Project. The analysis shows that big corporations benefit most from the enterprise zones, but that jobs don't necessarily follow.

"Our review of the most up-to-date data on the Enterprise Zone Program finds its cost has soared, but our communities haven't seen the jobs and economic growth they were promised," said Jean Ross, executive director of the California Budget Project.

The analysis shows that the cost of enterprise zone tax credits grew to $465.5 million in 2008, the latest year for which data are available, from $675,000 in 1986. The average cost per zone increased to $11.1 million in 2008, from $48,000 in 1986.

In addition, 70% of tax breaks related to enterprise zones are claimed by corporations with assets of $1 billion or more. Many of those corporate tax credits in 2008 were claimed by companies in the San Francisco zone, costing the state $25.5 million.

The data echoes a 2009 report by Jed Kolko, with the Public Policy Institute of California, which found that enterprise zones have no overall effect on job growth. The nonpartisan Legislative Analyst's Office has agreed, recommending in 2010 that enterprise zones be eliminated.

The issue is, however, a controversial one. Some observers claim that doing away with enterprise zones is illegal. Others cite a 2009 study by USC professors that showed that enterprise zones increase employment by 2% and household income by 7%, while reducing poverty.

“The governor’s proposal to eliminate enterprise zones is not only legally questionable, but will also increase taxes, put a further burden on the jobs climate and disadvantage communities who are already struggling during these though times," said Craig Johnson, president of the California Assn. of Enterprise Zones. "While we understand the state is facing a tough economic time, the last thing the state should be doing is raising taxes, making it more difficult to hire and eliminating one of the few programs that helps people get off government assistance and on to self-sustainability.”