New Enterprise Zone Boosts Spirits at City Hall : Business: Officials beset with budget worries are cheered by the designation, which gives tax breaks to companies in the area.
Battered by budget woes and the threatened shutdowns of some of Long Beach’s biggest employers, local leaders were all smiles over this week’s news that the state had named most of the city’s commercial areas an enterprise zone.
“It’s nice to talk about nice things for a change,” said City Councilman Jeffrey A. Kellogg, who helped lead the effort to win the enterprise designation for Long Beach.
Rooted in Republican policy-makers’ fondness for private-public partnerships, enterprise zones are intended to spark economic growth and create jobs by giving companies state tax breaks and other financial incentives.
But their record in California and other states suggests that they are by no means a cure-all for the economic ills of a community. Sometimes they haven’t even been much of a shot in the arm.
The enterprise zone in Watts, for instance, has failed to push that troubled Los Angeles district up the social and economic ladder.
“They have enterprise zones out there that have not been successful,” acknowledged Kellogg. But he insists that the program will work in Long Beach.
State officials point to cities such as San Diego and the Central Valley community of Porterville as examples of enterprise zones that have worked.
In San Diego’s Barrio Logan zone, companies taking advantage of the program’s hiring tax credits have put about 1,400 people to work since 1986. Expansion and renovation of existing industries has also greatly increased, said Michael Jenkins, San Diego’s enterprise zone coordinator.
In Porterville, a city of about 30,000 at the edge of the western Sierra Nevada, City Manager Guy Huffaker says an enterprise zone recently helped snag a huge retail distribution center for his community, which has suffered from double-digit unemployment.
“As a result of the zone we have companies that are interested in Porterville that probably wouldn’t even have known about us if it weren’t for the enterprise zone,” Huffaker said. “We have been extremely pleased. It’s been very, very helpful to us.”
Wal-Mart, one of the largest retail chains in the nation, is opening a 1.1-million-square-foot distribution center in Porterville that should eventually employ 1,000 workers.
Whether the potential tax savings of an enterprise zone really lured the company to Porterville is something of a question, however. Wal-Mart officials have indicated that the quality of the local work force and the city’s proximity to major highways were more important to their choice of a location than the enterprise zone.
Long Beach’s zone covers most of its industrial and commercial areas, including about 3,500 businesses of every size. Because of limits on the program’s tax credits, the zone is likely to be of the greatest help to small or medium companies rather than the largest firms.
“It’s a good thing for the community,” commented McDonnell Douglas spokesman Don Hanson, whose company operates a local plant with 35,000 workers, making it the largest employer in Long Beach. “It’s going to be useful to us to some extent, but it’s really more useful to smaller companies.”
Moreover, the uncertain future of some of the city’s most important employers is tied more to national issues than to matters within local or even state control. Post-Cold War slashes in defense spending are threatening to close both the Long Beach Naval Station and the naval shipyard. McDonnell Douglas has been cutting its local work force--by 8,000 last year--to reduce its overall company costs. And the firm is thinking of going out of state for future expansions to escape from Southern California’s high cost of living and environmental regulations.
Nonetheless, local business leaders say the zone is an important element in efforts to attract and maintain jobs in a city with an above-average number of poor. “Is it going to be the one thing that will keep McDonnell Douglas here? No,” remarked Randal Hernandez of the Long Beach Chamber of Commerce. “Is it going to help? Yes.”
Long Beach’s zone is one of 10 formed in the state this year, bringing the number of enterprise zones in California to 29. With the enterprise designation, businesses in the zones are eligible for millions of dollars in tax breaks and financial incentives from the state.
For example, a firm that hires employees from targeted worker-training or job-development programs could receive $19,000 in tax credits per employee over a five-year period, said Samuel Paredes, manager of the zone program in the state Department of Commerce.
Businesses can also carry their operating losses over to future years to reduce their state tax liability, and they can qualify for tax credits on certain equipment purchases.
“The zone will help business’s bottom line. It’s something tangible,” Hernandez said.
Enterprise Zone
Enterprise zones are areas where incentives are offered by the state to stimulate investment and growth. Long Beach’s enterprise zone is one of 10 formed in the state this year, bringing the number of such zones in California to 29.
Businesses in the enterprise zone will be:
* eligible for millions of dollars of tax breaks and financial incentives from the state;
* eligible to carry their operating losses over to future years to reduce their state tax liability;
* eligible to qualify for tax credits on certain equipment purchases.
