Close of session avoids major overhaul of enterprise zones

By CMTA Staff

Capitol Update, Sept. 15, 2006 Share this on FacebookTweet thisEmail this to a friend

In August 2005, legislation surfaced to reform the state's Enterprise Zone (EZ) program. Interest in doing a major overhaul to the program continued through the 2006 legislative year. While Senators Mike Machado (D-Linden) and Denise Moreno Ducheny (D-San Diego) advocated for changes on the Senate side, Assemblymember Juan Arambula (D-Fresno), Chair of the Assembly Jobs, Economic Development and the Economy Committee, was pushing hard on the Assembly side. The thrust of the Machado/Ducheny effort, among other things, was to limit the hiring credit and to provide for extending the life of Enterprise Zones. Assemblymember Arambula held informational hearings over four months and developed 46 recommendations for reform.

During the summer, the wind behind the larger reform effort subsided. Administration staff made it clear that the Governor was unlikely to sign any bills that granted extension options for zones and the business community remained opposed to raising taxes on EZ employers.

In the final weeks of the session, a compromise was reached to provide much needed statutory authority for EZs that are in the process of applying for new EZ designation. The problem arises because an EZ may receive a "conditional" designation, but the time until the final designation can be significant. During this "gap" period it is unclear whether an EZ can continue to operate and whether businesses in the EZ can continue to receive EZ tax benefits. AB 1550 (Arambula) allows the EZ benefits to continue during this period. AB 1550 also improves the program by allowing noncontiguous areas to be included in EZ boundaries.

CMTA supports AB 1550 and is requesting the Governor sign this important solution for EZ employers. With regard to larger EZ reform efforts, key legislators involved with the issue this year have indicated their interest in seeking broader reforms to the program in 2007.


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