Chamber Responds to Governor Schwarzenegger's Announcement of the Enterprise Zones

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Long Beach-(November 3, 2006) - Long Beach Area Chamber of Commerce Vice Chair for Economic Development Blake Christian issued the following statement today to the media on Governor Schwarzenegger’s announcement of 6 Enterprise Zones in Los Angeles County to push economic development.

The Chamber is delighted to learn from the California Business Transportation and Housing Agency that Governor Schwarzenegger has granted conditional approval to extend the Long Beach Enterprise Zone program for an additional 15 years. The EZ program offers Long Beach and 41 other cities throughout the state with a great economic stimulus and a competitive offset to businesses operating in one of the highest tax states in the country.

Although Governor Schwarzenegger has already produced over half a million jobs in California, valuable programs like this will only further economic development, helping California as a whole, and also benefiting Long Beach businesses and residents.

We are pleased to see that Governor Schwarzenegger is continually initiating programs that will help growth throughout the state and in Long Beach. By offering tax credits, preference points on state contracts, and up-front expensing of certain depreciable property, businesses can gain similar benefits as the 1990-2000 Enterprise Zones, which experienced over a 7 percent drop in poverty and over a 7 percent rise in household income, compared to the rest of the state.

Finally, we look forward to working with the businesses, city staff and residents of Long Beach to ensure maximum utilization of the Enterprise Zone program. We are eager to promote tax saving initiatives that help businesses and residents, and we thank Governor Schwarzenegger for this program that will be an advantage to the entire Long Beach area.

BACKGROUND:

Businesses within Enterprise Zones are eligible for substantial tax credits and benefits including:

  • Firms can earn $31,234 or more in state tax credits for each qualified employee hired.
  • Corporations can earn sales tax credits on purchases of $20 million per year of qualified machinery and machinery parts.
  • Up-front expensing of certain depreciable property.
  • Lenders to Zone businesses may receive a net interest deduction.
  • Unused tax credits can be applied to future tax years, stretching out the benefit of the initial investment.
  • Enterprise Zone companies can earn preference points on state contracts.
  • Up to 100% Net Operating Loss (NOL) carryforward. NOL may be carried forward 15 years.

In August, Gov. Schwarzenegger released a report commissioned by HCD that evaluated the success of Enterprise Zones in spurring economic recovery. The report shows that from 1990 to 2000 Enterprise Zones on average experienced:

  • Poverty Rates: declined 7.35 percent more than the rest of the State
  • Unemployment Rates: declined 1.2 percent more than the rest of the State
  • Household Incomes: increased 7.1 percent more than the rest of the State
  • Wage and Salary Income: increased 3.5 percent more than the rest of the State

The next step in the designation process will be the Department of Housing and Community Development's (HCD) issuance of a conditional designation letter to each of the new zones. The letters will outline conditions that must be met to be granted final designation. Examples of conditions include preparation of an Environmental Impact Report and a signed memorandum of understanding with the Department, which includes performance measures and benchmarks.