City officials to lobby for enterprise zones

Gov. Jerry Brown’s proposal to make significant changes to the California Enterprise Zone tax incentive program has Porterville officials concerned.

So much so, that the city manager and mayor plan to drive more than 230 miles north to attend a public hearing in Sacramento Thursday and speak on the proposed regulations they say would negatively impact local business and economic development.

The state’s 29-year-old enterprise zone program is designed to encourage business investment and new jobs by giving employers tax credits for hirings in economically depressed areas. Much of Tulare County is included in an enterprise zone.

Businesses can receive up to $37,000 for each qualified employee hired. Unclaimed tax credits can also be applied to future tax years.

“There’s a couple of targets,” Porterville City Manager John Lollis said about the governor’s proposal. “One is the people who make money off of enterprise zones and the reason the governor’s opposed to them is because they’re tax breaks — it impacts the state’s coffers.”

The regulatory reform would limit retro-vouchering — requiring all voucher applications to be made within a year of an employee’s hire. The proposal would also require third-party verification of the employee’s residence within a Targeted Employment Area — an area that is made up of census tracts where at least 51 percent of its residents are low- or moderate-income levels.

Lollis said that under the new criteria, several census tracts in West Porterville, including tracts in the North Creek and Porter Creek neighborhoods, would not qualify as reporting areas.

Though that doesn’t mean such businesses wouldn’t qualify for the tax credits, it would make for a more difficult process, Lollis said.

Brown’s proposal would also streamline the vouchering process for hiring veterans and recipients of public aid and create stricter zone audit procedures and audit failure procedures.

“Primarily, it could affect our economic development,” Mayor Virginia Gurrola said about Brown’s plan.

Gurrola said she thinks the new regulations will harm small businesses because they wouldn’t be able to keep up with the documentation required due to smaller staff.

Additionally, it could affect larger businesses looking to locate in Porterville.

“The incentives that are offered to industries coming to Porterville could make the difference in whether that company comes here or not,” she said. “We’re not saying that perhaps there needs to be some changes, but we also don’t want to eliminate the ability to offer that to companies as well.”

The regulations are expected to increase the state’s general fund revenue by $10 million this fiscal year and $50 million the 2013-14 fiscal year.

Brown wanted to eliminate the $700 million enterprise zone program altogether in 2011, arguing that the system is flawed and wastes hundreds of millions of tax dollars.

The governor lacked the state Legislature’s support and drew back from his proposal.

In his 2013-14 budget proposal, the Brown administration intends to pursue further reform through legislation.

Contact Denise Madrid at 784-5000, ext. 1047. Follow her on Twitter @DeniseMadrid_.