SACRAMENTO (AP) — The Assembly passed a hard-fought overhaul of California's enterprise zone program on Thursday that was sought by Gov. Jerry Brown after he called the system wasteful and ineffective.
The Assembly sent AB93 to the governor, marking the second major victory over local business-incentive programs for the Democratic governor in the past two years.
He previously eliminated community redevelopment agencies, saying they directed property tax revenues into slush funds for private developers rather than distributing money to school districts and police and fire departments.
Brown initially wanted to eliminate enterprise zones, as well, but settled on a compromise after it became clear his first proposal would not receive enough support to pass the Legislature.
AB93 passed 55-16 in the Assembly, gaining the supermajority vote needed after two initial attempts fell short. The Senate stayed in session deep into the night on Tuesday until a two-thirds majority was secured.
"This is a big, bipartisan win for California businesses and working people," Brown said in a statement after the Assembly vote. "AB 93 will help grow our economy and create good manufacturing jobs."
Brown had insisted on the changes as part of the state budget for the coming fiscal year. He has said communities abused the enterprise zone incentive program by providing unneeded tax breaks to businesses, including strip clubs and retailers that pay low wages.
The changes, backed by labor groups and some businesses, will redirect the program's $750 million in tax credits on three new economic development efforts, focusing on companies that add or retain well-paying jobs.
A sales tax exemption would be created for manufacturing or research-and-development equipment, a benefit that businesses groups have been seeking for years. Other credits would be available for hiring veterans and the long-term unemployed.
Assemblyman Mike Gatto, D-Los Angeles, described the current system as "a state-managed form of crony capitalism" that has not worked as intended.
"Enterprise zones rarely are the catalyst for creating new jobs," he said. "They most often just simply shift them from one part of the state to another."
Assembly Republicans who spoke against the bill said the tax breaks proposed in the bill being sent to the governor are available for too short a period of time. The exemption would be available to some businesses for four-and-a-half years, but several Republicans said it should be extended to 10 years.
Offering incentives only for short periods of time does not provide business owners with enough certainty and cost-savings to entice them to relocate, said Assemblywoman Shannon Grove, R-Bakersfield.
"That's kind of like a feel-good statement to think that you're going to be able to offer that to business and they're going to come here and invest in our state," she said.
Among the measure's opponents was the League of California Cities, which said undoing the enterprise zone program would eliminate the sole economic development program available to local governments.
The new tax breaks "won't come close" to what the enterprise program did to encourage development, said Kirstin Kolpitcke, the league's legislative representative.
"The state made a deal with enterprise zones and now they're taking it back," Kolpitcke said.
Related changes added to a separate bill, SB90, on Thursday could allow hiring credits for employing welfare-to-work participants. The new provisions also would prevent enterprise zone tax breaks from going to strips clubs, which occurred in Sacramento County.
Further changes are needed to fix conflicting sections of AB93 that were pointed out by opponents.
SB90 cleared the Assembly Local Government Committee and awaits a vote by the full Assembly. If approved, it will go to the state Senate.