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Employers, unions argue over Enterprise Zones

During a four-hour hearing at Liberty Station last week, local business leaders warned that they might cut back hiring or leave the area if Sacramento tinkers too heavily with the Enterprise Zone program, which provides tax credits and other incentives aimed at spurring job creation.

But an array of union representatives charged that the program has done little to spur growth and often rewards companies for hiring they may have done even without the incentives.

The hearing came as Gov. Jerry Brown's administration is finalizing a new set of restrictions on the tax credits that the program provides companies for hiring veterans, ex-convicts, the disabled and workers from low-income communities.

Colin Parent, director of external affairs at the California Department of Housing and Community Development, who oversaw the hearing, estimates the state could save $55 million a year by tightening restrictions on the program.

But the program's backers urged him to think of the tax credits as an investment in the labor force, ensuring that the zones will retain existing workers as well as attracting new ones.

“There are some rumblings about this being a public giveaway program, but I personally know many workers -- especially wounded warriors -- who have specifically benefited from the program,” said Dan Dufresne, director of government relations at Epsilon Systems, a military contractor in Mission Valley.

Dufresne said the tax-credit program has helped Epsilon hire several dozen veterans with post-traumatic stress disorder as well as a number of ex-convicts. One of the ex-convicts, who was hired as a low-paid laborer, has since worked his way up to foreman.

The Brown administration is not proposing getting rid of the program. But it wants more proof that employers actually fit the program’s requirements -- for instance, that their new hires actually live in a low-income, high-unemployment neighborhood, which is one of the program's criteria.

Cindy Gompper Graves, who heads the South County Economic Development Corp., complained that some of the changes could discourage companies from hiring such workers.

She added that the Enterprise Zones have helped create jobs in the South County, and was a key factor in attracting a meat packing plant from Vista to Otay Mesa.

The company had outgrown its Vista facilities and Colorado and Texas were trying to lure it away. But Graves -- working with civic and government agencies throughout the region -- helped arrange a site that would qualify for tax breaks as an Enterprise Zone and a Foreign Trade Zone.

The company bought a larger facility than it had in Vista and has since hired 200 workers, she said.

But union members complained that the zones sometimes encourage businesses to relocate from one area of California to another just to take advantage of its subsidies for low-cost labor. Yesenia Cabral, a representative of the food workers union, said Coca-Cola had moved one of its Southern California bottling plants 25 miles just so it could be in an Enterprise Zone.

“It becomes a tool in union-busting, subsidizing companies for hiring people at lower rates of pay,” she said.

On the other hand, Sam Sinasohn, global tax manager of ResMed Inc. (NYSE: RMD), said the program has been a key factor in keeping companies in California. “And more jobs means less poverty,” he said.

Sinasohn said that ResMed, which makes equipment to combat sleep apnea, has been evaluating how long it will keep its headquarters here, especially after being actively courted by South Carolina and Texas.

But ResMed decided to remain in the area — at least for now — after its headquarters was placed in a newly created Enterprise Zone last September.

“When we were informed that we were in a new zone, we felt like expanding,” Sinasohn said

The union representatives at the meeting complained that many of the jobs being created through the program are low-wage jobs that earn tax breaks for the employer no matter what salary the worker earns.

“Nobody knows who’s getting his tax credit or what they’re doing with the money,” said long-time San Diego teacher Bill Freeman.

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