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Civic leaders speak out on enterprise zones

Local politicians and civic leaders gathered on the loading dock of a Chula Vista air duct factory on June 6 to voice their support for San Diego County’s Enterprise Zone, a huge swath of territory that offers tax breaks and other incentives aimed at encouraging businesses to locate and expand in the region.

With heavy machinery clattering in the background, the mayors of National City and Chula Vista and representatives from the San Diego City Council, Port of San Diego and South County Economic Development Corp. spoke out against Gov. Jerry Brown’s recent proposal to eliminate California’s 40 enterprise zones and replace them with a statewide package of tax cuts and hiring incentives.

“I understand that there’s a legitimate need to streamline programs and make them more efficient, but this is the wrong place to cut,” said National City Mayor Ron Morrison.

Chula Vista Mayor Cheryl Cox said enterprise zones “are the only remaining tool that local governments can use to help create new jobs.”

The state began creating enterprise zones in 1986 to promote economic development in low-income areas and encourage businesses to hire veterans, welfare recipients, the disabled, the long-term unemployed and ex-convicts.

San Diego’s enterprise zone stretches from the Mexican border to Chula Vista, with separate pockets in Rancho Bernardo, Eastlake Business Park, Kearny Mesa, Mira Mesa and Mission Bay. Businesses within the zone can get tax credits for hiring disadvantaged workers or investing in manufacturing and production equipment, and banks that lend to them can deduct the net interest income on the loans.

Supporters of the program say it helps spur development in areas with high unemployment. But critics -- including Gov. Brown -- have questioned its value, saying it often rewards employers for business decisions they would have made anyway and that many of the neighborhoods it benefits, such as Rancho Bernardo, are relatively well-to-do.

But the speakers at the Plenums Plus factory in Chula Vista disagreed.

Plenums Plus owner Jim Copp said the program helped him maintain a work force about 15 percent higher than he normally would. And it has led him to hire workers with lower skills than he would normally employ, since the tax credits give him enough money to provide them with on-site training.

“We’re a union shop with union pay, so normally I’d look for experienced workers instead of people right off the street, since I couldn’t afford to train them,” he said.

Steve Johnston, owner of YYK Enterprises, which specializes in ship repair work and pipe retrofitting, among other things, said the enterprise zone credits have helped him grow his company from 18 employees to roughly 220 in the past five years. He says he has saved close to half a million dollars on the program, which he has pumped back into investing in equipment.

Morrison said that within the past two weeks he has talked to two sets of foreign investors who have been drawn to Chula Vista partly because of the enterprise zone: a manufacturing concern from Iraq and a set of Chinese investors who are interested in developing an import-export and retail complex.

“The enterprise zone was a huge push for them,” he said. “But when the state starts jumping on these things, it can be very short-sighted.”

Brown does not want to abandon the concept altogether. Instead, he wants to replace it with a statewide sales tax cut for manufacturing and R&D equipment, as well as a much smaller credit for hiring veterans or the chronically unemployed.

South County EDC president Cindy Gompper-Graves says the enterprise zones have room for improvement, but added that Brown’s plan would reduce the number of workers that could benefit from the program and would take away local oversight of the program, instead putting it in the hands of bureaucrats in Sacramento.

Brendan Foote, senior vice president of tax credit services for Hughes Marino in San Diego, which specializes in enterprise zone tax issues, said a bill currently floating through the Assembly provides a better fix for the program by imposing tighter geographic restrictions on the zones and making the zones more transparent, effective and accountable to the public.

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