Preserving enterprise zones, reviving bipartisanship

By Senator Anthony Cannella and Assemblymember Adam Gray
Tuesday, July 9, 2013

Published at the The Modesto Bee

Last week, the state Legislature voted to eliminate enterprise zones, a program that was established in 1984 to stimulate economic growth in our state's most depressed regions. Across the state, there are 42 enterprise zones, located in diverse locations such as downtown San Francisco and rural Shasta County. In our area, we have zones in Fresno, Merced and San Joaquin counties. The zones promote economic growth by providing tax credits and other incentives to entice businesses to relocate and grow in those areas. The enterprise zone program has been a valuable tool to bring new companies to the Central Valley.

Unfortunately there were problems with the way the benefits were being used, which created a blatant misuse of taxpayer money. The program had to be reformed. When Gov. Jerry Brown put the outright elimination of enterprise zones in his sights, we could see the writing on the wall. We didn't want to see enterprise zones go away, but he ultimately held the winning hand in the game.

The dirty little secret that no one really brought up in the debate over the future of the program was that as chief of the executive branch, the governor could have easily eliminated them through the Department of Housing and Community Development regulation. In the past month, the zones in Fresno, Arvin and Barstow failed their audits. They were given six months to achieve the unachievable and would have been dissolved. We spoke to the enterprise zones in our region, and they knew that they will not be able to stand up to new audit regulations that the governor could put in place unilaterally.

At the same time, the governor had his own plan for replacing the enterprise zone program and his staff met with legislators to explain what he wanted to have happen. Knowing where things were headed, we sat down to strategize what could be done to best serve our region. We knew that he needed votes to get his plan passed and that if we worked together, we would be able to find a compromise solution that would benefit the Central Valley. The governor's plan was a "one-size- fits-all" set of credits to spur growth across the state. The Central Valley is very different than the Bay Area, and his approach would have only penalized our more depressed areas.

We presented a plan to the administration that provided different criteria for areas that are still experiencing higher than average unemployment and poverty rates. For the businesses in those areas, they would be able to use certain tax credits for a longer period of time and would have a lower threshold to earn hiring tax credits. We also asked for agriculture industry tax credits to be expanded.

The governor appreciated that a Republican senator and a Democrat assemblyman were coming to him with a well-thought out plan, and he understood our arguments. With little time to spare, we negotiated feverishly through the day. Because certain members were leaving the Senate, if the bill did not pass, we would have missed our window. After making a handshake deal, our compromise bill passed the Senate late that night and was sent to the Assembly.

The Assembly did not have to act as quickly. This provided yet another opportunity to further the negotiations. We already understood that we had obtained some solid concessions that greatly benefited our region, but as representatives of our constituents, we had to work for more. Again, we came to the administration with another plan. Unfortunately, after seeing what happened in the Senate, there were assemblymen from other parts of the state that had their own ideas and were more than willing to negotiate with the governor. Discussions on the Assembly floor with administration officials went quickly, and the bill ended up passing with greater concessions from Brown.

It was an example of the political process working as it should, where a bipartisan group of lawmakers came together with the governor to find a solution that worked best for a state as diverse as ours. We eliminated the parts of the program that were being abused. We created a new "pilot program" for the former enterprise zones that needed greater assistance. We left the table with a solid compromise that benefited our constituents.

As many people are aware, gridlock has become a mainstay in Sacramento. The infighting and inability to work across the aisle has been a disservice to the people of California. We hope this serves as a model for the future. We demonstrated that you can work together and do what is best for the state.