San Diego Enterprise Zones Have Pros, Cons
CAVANAUGH: This is KPBS Midday Edition. I'm Maureen Cavanaugh. A group of business leaders and politicians gather today in Chula Vista in support of state enterprise zones. Those are designated business areas that offer tax breaks and other incentives to employers in an effort to stimulate job growth. The zones are in danger of being replaced by a new system of economic stimulus supported by Governor Jerry Brown. Critics of enterprise zones say they are not working to boost job growth as originally planned. Joining me to discussed issue of my guest, Ron Morrison, mayor of National City. Welcome to the show. MORRISON: Thank you for having me. CAVANAUGH: And Richard Barrera is here, Secretary Treasurer of the San Diego and Imperial County Labor Union and member of San Diego Unified School District's Board of Education. BARRERA: Great to be here. CAVANAUGH: Mayor Morrison, tell us about the rally held today in Chula Vista. What was the message you wanted to get out? MORRISON: I think the message was basically that we had not only the politicians but also business people and people that are interested in job creation in the South Bay realizing this is a program that may be there are flaws somewhere in the state, but within the South Bay, it has been working and has been very productive and has made sense. So I think that's the message we were wanting to get across. When we take a look at programs, and I don't know the government program anywhere that does not need improvement, so let's sit down and look and make the improvements. But basically throwing the program out to start another state bureaucracy, that's something we have a real problem with. CAVANAUGH: Who was there in support of the enterprise zones today? MORRISON: We had from the City of San Diego, Chula Vista, National City, the three cities affected within this zone. Elected representatives from there. Then also the chambers of commerces from those cities. Business people, large and small business people that have been affected by this. Then we also had people from the community themselves who their lifestyle has been changed because of this program. CAVANAUGH: Now, mayor, where are enterprise zones located in your city, National City? MORRISON: In my city, all the area that is commercial and industrial in National City. We're kind of unique in that way, is covered by the enterprise zone. So the only areas that are not are the residential zones. CAVANAUGH: How has being designated an enterprise zone changed the economic picture of National City? MORRISON: Well, it's changed drastically in that as we talk to businesses that have an opportunity to locate in California in our area, and they're looking at where to locate, when we let them know, okay, here's what you can do, here's the advantages that you'll be given, as opposed to going to Ensenada, shall we say, here's the advantages we can give you. And this is a huge advantage. So a good number of companies that otherwise we would not have, not only in National City, we haven't have in California, maybe not even in the United States have been drawn because of this. CAVANAUGH: Can you give us an example? MORRISON: We have a number of businesses, one I think is one of our ship-building companies that we dealt with. They had an excellent opportunity to go to Ensenada. And when you looked at wages, all the other things, all the incentives were there for them. But we showed them when could be done here, they said okay, we'd much rather be here. This is a much better location. But the economics was going to drive us away. Another good example if I can, more of a regional one. A lot of times they just say you're taking from one city to another. We had Jensen's Meats in Vista that was growing at 150 employees. They were going to have to put in a lot of infrastructure. Colorado and Texas said we want you. They said our only opportunity is going to be to go to Colorado or Texas. We talked to them and said wait a minute, here's what can be done with the enterprise zone. They moved to Oat a mesa and are now employing an additional 100 employees. That's 250 employees that we were going to lose from the state. So it wasn't just taking from one location to another, it was keeping them within our state, and within our economy. CAVANAUGH: Now, Richard Barrera, labor unions have not been big fans of enterprise zones. Why is that? BARRERA: If you look at the state of what working families are dealing with in our economy, by the most recent estimate, by the center and policy initiative, almost 1/3 of families in our region just can't make their ends meet, can't pay their bills from month to month. And so our issue that if there's going to be a tax subsidy program, a giveaway program for companies from the State of California, that the tax subsidies should do something to help working families actually be able to make ends meet. And there is nothing in the current enterprise zone program as it's set up that requires employers to create good jobs. So we might have a range of the company that mayor Morrison was out today, is a manufacturing company. But right next to it is a Walmart. And right next to the Walmart is a strip club. And the point is that under the current enterprise zone program, all of those companies are getting taxpayer subsidies, and there is no accountability in terms of the kinds of jobs that get created, how much are people making in wages, there's no accountability about were the decisions of firms to locate and to hire people and receive credits, had they already amaze those decisions? So are we subsidizing employers based on decisions that they have already made? The State of California spends about $750 million a year on this program. And the costs are going up about 35% every year. That's money that could otherwise be going to schools, be going to important public safety and a ranger of services. If we're going to take money and divert them in the name of economic development, it seems like families should benefit, not just large employers. CAVANAUGH: Let me take that issue, you mentioned strip clubs. Sacramento NBC station recently did a report on strip clubs within enterprise zones. They also get criticized because there's card rooms, fast-food chains, big box stores, etc. Mayor Morrison, do you see the fact that all of the businesses, no matter what they are, in a certain area, is that one of the weaknesses of the program? MORRISON: Well, I think it can be seen that way. But I think that's just a very small portion of the situation. And how do you equate that? That becomes a problem. Of how do you start carving out this portion or that portion? And the question is even if -- and we all want the higher-paying jobs, and the ones that have all the benefits, everything else. That would be great if we could have them. But at the same time, if you've got someone who's providing a job, even if it is at the lower wage, $10 an hour and doesn't have all the fringe benefits, it's a lot better than that $10 an hour job being in Colorado. At the same time, while the state is "spending money" on this, this is actually an investment. Otherwise, if these businesses -- if we do not encourage businesses to improve, enlarge, that is revenue that this state loses. So you're saying they're spending money. I think they're investing money because I think the return on investment for the state is much higher than the amount of money that's being lost. CAVANAUGH: Governor Jerry Brown is not talking about simply wanting to eliminate enterprise zones. He has a replacement plan that he hopes will stimulate business and job growth. Can you give us a few key elements of that plan? BARRERA: Exactly. What the governor is talking about is really repurposing enterprise zones. For the exact goals that mayor Morrison is talking about, to invest in decent job creation. For instance, the company that the mayor was at this morning is a manufacturing company. Governor Brown's program is focused on bringing resources in support of manufacturing companies so they don't leave the state. But not to support fast-food companies, Walmarts, and strip clubs. So it's bringing a little bit more focus that if we are going to invest in the creation of jobs, and if we're going to subsidize the creation of jobs in the state that we subsidize good jobs that are going to help families. Another aspect is accountability and transparency. Currently we don't actually know which jobs are being created, which companies are being subsidized in these enterprise zones. In fact the State Federation of Labor made a can to the request to the City of San Diego asking them to tell us, and the city responded under state law we're not allowed to tell you that. So what we're talking about is a repurposing that will focus more on the better job creation, creating job standards, and having some transparency and accountability so the taxpayers know what they're getting for their money. CAVANAUGH: Now, mayor Morrison, the governor's plan would allow businesses located in census tracts with 25% higher share of both unemployment and poverty to get hiring credits instead of having a designated geographical area. Do you think that that kind of thing might work also in an area like National City, to help stimulate business? MORRISON: It could. The problem is, it puts limits on the amount of money that can be used, and it puts, what I'm going to call the peanut butter effect. It spreads it throughout the state. Right now, it's concentrated in specific areas, so you can see the benefit there within that area. By doing the peanut butter effect and spreading it all out and putting it under a state-controlled program -- to be honest with you, as an elected official who has been in government for over 20 years, and seeing new state programs come along, I have not seen one yet that became more efficient or that took the money and it got spread out in a way that really was helpful. So there's a real concern on that, are just starting more bureaucracy in Sacramento. And there's different levels of transparency. I have right here in front of me a very fine-print of all the businesses that received vouchers in National City. And so that material is out there. And the number of vouchers and who's getting those vouchers is information that is put out there also. Just within our area alone, that area of San Diego, that's included, and of Chula Vista, National City, over 9,000 vouchers, working vouchers last year, and we're looking at about 17,000 this year. That's in the middle of a great recession. This is working here. CAVANAUGH: I want you, Richard, if you would, respond to what mayor Morrison referred to as the peanut butter effect. The governor's new plan may indeed not target certain areas that real need some help when it comes to job growth and help for businesses. BARRERA: Actually the governor's plan is doing just the opposite. It's concentrating more on the most disadvantaged areas. What we currently have I think is more of a peanut butter approach. For instance, downtown San Diego, employers get credits for hiring folks in an enterprise zone program. That means a law firm that hires a lawyer could potentially get a voucher under the notion that they're helping the economy and helping job growth. What we need to do and what the governor is talking about is let's really focus on areas like National City and areas in the South Bay where we need to invest in job creation and invest in the creation of quality jobs that are going to help families rather than spread these out so you could have a mishmash of some companies where the program is working not just for the company but for the employee and for the taxpayers, and others like Walmart who frankly don't need any subsidy at all. That's the largest company in the world. Why should the taxpayers of California be subsidizing Walmart? CAVANAUGH: I want to ask you both a political question. This isn't the first time that Governor Brown has tried to eliminate change, enterprise zones. He tried a couple years ago. What do you think his chances are politically this time? And I'm going to ask you, mayor Morrison, in terms of today's rally, does that indicate to you the level of political support that might be behind keeping enterprise zones the way they are? MORRISON: Well, I think both sides have a lot more political clout. I think the governor -- I think this is a very astutely political move on his part because he couldn't get it before when it was basically just the elimination. Now he's saying to legislators, if you don't have internetan enterprise zone in your district, that gives an opportunity for some of the money to be spread to you. That's the peanut butter effect I'm talking about. So you get legislators who say, maybe, before I wasn't getting anything. Those disadvantaged areas aren't within my area. Maybe now I can get something. So it gives them a better chance to get those type of votes. But certainly the business community, when we've seen in this recession we've seen in our areas which are extreme disadvantaged areas, we've seen the kind of growth that we've been able to do in jobs, everything else, our city alone has an 18% unemployment rate. The state itself is way over the national average. All of these things going, we're trying to look at what tools are in our toolbox, and the state has basically eliminated one tool after another. Redevelopment, it took that away. We're sitting in limbo right now because they eliminated it before they figured it out. Now they want to do the same thing here. They haven't sat down with anybody. We're asking them, if there is problems, sit down with us, and instead what we do is we get legislative proposals. Not sitting down and saying let's find out what the problems are. CAVANAUGH: And Richard, quickly if you would, what do you think the chances are? BARRERA: The prospects are very strong in the legislature in support for the governor's proproposal. You've got worker advocates, consumer advocates that are coming together. Now though is the time that the mayor is talking about. We're going to see some changes in the enterprise zone program, and they're going to be changes for the better. We should be working together. The types of job creation that mayor Morrison has led and we've seen some cases in the south bay, in some instances those should be the model for the new repurposed program. And we are absolutely open to working together to make this program better and make it work for working families and for taxpayers. CAVANAUGH: I have to end it there, gentlemen. Thank you both very much. MORRISON: Thank you.
A group of business leaders and politicians gathered today in Chula Vista in support of state enterprise zones, designated business areas that offer tax breaks and other incentives to employers in an effort to stimulate job growth.
Supporters in San Diego have said enterprise zones have generated $1.7 billion and brought 20,000 jobs to the San Diego region.
National City Mayor Ron Morrison says the enterprise zones brought Jenson's Meats to National City.
He said "they said our only opportunity is going to be to go to Colorado or Texas. We talked to them and said wait a minute, here's what can be done with the enterprise zone. They moved to Otay Mesa and are now employing an additional 100 employees. That's 250 employees that we were going to lose from the state."
The zones are in danger of being replaced by a new system of economic stimulus supported by Gov. Jerry Brown.
A 2009 Public Policy Institute of California study compared data from businesses inside and outside of enterprise zones and found the zones were ineffective in creating jobs in most cases.
Opponents of enterprise zones hold that the program is not an appropriate use of taxpayer money.
Richard Barrera, CEO and secretary-treasurer of the San Diego and Imperial Counties Labor Council, says there is nothing in the current enterprise zone program as it's set up that requires employers to create good jobs.
He said "the company that Mayor Morrison was out at today is a manufacturing company. But right next to it is a Wal-Mart. And right next to the Wal-Mart is a strip club. And the point is that under the current enterprise zone program, all of those companies are getting taxpayer subsidies and there is no accountability in terms of the kinds of jobs that get created, how much are people making in wages. There's no accountability about were the decisions of firms to locate and to hire people and receive credits, had they already made those decisions?"
Another criticism of enterprise zones is that any business within the zone can get a tax credit. That means card rooms, fast-food chains and giant corporations are eligible. Last week, an investigative report by Sacramento NBC station KCRA found strip clubs within enterprise zones that received tax credits.
Morrison said "we all want the higher paying jobs and the ones that have all the benefits, everything else. That would be great if we could have them. But at the same time, if you've got someone who's providing a job, even if it is at the lower wage, $10 an hour, and doesn't have all the fringe benefits, it's a lot better than that $10 an hour job being in Colorado."
The investigation also found a lack of transparency by the state in making information about companies participating in the program public.
Barrera said "currently we don't actually know which jobs are being created, which companies are being subsidized in these enterprise zones. In fact, the state federation of labor made a request to the City of San Diego asking them to tell us and the city responded under state law 'we're not allowed to tell you that.'"
The governor's proposed changes to the enterprise zone program would allow businesses located in census tracts with a 25 percent higher share of both unemployment and poverty to get hiring credits instead of having a designated geographical area.
Morrison said "the problem is, it puts limits on the amount of money that can be used and it puts what I'm going to call the 'peanut butter effect.' It spreads it throughout the state. Right now, it's concentrated in specific areas, so you can see the benefit there within that area."
Barrera said the governor's plan is doing just the opposite.
He said "what we currently have, I think, is more of a peanut butter approach. For instance, downtown San Diego, employers get credits for hiring folks in an enterprise zone program. That means a law firm that hires a lawyer could potentially get a voucher under the notion that they're helping the economy and helping job growth."
This isn't the first time Brown has tried to eliminate enterprise zones. But Barrera said this time, he thinks the state legislature will support the governor's proposal.
Morrison said "we're trying to look at what tools are in our toolbox and the state has basically eliminated one tool after another. Redevelopment, it took that away. We're sitting in limbo right now because they eliminated it before they figured it out. Now, they want to do the same thing here. They haven't sat down with anybody. We're asking them, if there is problems, sit down with us."