Workers to State Legislators: Stop ‘Sweetheart’ Enterprise Zone Deals

by Steve Smith on February 15, 2011

Union members deliver special Valentine to state legislators calling for elimination of failed Enterprise Zone program

State legislators received a special Valentine from workers yesterday, calling on the legislature to support Governor Jerry Brown’s call to end the state’s failed Enterprise Zone program. The program has cost taxpayers $3.6 billion in handouts to large corporations and lobbyists without having any positive effect on job creation. The workers, who are members of the International Brotherhood of Teamsters, visited every state legislator with a small box of chocolates that said “Stop the Sweetheart Enterprise Zones.”

Brown has called for elimination of the Enterprise Zones after a series of reports determined that the zones do not fulfill their intent of creating jobs. Instead, they subsidize big, profitable corporations and a burgeoning industry of consultants who exploit the program for their own personal profit.

The Public Policy Institute of California released a study in 2009 finding that Enterprise Zones have “no statistically significant effect on either employment levels or employment growth rates.” In addition, the California Legislative Analyst’s Office has issued several reports concluding that the Enterprise Zone program does not create jobs, finding that the program is “expensive and not strongly effective.”

“Enterprise Zones are the poster child for wasteful government spending,” said California Labor Federation Executive Secretary-Treasurer Art Pulaski. “At a time when the state is considering devastating cuts to higher education and programs that are a lifeline for seniors and people with disabilities, eliminating this wasteful program should be a top priority.”

While state spending on education, public safety and other programs that are a priority for California families have been drastically reduced in recent years, a new report by the California Budget Project shows the opposite to be true for Enterprise Zones. Since the program’s inception, the cost of these giveaways has increased by 35% per year, totaling more than $3.6 billion.

Even worse, these tax credits are going primarily to less than one percent of the state’s corporations, those with assets of a $1 billion or more. Major corporations like Wells Fargo, Nordstrom and Levi Strauss are subsidized by the Enterprise Zone program. Even big banks get a cut through a tax deduction on loans.

Workers in the city of Brisbane know firsthand the negative effects of Enterprise Zones. VWR, a medical distribution company in Brisbane, was recently bought by a private equity firm that told workers the company was closing the Brisbane operation and moving to Visalia, which is in a Targeted Tax Area, part of the Enterprise Zone program.

VWR refused to allow workers to relocate and offered little severance. The new jobs in Visalia are low-wage with few benefits. The economic impact on Brisbane and the workers employed at VWR is devastating. And because of the Enterprise Zone tax credit, California taxpayers are on the hook to pay for the move and resulting job loss.

“Tax credits should create jobs, not destroy them,” said Doug Bloch, with Teamsters Joint Council 7. “It’s time for the state to end this failure of a program and start investing in real job creation.”

As part of his recent budget proposal, Gov. Brown called for the elimination of the wasteful program to help the state avoid another nearly $1 billion in cuts to programs Californians depend upon.

An army of high-paid lobbyists and various other “consultants” who make their living skimming off the top of a state program are fighting the elimination of the program. These consultants make their money by trolling Enterprise Zones for businesses who have not yet claimed their tax handouts.

The Enterprise Zone program allows business to go back four years to claim retroactive credits, so they can get a tax credit for a worker they already hired or an employee who has left the job. The consultants help the business claim the credits, even though they have created no new jobs, and then take a cut of the tax break.

For more information about the California Labor Federation’s campaign to shut down Enterprise Zones, click here.

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