Enterprise zone hopes: County's expanded designation takes effect, extending tax incentive programs by 15 years

They call it a "gift" in a down economy.

While many businesses are just scraping by in this recession, Kings County's economic development officials say they have received a key designation.

Kings County's newly designated enterprise zone took effect on July 1 for another 15 years, continuing a bounty of tax incentives and other enticements for new and existing businesses.

More good news for the county: While the previous zone encompassed Hanford, Lemoore and Corcoran, the new zone -- 64 percent larger -- includes all that plus Kettleman City, Stratford and Avenal.

Designed to promote job creation and boost the local economy, the program provides a series of California tax credits for businesses located in the zone. The most significant of these is a hiring tax credit that businesses can use to offer up to half of a newly hired employee's salary, said John Lehn, president/executive director of the Kings County Economic Development Corp.

As part of the enterprise zone designation, a targeted employment area in the zone provides a tax credit for those employers who hire someone local. A business can claim up to $37,000 per employee over a five-year period, Lehn said.

"There is such a difference between a business that is operating within the enterprise zone and one that is not in terms of profitability," Lehn said. "If you're looking at hiring three employees who live in the enterprise zone, over the 60-months period that's literally a net profit of over $100,000."

Because the area designation is retroactive to June 22, 2008, businesses that hired people from the area after that can still receive the payroll tax refund, Lehn added.

Kings County is one of eight communities that have recently received a enterprise zone designation through a competitive process. There are 42 such zones statewide.

The county has had an enterprise zone for 15 years, and businesses -- big and small -- have taken advantage of the incentives. Among those businesses are Wal-Mart, JG Boswell, Marquez Brothers and Alpha Designs. But Lehn said many businesses have yet to take advantage of the opportunity.

California's enterprise zone program targets economically distressed areas like Kings County, where its agriculture wealth is often paradoxically marked with high unemployment rates. Benefits for those locating a business in the zone are tax credits on hiring, capital purchases, interest on loans and the ability to expense some depreciable property up-front.

"The theory is that if the public investments come, then private investments will follow, for the long term," Lehn said. "It infuses money into the economy. Literally it's a dollar-for-dollar increase to the bottom line of the business."

Local opinions over the efficacy of this economic development program vary.

Steve Morrison, owner of Morrison's Silkscreen in downtown Hanford, said he believes the enterprise zone is a boon to the local economy.

"It helps businesses, but also local residents who are looking for jobs. It's a win-win situation," Morrison said.

Although his apparel-printing business isn't big enough to reap credit for capital investment, he said his business has occasionally benefited from hiring credits over the years.

Verdegaal Brothers, Inc., a fertilizer company located in Hanford's Kings Industrial Park, said the enterprise zone does provide rare "perks," but is not an important factor for the company to stay in the area.

"We take advantage of it whenever we can, but its' not really a driver for our decisions," said Jim Gregory, agronomist for the family-owned company.

That's because of 48 employees, a "very few" have actually met the criteria for hiring credits, Gregory said. "We've been working out of Hanford since 1975 and in the industrial park since 1985. We would be operating here whether the enterprise zone is here or not. But it would be different for different companies looking to locate here."

Economists in California also seem to be divided.

While the Public Policy Institute of California was highly critical of the enterprise zone program in its recent report, the University of Southern California's study found statistically significant positive impacts of the enterprise zone on employment and workers' incomes.

Local officials say figures in Kings County are more consistent with the latter assessment.

The benefit Kings County has reaped from the presence of the zone is tangible in terms of both the money infused back into the local economy each year and jobs created.

"With the exception of the last 18 months, if you look back the previous decade, every year our unemployment rate went down. Every year the number of jobs in Kings County increased at a faster rate than the population grew," Lehn said. "So did it work? One can certainly draw that correlation."

In 2008 alone, 79 businesses received some 1,616 enterprise zone hiring-credit vouchers, which Lehn estimated to be worth about $38 million.

With the new designation, Kings County is expected to continue to be able to receive its servings of tax-supported economic nourishment.

The difference in incentives is that the Target Employment Area is much bigger this time around, Lehn said.

Under the old zone, the targeted employment area was confined to small portions of Hanford and the southern portion of the rural county area -- likely the reason why some employers such as Verdegaal Brothers didn't get much out of it.

The targeted employment area under the new zone encompasses virtually the entire county, so employers who hire any Kings County resident will likely be able to claim the tax credits, Lehn said.

The reporter can be reached at 583-2429.

(July 11, 2009)