Illustration by Lalo Alcaraz. (Click image twice for full size.)
See Gary Cohn’s reports on California’s enterprise zone program and the tax credits received by two Sacramento strip clubs.
» Read more about: Lalo Alcaraz on State’s Enterprise Zone Program »
“If only they would run government like a business,” goes a familiar conservative lament, the gist of which equates “business” with the kind of furious efficiency that rewards honest, hard work in both industry and the animal kingdom. But now a new study shows what actually happens when elected officials hand over the keys to the private sector and ask it to run the services that society depends on.
Suddenly, according to Creating Scandals Instead of Jobs, the book of Ayn Rand fairy tales is shut and a dangerous reality asserts itself. The study, conducted by Good Jobs First, discovered an especially dizzying level of corruption in those enterprise and commerce agencies charged with expanding state economies and creating jobs. (Californians will remember how, until it was recently changed, their own Enterprise Zone program helped wreck the middle class by rewarding businesses for downsizing their work forces and lowering wages.)
Among Scandals/Jobs’ findings about so-called PPPs (public-private partnerships):
» Read more about: Public-Private Partnerships: Schools for Scandal »
Governor Jerry Brown signed into law Thursday the “Governor’s Economic Development Initiative,” which radically overhauls California’s troubled Enterprise Zone program. The signing took place in San Diego at the headquarters of Takeda California, a pharmaceutical company. State legislature backers of the new program, which consists of Assembly Bill 93 and Senate Bill 90, say it will stimulate economic activity and create good jobs for Californians via a three-pronged approach.
The first prong is a sales tax exemption on research and development equipment purchases for biotechnology and manufacturing firms. The second is a series of credits given to businesses that hire in regions with high unemployment and poverty rates. Finally, the initiative allows for California business to gain tax credits based on the quality and quantity of jobs they create.
The governor said he has supported this legislation in order “to help grow our economy and create good manufacturing jobs,” with a focus on building “the strength of intellectual capacity.”
» Read more about: Governor Signs Overhaul of Enterprise Zone Program »
The victory in the state Assembly was a narrow one, but a victory nonetheless for Governor Jerry Brown and opponents of California’s troubled enterprise zone program. The zones reward companies with $750 million in annual tax breaks for relocating their businesses to depressed parts of the state – and for replacing their workforces with newer, usually lower paid ones. Thursday, the Assembly approved a bill already passed by the state Senate that would radically overhaul the program.
Although the vote was 54-16, passage required a two-thirds vote, since it amended a tax law; four Republican Assemblymembers joined 50 Democrats in voting for AB 93. The legislation now goes to the governor for his signature.
According to the Los Angeles Times’ Marc Lifsher, “Brown’s proposal, the centerpiece of his economic development strategy, all but eliminates the power of the state’s 40 locally controlled enterprise zones and replaces the program with a broader,
» Read more about: Enterprise Zone Bill Goes to Governor’s Desk »
(Editor’s Update: Luke Dowling’s June 25 piece below references Governor Jerry Brown’s proposal to restructure California’s controversial enterprise zone program. Last night the state Senate approved Brown’s initiative to transform the program. The next move rests with the Assembly, which is considering a Brown-backed measure that would create an alternative to the program.)
The fight over California’s enterprise zone program continued last Friday when John Burton, chairman of the California Democratic Party, proposed a measure for the November 2014 ballot which would give voters the power to eliminate the zones.
This proposal echoes concerns contained in Frying Pan News reporter Gary Cohn’s exposé of the rampant exploitation of the enterprise zone program. These zones are intended to foster the creation of jobs in economically distressed areas of the state by providing financial incentives to companies to move to those areas.
» Read more about: State Senate Approves Enterprise Zone Overhaul »
The fight over California’s enterprise zone program continued last Friday when John Burton, chairman of the California Democratic Party, proposed a measure for the November 2014 ballot which would give voters the power to eliminate the zones.
This proposal echoes concerns contained in Frying Pan News reporter Gary Cohn’s exposé of the rampant exploitation of the enterprise zone program. These zones are intended to foster the creation of jobs in economically distressed areas of the state by providing financial incentives to companies to move to those areas. However, a study by the non-partisan Public Policy Institute of California found that “enterprise zones have no statistically significant effect on either business creation or employment growth rates.”
Moreover, Senator Jerry Hill (D-San Mateo) called the enterprise zones “the most abused program I’ve seen,” adding that they amounted to little more than “a big-industry, big-business tax grab.”
Burton is not the only high-profile California Democrat to come out against the zones —
» Read more about: John Burton Measure Would Eliminate Enterprise Zones »
The ripples continue to spread from Frying Pan News reporter Gary Cohn’s piece on California’s enterprise zones, which were created in 1984 to help small businesses and create jobs by giving tax breaks to companies in the state’s economically depressed regions. Last Friday the Fresno Bee called for reform of the zones and today a Los Angeles Times editorial declared that nothing less than pulling the plug on the program would do.
The zones, said the Times, “were a well-intentioned experiment that was tried, failed and has been kept around too long. This is one experiment that should be ended, not merely mended.”
Cohn’s May 28 article appeared at the same time Governor Jerry Brown was maneuvering to reform the program out of existence. The Frying Pan News story emphasized that 61 percent of the enterprise program’s beneficiaries are companies with more than $1 billion in assets,
» Read more about: L.A. Times: Pull the Plug on State’s Enterprise Zones »
In How Enterprise Zones Are Killing the California Dream, Frying Pan investigative reporter Gary Cohn looked at the impact of the controversial program, including workers who lost their jobs while their former employers received tax breaks for hiring lower-paid replacements. He also reported on two strip clubs revealed to have benefited from the secretive program. Other media have picked up the story as well, building momentum for an overhaul. A more detailed overview of the Governor’s plan can be found here. The following post first appeared in the blog Labor’s Edge.
To some politicians, economic development means giving hundreds of millions of taxpayer dollars to strip clubs, fast food joints and retail giants like Walmart. Gov. Brown, thankfully, has a better idea. Today, the Governor announced a broad coalition of labor, business and others in support of his good jobs plan that will flip the broken enterprise zone program into real incentives for creating quality,
» Read more about: Governor Brown Outlines Plan for Good Jobs »
In How Enterprise Zones Are Killing the California Dream, Frying Pan investigative reporter Gary Cohn looked at the impact of the controversial program, including workers who lost their jobs while their former employers received tax breaks for hiring lower-paid replacements. He also reported on two strip clubs revealed to have benefited from the secretive program. The governor and legislators have now put forward proposals to reform the program or replace it with other economic development programs. This post originally appeared in Labor’s Edge.
You’ve probably seen the stories by now: Enterprise zone tax breaks, which are supposed to provide incentives for good jobs, are instead going to strip clubs and low-wage mega corporations like Walmart.
The current enterprise zone program is shrouded in secrecy, with virtually no accountability or transparency. Study after study shows the program is a massive failure,
» Read more about: End the Enterprise Zone Abuse: Gov. Brown’s Good Jobs Proposal »
Two State Senators held a press conference this morning outside Déjà Vu Showgirls, one of two Sacramento-area strip clubs that the Frying Pan News documented as benefitting from a controversial tax credit program. State Sens. Jerry Hill, D-San Mateo, and Anthony Cannella, R-Ceres, urged fellow legislators to join them in reforming California’s enterprise zone program.
Criticism of the enterprise zone program, which our Gary Cohn recently investigated, seems to be gathering attention. Documents received last week by Frying Pan News showed that Déjà Vu Showgirls and Gold Club Centerfolds received a combined two dozen vouchers for tax credits of up to $37,000 per employee, despite paying most of them around $9 per hour. The program also requires no evidence of job creation. In his piece “How Enterprise Zones Are Killing the California Dream,” Cohn quotes two Californians who had been laid off while their former employers received credits for their lower-paid replacements.
» Read more about: Heat Grows on “California Dream Killer” Tax Program »
California’s controversial $700 million enterprise zone program has long been shrouded in secrecy. But now Frying Pan News has obtained documents showing that the Rancho Cordova strip club Gold Club Centerfolds has been approved for enterprise zone tax credits. The documents show that the gentlemen’s club has received credits worth up to $37,440 apiece for nine employees — sales associates, door hosts and security officers — who are paid from $8 to $9.25 an hour.
See Gold Club Centerfolds’ tax credit documents here.
The documents reflect only a portion of all approvals for Gold Club Centerfolds. The approvals were granted by Sacramento’s enterprise zone manager and came in 2011. The documents were obtained by the California Labor Federation under a public records request. The labor federation also requested records to see if another Rancho Cordova strip club, Déjà Vu Showgirls, has similarly been approved for tax credits,
» Read more about: In Black and White: Strip Club Approved for Tax Credits »
John Thomas and Hans Burkhardt have a lot in common. For more than 17 years each man had a good paying union job, with health and pension benefits, near San Francisco Bay. Thomas worked as a warehouseman for VWR International, a medical supply company with a warehouse in Brisbane, south of Candlestick Park. Burkhardt also worked as a warehouseman, for BlueLinx, a building products company with a facility across the bay in Newark.
The similarities don’t end there. Both Thomas and Burkhardt are now collecting unemployment, having lost their $22-an-hour jobs after their employers moved to take advantage of California’s enterprise zone plan, a controversial state program that is supposed to create jobs.
The enterprise program, established in 1984, provides $700 million in tax breaks for companies that set up business or move to one of 40 zones within the state.
» Read more about: How Enterprise Zones Are Killing the California Dream »
Hundreds of workers descended on the Capitol yesterday as part of the California Labor Federation’s legislative conference lobby day with a simple message for both Democrats and Republicans in office: “End the Corporate Gravy Train.” They were referring to the state’s wasteful enterprise zone program, which takes money away from schools, infrastructure and other valuable services to line the pockets of corporate CEOs at Walmart and other large, profitable corporations.
At a lunchtime rally, workers, labor leaders and elected officials railed against this massive giveaway and urged support for SB 434, a reform bill authored by State Sen. Jerry Hill. The event coincided with the launch of a new website, www.EndTheCorporateGravyTrain.com, which details the wasteful program and exposes some of the massive companies that are riding the gravy train.
California Labor Federation Executive Secretary-Treasurer Art Pulaski:
“Taxpayers are sending $700 million per year straight into the pockets of corporate executives without seeing good jobs created in return.
» Read more about: Capitol Rally: Derail This Corporate Gravy Train! »
Imagine a system that gives companies enormous tax breaks for firing workers – and then forces those jobless workers to pay for those tax breaks themselves.
It might sound outrageous, but in California, that’s the reality. Just ask Joan Beighley, who worked at VWR in Brisbane for 14 years before her job was eliminated when her employer decided to take advantage of the state’s wasteful “enterprise zone” (EZ) corporate tax giveaway program. Thanks to this flawed program, VWR is able to collect up to $37,000 for each worker the company fired and replaced when they shut down their Brisbane facility and relocated to Visalia – even though no new jobs were created, and the jobs in Visalia pay a fraction of what the Brisbane workers earned for the same work.
The VWR move cost the city of Brisbane more than $2 million a year, while the company took in a windfall $1.5 million,
» Read more about: Law Proposed to Stop Enterprise Zone Tax Giveaways »
On February 14, 68 employees of VWR in Visalia voted affirmatively to join Teamsters Local 948 in an election supervised by the National Labor Relations Board. The election punctuates a very high profile and controversial move by the company from the Bay Area to Visalia and continues the Teamsters struggle with the company.
VWR, which [distributes laboratory equipment], was founded as a local California company, has grown into a global corporation, reporting more than $4.1 billion in sales for 2011. The Teamsters have represented VWR employees at their distribution center in Brisbane for over 50 years. For most of that time, labor-management relations were good. But when Madison Dearborn, a Chicago-based private equity firm, bought the company in 2007 things quickly changed.
In the midst of contract negotiations in 2010, VWR announced plans to close its Brisbane distribution center and move its operations 220 miles south to a new 500,000 square foot facility in Visalia.
» Read more about: Teamsters Win Election at Runaway Company in Visalia »