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Home My WebLink AboutR09-Redevelopment Agency COO ~ REDEVELOPMENT J\G-NCY.REQUEST FOR COIlWISSION/COUNCIL ACTION - m: GLENDA SAUL '- Dept: Redevelopment Agency Subject: ANALYSIS OF THE EMPLOYMENT AND INCENTIVE ACT (A.B. 514 WATERS BILL) Date: MA Y 28, 1986 Synopsis of Previous Commission/Council action: NONE Recommended motion: (MAYOR AND COMMON COUNCIL) c That the Mayor and Common Council elect not to pursue the application process under the Waters Bill and, further that full and complete implementation of the Enterprise Zone adopted as part of the Nolan Bill process be reaffirmed by the Mayor and Common Council. #~kJ / Signature Contact person: GI ENDA SAIII Phone: 383-5081 Supporting data attached: STAFF REPORT Ward: 1,3,5,6 . FUNDING REQUIREMENTS: Amount: $ N/A Project: NW, UPTOWN,CCN,CCW,SC No adverse Impact on City: ...- '--'ncil Notes: Date: June 2, 1986 f)C! - - CIN OF SAN BERNARDtQ) - REQUM FOR COUNCIL AC-hON STAFF REPORT - --- The Department of Commerce may designate not more than three (3) program areas by the end of 1986. ()fflcla1s have Indicated that applications under A.B. 514 are due by September 1, 1986. An area that Is a high density unemployment area Is eligible to apply for program participation. A high density unemployment area Is a metropolitan statistical or nonmetropolltan statistical area which contains at least 4,000 people or 2,500 people respectively In a cluster of blocks. Each block must meet the following criteria according to U.S. census Information: 1) The average unemployment for the block group In the past twelve (12) months was at least 1 1/2 times the average national rate for that twelve (12) month period. 2) The average poverty rate for the block group In the past twelve (12) months was at least 1 1/2 times the average national rate for that twelve (12) month period. 3) At least seventy percent (70%) of the household earnings for the block group In the past twelve (12) months was a maximum of eighty percent (80%) of the average state household earnings for that twelve (12) month period. c If the area does not meet the definition of a high density unemployment area, it can petition for program ellgiblity and potentially qualify as a "pocket of poverty" under the federal UDAG standards. The program areas themselves consist of Neighborhood Economic Development areas (NED's) and Targeted Economic Developments (TED's). A NED Is a commercial area located entirely within a high density unemployment area. A TED consists of vacant or sparsely developed land, close to, but not necessarily In, a high density unemployment area, and is zoned for light Industrial or mixed business use. The application for a designated commercial use area must contain an Industrial designation. However, an application for an Industrial area designation does not require a commercial area. The Haters Bill Is much more restrictive as compared to the Nolan Bill. A much smaller area would be eligible as an Enterprise Zone with only a portion of the Mt. Vernon strip Included. None of the current Industrial area could be Included In the zone. Areas south to Mill Street are eligible which are predominantly residential (see map). Application Content and Selection Process In designating program areas under the Haters Bill, the Department of Commerce will select those areas that best address the following major components of ~ the application. '- 75.0264 c - 1) "- 2) 3) 4) 5) 6) 7) 8) 9) ,.,-. '- 10) - c :) - ......; A comprehensive economic development strategy for the program area. A community Impact statement which analyzes the Impact of designation of the community. A plan which specifies economic development objectives and assigns a priority to each objective. The manner and level In which community services and Infrastructure will be Improved to accommodate new development. A description of current economic development activity, Including funding from the federal, state and local governments. An Identification of funds for economIc development projects from federal, state, local and private sources. An assessment of the employment job skills and management training needs of businesses and residents In the application area. An estimate of the number of new jobs that will result from the program based on an employment needs assessment of the locality. A plan of action to reduce, remove, simplify, or streamline local requirements and the local permit process within the program areas which does not endanger the public health, safety and welfare of the community. Involvement in the program by private entities, organizations, and neighborhood groups which may make contributions to the project. In other words, a Project Area or Citizen Advisory Committee. Requirements 1-4 are basically the same requirements for the Nolan Bill, the difference being the emphasis Is placed upon employing the unemployed rather than just the generation of employment. Requirement 5 Is relatively easily assembled. Requirements 6, 7 and 8 would require a detailed summary and/or study. Requirement 9 Is similar to the streamlining and Incentives currently In place for the City's designated Enterprise Zone. Requirement 10 Involves establishing a community advisory council. It Is further required that there be one (1) representative from each of the following categories: a. Private area residents. b. Business within the zone. c. Private Industry Council. d. Small business corporations. e. Community based organizations. In the application, strong emphasis Is needed In the following areas: 1) A proposal for program areas close enough for easy access to the high ~ density unemployment areas. '- -2- '-' .',~... 2) .......... 3) 4) 5) 6) 7) ~ --- - - - o - .....,I J A plan to encourage the retention and expansion of existing businesses. A strategy for the recruitment of new businesses Into the program area. A realistic projection of new job opportunities that are suitable to the needs of program area residents. A plan to demonstrate innovative and comprehensive strategies to improve community services. A plan to provide, by working with the State, Insurance for qualified businesses In the program area. A plan to establish a loan bank or fund to provide capital to qualified businesses In the program area. 8) A plan to rehabilitate existing abandoned structures. Economic Incentives Assembly Bill 514 differs greatly from Assembly Bill 40 In the economic Incentives and/or economic advantage It offers to businesses located or locating with the Enterprise Zone. According to A.B. 514, a qualified business Is a business that meets one of the following criteria: <::: 1) Has at least fifty percent (50%) of Its employees who are residents of a high density unemployment area; or 2) Has at least thirty percent (30%) of Its employees who are residents of a high density unemployment area and the business has set up a community service approved by the government body and the community advisory committee which oversees the program implementation; or - '- 3) Is a joint venture between an existing business and a business owned by residents of the Enterprise Zone with the residents owning at least thirty percent (30%) of the business. This eligibility criteria limits the number of businesses which would qualify for benefits. Existing businesses could have an especially difficult time qua 11 fyi ng. Qualified Employee Under A.B. 514, a qualified employee is an individual who has been an unemployed resident of the zone for at least three (3) months prior to being employed. Amount of Tax Credit Offered 1) Unemployed between three (3) and six (6) months. -3- ~ - - .. - - '- ,-' -- "-" .....,I :) ,-..- a. Five percent (5%) of the qualified wages for the first year of employment. b. Seven percent (7%) of the qualified wages for the second year of employment. """ 2) Unemployed at least six (6) months. a. Twelve percent (12%) of the qualified wages for the first six (6-) months of employment. b. Twelve percent (12%) of the qualified wages for the second six (6) months of employment. c. Seven percent (7%) of the qualified wages for the second year of employment. ,- \"... In addition, the legislation provides guidelines for the use of employer tax credit programs and tax planning considerations. 1) Assembly Bill 514 allows for the taxpayer to expend forty percent (40%) of the cost of the eligible property as a deduction for the taxable year in which the property is placed in service. Eligible property tax includes: a. Machinery and machinery parts used in industry and/or for the production of renewable energy services, or water pollution control mechanisms. b. Property used as an integral part of a qualified business within an Enterprise Zone area. 2) Sales tax credit for the amount equal to the sales or use tax paid by the taxpayer in connection with the purchase of qualified property. This is also available under Nolan (A.B. 40). 3) A net operating loss carryover is allowed for a qualified business engaged in activity in the program area. (Also included in Nolan A.B. 40.) 4) Government land lease (also included in A.B. 40). 5) Preference points on state contracts for goods in excess of $100,000 to a bidder who conducts at least fifty percent (50%) of the labor at a work site located in a program area. (Included in Nolan A.B. 40.) 6) Job training priority. 7) Business employment loans for small businesses. (Included in Nolan A.B. 40. ) .- 8) Energy loan preference. (Included in Nolan A.B. 40. ) '-' The area eligible under A.B. 514 differs from what was submitted to the state last year under the Nolan Bill. Because the areas differ substantially, a new -4- c \ ......" '- c ,-. "- - - - .. -- o -..., --' :> Environmental Impact Report (EIR) could be requIred. At the very least, an extensIve revampIng of the exIstIng EIR would be necessary to encompass the areas elIgIble under A.B. 514 whIch were not Included In the CIty's inItial EnterprIse Zone applIcatIon. Because of tIme and expense consIderatIons and the sIgnIfIcant dIfferences in the focus of the Nolan and Haters BIlls, staff recommends that the City not pursue the applIcatIon process under the Haters BIll, and, further that full and complete ImplementatIon of the EnterprIse Zone adopted as a part of the Nolan BIll applIcation process be reaffirmed by the CouncIl/CommIssIon In the contInuing effort to improve the qualIty of lIfe of the cItIzens of San BernardIno. l031L 5/56 -5-