|Budget Issue:||HCD administration of the Enterprise Zone (EZ) program|
|Program:||Department of Housing and Community Development|
|Finding or Recommendation:||Conforming issue. If the Legislature adopts the Governor’s January 2011-12 budget proposal to eliminate enterprise zone tax credits, recommend elimination of the ten positions at HCD responsible for administering the program.|
Background. The Enterprise Zone (EZ) program provides state tax incentives to encourage business investment and promote the creation of new jobs in economically distressed areas of the state. Each enterprise zone is administered by its local jurisdiction, working with local agencies and business groups to promote economic growth through business attraction, expansion, and retention. State statute allows for a total of 42 zones, each expiring after 15 years. Once one expires, the state awards the designation to another zone through a lengthy application process.
The Department of Housing and Community Development (HCD) coordinates the program statewide with 10 authorized positions. The department’s primary workload is reviewing, ranking, and awarding new enterprise zones as allocations become available. Other responsibilities include auditing the local jurisdiction zone managers to ensure compliance with state agreements, as well as maintaining and standardizing various regulations involving tax credit vouchers.
The 2011-12 January budget proposes to repeal all enterprise zone tax incentives for tax years beginning on or after January 1, 2011. This means that if this budget proposal were to be adopted by the Legislature, HCD would no longer be reviewing applications and awarding new zones, and no new tax credits will be awarded.
The elimination of these positions was not proposed as a conforming item in the Governor’s budget. However, according to the department these positions would no longer be necessary if the EZ program is repealed.
LAO Recommendation. We recommend that if the Legislature adopts the Governor’s proposal to eliminate enterprise zone tax credits, it should also eliminate the ten positions at HCD responsible for administering the program.