SAN BERNARDINO, CA-GlobeSt.com recently chatted with San Bernardino Valley Enterprise Zone manager Wendy Clements about the increased loss of business in California due to various factors including: high taxes; high property and utility costs; permitting and government red tape; and environmental regulations, employment laws and other anti-business polices. During the following Q&A, Clements points out that the enterprise zone program is instrumental to economy development in California because it “encourages business development and job creation in low income and economically depressed areas.”

GlobeSt.com: What factors are contributing to the increased loss of business in CA and how are enterprise zones helping to fight this trend?

Clements: California’s poor business climate is contributing to the loss of more companies and jobs each year. The state is consistently ranked by various independent reports as one of the least business-friendly states in the nation, typically because of high taxes; high property and utility costs; permitting and government red tape; and environmental regulations, employment laws and other anti-business polices. Each year, California raises the cost of doing business, causing thousands of established companies to flee and many others to explore relocation.

The enterprise zone program is the only economic development tool that the state has to influence companies to stay here. Cost reduction is a primary focus of all businesses today and enterprise zones across the state are helping businesses lower their costs by subsidizing a small amount of their tax burden. The program’s tax deductions help keep California a competitive location for large employers, and also incentivize companies to make additional investments in our communities.

GlobeSt.com: How is the enterprise zone program instrumental to economic development in CA?

Clements: The enterprise zone program encourages business development and job creation in low income and economically depressed areas—communities where the state desperately needs businesses to create jobs and tax revenue—by incentivizing businesses to make workforce and capital investments. These investments contribute to the overall economic prosperity of the state and of the communities it serves.

Enterprise zone tax credits serve multiple purposes. For businesses in zone areas, the cost savings not only increase financial stability and cash flow, but also improve their ability to hire more workers, retain workers and take on new business ventures. With more capital businesses can grow and take progressive steps such as purchasing new equipment or property, which generates activity in local real estate and manufacturing industry sectors, among others.

For residents in zone communities, which are often characterized by high unemployment and low income, the program helps create more local employment opportunities for both qualified candidates and challenged workers that face barriers to employment such as long-periods of unemployment, receipt of public assistance, lack of skills and education, and having a disability or a criminal history. The program’s hiring tax credit helps reduce the number of local people receiving unemployment benefits and other public assistance by alleviating some of the risk and cost to take on challenged workers.

For the state, the program not only keeps large employers and their tax revenues in California, but also doubles as an attraction tool that helps to bring expanding and relocating businesses to the state, and more importantly, to distressed areas, which they would not consider otherwise.

GlobeSt.com: How do enterprise zones support California’s real estate markets and keep the region a competitive location for business?

Clements: The enterprise zone program attracts commercial development to economically challenged regions, which are commonly characterized by infill properties and redevelopment projects. Whether it is build-to-suit or speculative building, development companies are drawn to enterprise zones because the additional benefits they pass on to businesses increase the likeliness that properties will lease and sell quickly. The incentives keep zones competitive with other areas, and allow developers to better pencil out their investment.

The program allows commercial markets in zone areas to compete with other developed areas. The tax credits further differentiate the cost to do business in real estate markets such as the San Bernardino and Shasta counties to those of Orange and Los Angeles counties.

Broker and development communities often utilize the program to lure businesses by using it as a marketing tool and highlighting the additional benefits of choosing a location in an enterprise zone. The program’s long-term cost savings often plays a factor in a businesses’ decision to select a property in a designated zone. The enterprise zone’s benefits are especially desirable for manufacturers and other employers that have a large labor force that may qualify.

GlobeSt.com: What recent successes can you highlight?

Clements: Since 2006, the San Bernardino Valley Enterprise Zone has attracted 28 new businesses, accounting for the absorption of more than 4 million square feet of commercial space. Recent examples include Simpson Strong-Tie, manufacturer of structural building products that consolidated its Southern California operations into a 400,000 square-foot building; Hayden Industrial, a manufacturer of mobile and stationary heat exchangers relocating to a 109,000 square-foot industrial building; Parsons Brinckerhoff, a global planning, engineering and construction management firm, relocated to a 20,000-square-foot office building. Hewlett-Packard, Kohl’s and Dollar Tree have also opened large distribution/ warehouse facilities in the zone in recent years.

GlobeSt.com: How well do commercial properties perform in zone areas?

Clements: Despite the economic and market conditions, properties in the San Bernardino Valley Enterprise Zone have done well. Demand for properties in zone areas is generally higher because of the potential incentives.

Currently the city of San Bernardino, which makes up a bulk of the 42-square mile zone, has no industrial buildings over 500,000 square feet available. During the last year, the city has experienced the absorption of more than 1.8 million square feet of commercial space.

John Magness, senior vice president at Hillwood Investment Properties, a real estate company that has utilized the program for many years to lease properties in San Bernardino and areas near the ports of Los Angeles and Long Beach, has attributed many of his successes to the program. He recently said that in zones where Hillwood Investment Properties has developments, its properties are 100% leased despite the recession.

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Six Questions for San Bernardino Valley Enterprise Zone Manager

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