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Enterprise Zone Helps South Gate Dairy Keep “Moo-ing” Forward

May 31, 2013
Note: With job creation and affordable housing on the minds of public officials throughout California, the power of state-local partnerships in creating good paying construction and other private sector jobs merits attention. This is part of a series of special papers on some successful partnerships.
South Gate is a city with a colorful history and a strong sense of the way its past contributes to the present and shapes the future. 
Part of the Gateway Cities region of southeastern Los Angeles, South Gate’s population lives within 7.4 square miles — 2,000 acres of which can be traced back to the city’s original settlers, the R.D. Tweedy family, who arrived in 1852.
Today the city is the 17th largest in Los Angeles County. Also known as the “Azalea City,” South Gate was one of 10 cities nationwide in 1990 to receive a coveted “All-America City Award.” The city is showcased as part of Strong Cities | Strong State.
Its economy rumbles, hums and, well, moos. South Gate has everything from trucking businesses, to a name-brand blue jean manufacturer and a dairy. Some of the businesses have been around a long time and are identified with the city’s development and history.
The question facing many cities today, including South Gate, is how to hold onto individual businesses and keep the entire local business base intact while at the same time stimulating job and economic development. That’s not an easy task, especially when the reality is that other states are trying to lure away businesses with attractive tax incentive packages if they relocate.
California’s Enterprise Zone program has provided California cities the answer. And South Gate has made successful use of it.   
Rockview Farms, for instance, one of the largest family-owned dairies in Southern California, has had operations in South Gate since the city incorporated in the mid-1920s. The company employs 250 people with approximately 120 working outside California according to Joe Valadez, the chief financial officer. Significantly, in recent years, he says, the dairy has hired six to 10 new employees annually from targeted Enterprise Zone employment areas within the local community, earning the business tax credits now worth approximately $100,000 a year.
The company could easily find employees elsewhere. “There are plenty of people out there looking for work,” Valadez notes. But they wouldn’t earn Rockwell Farms tax credits.
“The one thing the tax credits do is allow us to continually expand our facility,” he adds. The tax savings provide small companies in Enterprise Zones with the needed capital for reinvestment, and with that expansion comes the ability to hire still more residents from the local pool.
California's Enterprise Zone program began in 1986 and falls under the auspices of the California Department of Housing and Community Development (HCD). It is the state's largest economic growth program — and in the view of many local governments also the most successful, with 40 zones statewide.
Cities and counties may apply for their own designated Enterprise Zones or seek designations together to form a single area in common. South Gate shares its Enterprise Zone with nearby Lynwood.
The South Gate–Lynwood Enterprise Zone has been creating between 70 and 100 new jobs a year on average since 2010 and has reported between 1,300 and 1,400 total jobs within the zone. Nearly 800 of the jobs are in South Gate.
Essentially a state and local government partnership, the program offers businesses investing in Enterprise Zones sales tax and use credits for certain kinds of manufacturing and processing equipment, in addition to the hiring tax credits worth as much as $37,000 per employee and interest deductions to lenders.
The program’s popularity is reflected in part in the rapid statewide growth in the use of the hiring tax credit. The number of employees reported to be employed on tax returns grew from 24,190 to 103,999 between 1999 and 2008 according to information for 2011 from the state’s Legislative Analyst’s Office. Nearly 40,000 new hires were noted in 2008 alone.
The South Gate-Lynwood Enterprise Zone workers, hired from targeted employment zones, include the economically disadvantaged, ex-offenders, military veterans and others for whom finding work is challenging.
The state bases its selection of successful city and county applications on such criteria as the localities' use of appropriate, innovative and comprehensive regulatory tax programs and other incentives to stimulate private-sector investments.
Among other criteria, eligible areas must:
  • Be affected by a plant closure within the past two years affecting more than 100 workers;
  • Chalk up unemployment rates of not less than 3 percent above the statewide average; and
  • Show that median household incomes for families of four do not exceed 80 percent of the statewide median income. 
When it comes to attracting new business, South Gate’s Community Development Director Steve Lefever says Enterprise Zones make a great difference.
“I can say that every company, real estate broker and industrial developer that I have spoken to has asked whether we are in an Enterprise Zone,” he explains. “It is an important component in their decision process.”

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