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Lodi Enterprise Zone Relieves Burdened Businesses

May 17, 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.
 
The city of Lodi has 63,000 residents and a labor force of about 31,000.
 
It has “a school district, retail, medical and other service industries” that “serve an estimated 175,000 customers,” as the city website proudly notes.
 
And it has its own electric utility, a prized possession because it can be used to help spur economic growth.
 
But Lodi also has an Enterprise Zone.
 
And all of these things together can be fashioned into a powerful tool with which to strengthen a city’s economy, grow jobs and encourage business expansion.
 
Through its Enterprise Zone, which is part of the larger San Joaquin County Enterprise Zone, Lodi and the state of California have worked together to offer a robust package of financial incentives to businesses located in the zone when they hire employment-challenged local residents. Lodi businesses created 350 new Enterprise Zone jobs in 2012, says Rob Lechner, the city’s business development manager.
 
The incentives can include a discount on Lodi Electric Utility rates, a state tax credit of up to $37,400 for hiring and retaining eligible employees, a $20,000 business expense deduction on tangible personal property, and more.
 
Enterprise Zones — there are 40 in the state — are places designed for teaming up economic resources of local and state governments. Not surprisingly, the state’s Enterprise Zone program, which falls under the California Department of Housing and Community Development, is California’s largest economic growth program. 
 
Each city with an Enterprise Zone has identified census tracts in which at least 51 percent of the residents have low-to-moderate income levels. Businesses receive tax credits from the state when they hire individuals within the so-called Targeted Employment Areas (TEA).
 
If a business hires a military veteran or an ex-felon from such an area, for example, and trains and retains that person for at least 5 years, it can be worth up to $37,400 per employee in state tax credits to the company. The same company may also get certain permit fees and business license fees waived by the city, as well as reduced rates on utility fees.
 
Enterprise Zone hiring programs can be particularly effective in providing work to individuals who face hurdles getting hired — ex-offenders, for example.
 
At least one California study suggests Enterprise Zones can also help spur employment when coupled with active marketing plans. 
 
But this is hardly news to Lodi business owners.
 
If it wasn’t for the city’s marketing, Joe Hohenrieder says, he might not have found out about the program, which he has participated in for about three years now. Joe Hohenrider and an employee.
 
Hohenrieder’s experience began with an informational city handout about the Enterprise Zone. City staff then followed up by helping his business, Lustre-Cal Corporation, process the necessary paperwork to benefit from the Enterprise Zone program.
 
He says he’s hired six people through the Enterprise Zone since then. All have come from the targeted employment areas from which Lodi companies must hire people if they want to qualify for the hiring tax credit.
 
Proponents of Enterprise Zones, including Hohenrieder, often point out that the benefits are not limited to job growth.
 
For instance, the money saved through tax incentives is often reinvested in a company’s equipment. Hohenrieder estimates he has invested an additional $110,000 in equipment for his company, a producer of high-quality, custom label nameplates, panel plates, panel overlays and serialized bar-coded property ID labels, among other products.
 
“If we didn’t have the Enterprise Zone incentives we wouldn’t buy as much equipment,” he says. “And if we didn’t have the equipment we wouldn’t have as much business. And we wouldn’t have as many people working here.”
 
“It spirals up,” he explains, “or it spirals down.”
 
Success within an Enterprise Zone may be difficult for some to measure. For him, it seems simple enough.
 
“The healthier your company, the more taxes you’re going to pay,” he says. “The people you hire also pay taxes. And they’re putting money back into the economy.”
 
Lustre-Cal began in Lodi in 1964 as a one-man operation in a basement. Today it has 65 employees and is located in its own 50,000-square-foot production facility.
 
“A stronger company makes for a stronger community,’ Hohenrieder believes. And the Enterprise Zone contributes to that. It can also tie a business to a community.
 
 “We can’t locate to another city,” he points out. “Our employees are here.”
 
Finally, there is the simple matter of the tax benefits. Like many small business owners, he finds the state tax rate burdensome.
 
The Enterprise Zone, he says, is definitely a benefit. “I’d hate to see it go away. For the state to be healthy, you can’t just take all the time. It’s good for the state to give some.”
 
In fact, he says, Enterprise Zones “may be an incentive for some companies that might otherwise move to another state to stay in California.” 
 
Jennifer Tracy, owner of Mepco Labels, says that 65 of her 120 employees are from the targeted employment zones. “I bring them in at minimum wage. We train them,” she says. “They start in shipping and rewinding equipment, and later we move them up to printing, which is skilled labor, and some move into management.”
 
“The Enterprise Zone incentives at least give me a little benefit to hire people from certain areas with limited income ranges,” she says.
 
For cities, Enterprise Zones are essential, says Lodi Business Development Manager Lechner.
 
“There are very few arrows in the quiver that communities have for economic development,” he says. “Enterprise Zones are one of those arrows.”


 
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