San Diego’s South Bay Enterprise Zone May Get Extension
Proposed State Legislation Would Extend the Business Incentives for Five More Years

SAN DIEGO – Critical tax incentives and assistance for businesses located in the South Bay Enterprise Zone may be extended thanks to proposed state legislation that would extend the life of the Zone, which is credited with job creation and business investment within the cities of San Diego, Chula Vista and National City.  If there is no extension from the state, the Zone will expire in January 2007 ending vital incentives for businesses and causing the loss of a valuable economic development tool for municipalities and the surrounding region.

Under current law, only Enterprise Zones established before 1989 are able to apply for a five-year extension beyond their guaranteed 15-year lifespan.  In early December of last year Senator Denise Moreno Ducheny (D-San Diego) introduced Senate Bill 6 which would allow the state's 19 Enterprise Zones created after 1989 to be eligible for the five-year extension as well.  If approved, the legislation could be made effective as early as August, which would serve as a boon for local cities trying to lure companies to the zone with the prospect of prolonged incentives.

“Enterprise Zones, especially in developing communities throughout California, have been extremely beneficial to both the residents and the businesses in those communities,” said Senator Ducheny.  “It is critical that we keep this economic development tool available to create more jobs and increase investment in the South Bay area.”

An Enterprise Zone is a geographically designated, economically depressed area in which businesses can receive several substantial state tax breaks and other benefits.  Enterprise Zones were created in California to stimulate business investments in areas where they are traditionally slow, and to increase job opportunities in areas of high unemployment.  San Diego is home to two of 39 Enterprise Zones statewide and a Local Area Military Base Recovery Area (LAMBRA) zone:

·        Metropolitan Enterprise Zone: Established in 1986, it includes portions of downtown San Diego in the Fourth and Eighth Council Districts.  This zone did receive a five-year extension and will sunset in October 2006.
·        SouthBayEnterprise Zone: Established in 1992, it is located along the U.S.-Mexico border and includes the City of San Diego neighborhoods of San Ysidro and Otay Mesa.  It was expanded twice to include portions of the cities of Chula Vista and National City.
·        The City also maintains a “special enterprise zone” at the former Naval Training Center, in the form of a (LAMBRA), which provides similar incentives as the other Enterprise Zones, though specific eligibility criteria and benefits may differ. 

“Our Enterprise Zones have generated nearly 14,000 jobs for local residents and more than $460 million of investment by companies in these areas,” said Hank Cunningham, director of the City of San Diego’s Community and Economic Development Department, which administers the zones.  “We’re grateful to Senator Ducheny for her support of this program and look forward to securing an extension for the South Bay Zone.”

The major benefits of the Enterprise Zone Program are the tax savings on California Business income tax.  These include:

·        Sales or Use Tax Credit: A tax credit against the purchase of new manufacturing, assembly, data processing or communications equipment equivalent to the amount of sales or use tax, or up to $1.35 million annually.
·        Hiring Credit: A tax credit on up to 50 percent of the wages to qualified new employees over a five-year period (up to 50 percent in the first year, 40 percent in the second year, etc.).  This credit could exceed $32,000 per eligible employee.
·        Accelerated Depreciation Deduction: The option to accelerate depreciation on business property.  A business may treat 40 percent of the cost of qualified property as a business expense in the first year it is placed into service for a maximum deduction of $20,000 per year, whichever is smaller.
·        Net Interest Deduction for Lenders: Allows lenders a deduction on the net interest earned from loans made to Enterprise Zone businesses.  Qualified loans include business loans, mortgages and loans from noncommercial sources.

Other advantages for businesses include a job referral service, development permit assistance and expediting, reduction and/or waiver of certain development fees, tax savings for Enterprise Zone employees and access to specialized technical and financial assistance programs.

A new City resource, the Business Development and Incentive Zone Mapping System, allows the public to quickly determine whether a business or property is eligible for certain incentives based on its location – including Enterprise Zone tax incentives.  Users can search for incentives by entering an address or Assessor Parcel Number.  To access the system, visit the City’s Web site at www.sandiego.gov and type “business development” in the search field.

For information on Senate Bill 6, contact Senator Denise Ducheny’s Office at (916) 445-6767. For more information on the City of San Diego’s Enterprise Zone Program, contact the Community and Economic Development Department at (619) 533-4233 or visit the City’s Web site at www.sandiego.gov/cpci.

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City of San DiegoCommunity and Economic Development Department
With an emphasis on the City’s urban core neighborhoods and low and moderate income residents, the Community and Economic Development Department strives to improve the quality of life and ensure a healthy economy in San Diego through job development, business development, neighborhood revitalization, public improvements, redevelopment, social services, and revenue enhancement.