The dissolution of redevelopment agencies may be the biggest bombshell that Gov. Jerry Brown dropped on the land use community. But it is not the only one. He is also targeting the Williamson Act, Enterprise Zones, and fire safety in order to help close the state's $28 billion deficit.
Like redevelopment project areas, Enterprise Zones are intended to stoke economic development in disadvantaged areas. However, rather than using tax increment financing and being orchestrated by a public agency, Enterprise Zones simply confer tax credits and other financial incentives on businesses that set up shop within the zones.
The proposed budget calls for the elimination of all Enterprise Zones and related benefits. Similar zones such as Targeted Tax Areas, Manufacturing Enhancement Areas, and Local Agency Military Base Recovery Areas would also be eliminated. Because these zones involve relatively straightforward tax credits, the savings estimate is relatively straightforward: $343 million in 2010-11 and $581 million in 2011-12.
The proposed budget includes the rationale that local economic development strategies should be managed locally. These strategies are, in fact, not of "statewide interest" "because the primary benefit of these zones is to shift economic activity from one geographic region within California to another geographic region within California," according to the budget draft.
As with redevelopment agencies, the draft budget also includes some scathing criticism of Enterprise Zones:
- The Legislative Analyst's Office "California's Enterprise Zone Programs" – 2005 found that EZs have little if any impact on the creation of new economic activity or employment. That activity would have occurred elsewhere, according to the analysis.
- The Public Policy Institute of California found "Do California Enterprise Zones Create Jobs?" – 2009 that there was "no statistically significant effect on either employment levels or employment growth rates" within enterprise zones as compared to neighboring areas.
- The greatest benefits of Enterprise Zones may not accrue to the companies or localities but in fact to the consulting and accounting firms that facilitate the relocation of a business to an Enterprise Zone.
Enterprise Zones were established in 1984, with a maximum of 42 zones throughout the state at any one time. Zones are approved for 15-year terms. Gov. Arnold Schwarzenegger presided over on an Enterprise Zone bonanza, approving 36 in his two terms. New Enterprise Zones were approved in Anaheim, the Santa Clarita Valley, and the Los Angeles Harbor area just last month.
California Land Conservation (Williamson) Act
A relatively minor item in the state budget, the Williamson Act for farmland protection cost the state $35 million in 2009-10.
Under the Williamson Act, owners of farmland can voluntarily agree to keep their land in agricultural production for as open space -- rather than convert it to other uses -- for a specified period in exchange for an artificially low tax assessment. The 1972 Open Space Subvention Act provides for the state to reimburse local governments for lost property tax revenue.
The governor proposes the permanent suspension of Wiliamson Act subventions. The budget invites localities to run the program as they see fit.
Wildlands Fire Protection
The Department of Forestry and Fire Protection (Cal Fire) provides wildland fire protection services in over 31 million acres of state responsibility areas (SRAs). Although the number of acres in SRAs has been relatively constant since the 1950's, the composition of SRAs has greatly changed. Population and urban development in SRAs has grown significantly in recent decades, increasing fire risks and state costs.
Under this proposal, responsibility for fire protection and medical emergency response in these populated wildland areas will be assumed by local government.The budget insists that jurisdictions making land use decisions which result in housing development encroaching in wildland areas also provide the necessary emergency response services associated with more highly populated land use patterns. In other words, local jurisdictions may not be able to approve development in unincorporated areas without also planning and paying for fire protection.
It is estimated that this proposal will result in the realignment of up to $250 million of Cal Fire's fire protection program to local governments.