State Sens. Jerry Hill and Anthony Cannella to Hold News Conference Outside Rancho Cordova Strip Club that has Received Thousands of Dollars in Tax Credits Under the State’s Broken Enterprise Zone Program
WHAT State Senators Jerry Hill, D-San Mateo, and Anthony Cannella, R-Ceres, will hold a news conference outside Déjà Vu Showgirls, one of two Rancho Cordova strip clubs that have received thousands of dollars in tax credits from California’s Enterprise Zone program. Senators Hill and Cannella will urge the legislature to reform the Enterprise Zone program and increase transparency.
Hill’s Senate Bill 434 would close a tax loophole that allows companies in enterprise zones to receive millions of dollars in tax breaks – even when they don’t create new jobs. Another strip club in Rancho Cordova, Gold Club Centerfolds, has also tapped into the program, which allows companies to claim a $37,000 tax credit for each worker hired. That’s more than the servers, waitresses and sales clerks earn in a year.
Sen. Hill introduced his legislation after a company in his district – VWR International – moved from Brisbane to an enterprise zone in the San Joaquin Valley city of Visalia, displacing 150 workers last year.
Like Sen. Hill, Sen. Cannella believes the Enterprise Zone program should have more transparency so taxpayers know where their money is going. The Enterprise Zone program is so shrouded in secrecy that taxpayers have no idea how many other strip clubs are receiving similar tax giveaways. The program does not disclose what businesses received tax credits or whether those companies created a net number of new jobs or simply hired replacement workers. It took a Public Records Act filing by the California Labor Federation to uncover that the Rancho Cordova strip clubs were receiving the tax credits -- and that enterprise zone was the only one of the 10 zones that received a PRA request to hand over the information.
WHEN Monday, June 3, 2013 11 a.m.
WHERE Déjà Vu Showgirls 11252 Trade Center Dr Rancho Cordova, CA 95742
CONTACT Contact for Sen. Hill: Aurelio Rojas 916-747-3199 cell Contact for Sen. Cannella: Jeff Macedo 916-764-9100 cell
BACKGROUND California’s Enterprise Zone program was established in 1984 to create jobs in disadvantaged communities. But over the years tax consultants for big companies have exploited loopholes in the law to claim tax credits without adding to the state’s workforce. There are 40 enterprise zones in the state. An overwhelming 91 percent of enterprise zone tax credits were claimed by corporations with more than $10 million in assets. Corporations with less than $1 million in assets claimed only 1 percent of Enterprise Zone tax credits. San Francisco and Los Angeles account for 30 percent of all EZ credits, while areas with much higher unemployment claim far fewer credits. It has cost the state over $4 billion dollars since its creation and it’s growing at 30% per year creating annual impacts to the General Fund of $700 million dollars. SB 434 will save the state an estimated $250 million annually when fully implemented. Hill’s legislation, which would require a two-thirds vote of the Legislature, keeps California’s 40 Enterprise Zones in place, but it would enact several reforms in the EZ program: 1. Require Job Creation: Employers must create net new jobs in the state to claim the hiring credit. 2. Transparency: Create a public database of companies that get EZ tax breaks and how many jobs they created. 3. Cap, Sunset and Review: Cap the cost of the program, set a sunset date and require legislative review. 4. Eliminate Retroactive Vouchers: Credits can only be claimed within a year of hire instead of the current four-year allowance. 5. Job Quality Standards: Employers must pay at least $16 an hour and meet retention standards to claim credits. 6. Regulate Tax Consultants: Prohibit contingency fee arrangements with tax consultants that drive up the cost of the program with excessive claims. The owner of Gold Club Centerfolds says he did not seek out his tax windfall; he was approached by tax consultants who got a piece of the pie. ###