The Bloom is on the Rose in Pasadena, Thanks to State and Local Incentives
Note: With job creation and affordable housing on the minds of public officials across California, the power of state-local partnerships in stimulating the local economy and creating good paying private sector jobs merits attention. This is part of a series of special papers on some successful partnerships produced in collaboration with the League of California Cities. http://www.cacities.org
Pasadena is known around the world for the annual Rose Bowl Game and Tournament of Roses Parade, but in some sections of the City outside the international media spotlight—where unemployment can range as high as 10 percent—cultivating business growth and creating jobs can be a daunting challenge that often requires special resources.
Luckily for California’s cities, entrepreneurs and job seekers, there is a way to provide just such help through the creation of Enterprise Zones. Since 1986, California’s Enterprise Zones have forged state and local partnerships under the auspices of the California Department of Housing and Community Development. It is the state's largest economic growth program—and in the view of many local governments also the most successful, with 42 zones statewide.
By providing tax breaks and other incentives to big and small businesses that operate or re-locate within these zones, the private sector, in turn, is able to successfully stimulate job growth and other business investments in the local economy, including disadvantaged areas most in need of the economic boost.
In Pasadena, www.cityofpasadena.net, Enterprise Zone offerings have convinced a variety of big and small businesses to stay, re-locate new operations or to expand. From high tech companies to sole proprietors, the Enterprise Zone has made Pasadena a more business friendly place helping to improve the bottom line.
Ayzenberg Group, www.ayzenberg.com, a Pasadena-based advertising agency, has grown from a small 14-employee operation to more than 145 employees since 2000, in no small part thanks to the advantages of hiring qualified workers (both within and outside the Enterprise Zone). The firm is a full service advertising agency specializing in computer games, marketing and digital entertainment for companies like Disney, Warner Brothers, Microsoft, Electronics Arts and Sony.
“Pasadena is already such a great place to do business, but our employee growth was considerably enhanced by the economic incentives we received by being in Pasadena’s Enterprise Zone program," said Edgar Davtyan, CFO for Ayzenberg Group. “The Zone helped us considerably in our expansion plans: without it our business would have encountered significant challenges.”
Utilizing the Enterprise Zone to foster a growing innovation economy blends perfectly with Pasadena’s 2012 Economic Development Strategic Pan, added Eric Duyshart, Pasadena’s Economic Development Manager.
“We’ve identified tech and innovation start-ups as key ingredients for the local economy that are also important to the state’s overall economy too,” Duyshart said. “Ayzenberg Group is a great example of an advertising business using the Enterprise Zone’s hiring credits to help support their hiring decisions.”
Open X, www.openx.com, a Pasadena-based web software company, also has grown from a small, start-up tech company to more than 200 employees in just seven years also by taking advantage of Enterprise Zone incentives, Duyshart said.
Several other Pasadena businesses have benefited too, Duyshart said, from a pasta maker and a medical services company to a new local “green” laundromat.
Pasadena business owner Michael Yagjian decided to set up his pasta business in the city in 1996. He initially hired 20 workers for Gourmet Fresh Pasta, www.gourmetpasta.com which makes a full line of pasta products used in foods prepared and packaged by other businesses.
Thanks to the money he has netted through Enterprise Zone savings, Yagjian has been able to buy more equipment and expand. Today, he employs 50 people, the majority of whom are from the designated pool within the city’s, or nearby Los Angeles County’s, Enterprise Zone.
For Pasadena, certain residential census tracts within the city, (population 149,475) showing higher unemployment, fewer businesses and higher crime rates offer the clues to the economic puzzle that Enterprise Zones seek to solve using an effective combination of federal, state and local incentives.
Cities and counties may apply for their own designated enterprise zones, or seek designations together of a single area in common. The state bases its selection of successful applications on such criteria as the localities' use of appropriate, innovative and comprehensive regulatory tax programs and other incentives to stimulate private sector investments.
Enterprise Zone designations must be affected by a plant closure within the last 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 4 do not exceed 80 percent of the statewide median income.
Businesses within or that re-locate to an Enterprise Zone become eligible to receive a variety of tax credits and other incentives when they hire individuals with barriers to employment. Equipment purchases and other capital improvements can also qualify for cash back to the businesses, helping them to expand and remain profitable for future growth opportunities.
For example, if a business hires a military veteran or an ex-felon and retains that person for at least five years, it can be worth up to $37,000 per employee to the company. The same company may also get some local permit fees and business license fees waived by the city, as well as reduced rates on utility fees, sales tax credits and possible interest deductions on loans.
Since April 10, 2007, the Pasadena program has placed 468 Individuals convicted of a felony or misdemeanor in jobs within its Enterprise Zone. Of those, 34 were placed in new jobs and 434 were employed in existing positions. The average wage paid: $13.95 an hour. Under state law, city Enterprise Zone designations last 15 years. Pasadena established its current zone in April 2007. The designation is set to expire in April 2022.
There are 11,587 workers in the Pasadena area that qualified under the state hiring credit program. Businesses benefiting from the program have created 2,320 new jobs while Enterprise Zone-eligible workers have filled an additional 9,267 existing jobs.
For any business, the money can add up to a significant sum. And the savings are often plugged back into the local economy with equipment purchases or additional business growth, which leads to even more job opportunities and hiring.
The Enterprise Zone also made it possible for Gary Thompson to rehabilitate a derelict building on North Fair Oaks Avenue, buy new equipment and hire six employees for a new laundry business that has become a source of pride for the local neighborhood. Now, he’s hoping to replicate his success in Hollywood, which also has an Enterprise Zone.
According to Thompson, without the incentives and savings offered by the city and state he would not have been able to afford to undertake the project, which began when he gutted the former “greasy, dark” laundry business that occupied the site.
Starting with only the four original walls, he installed high-efficiency “green” washing machines and dryers, cut skylights in the roof for natural lighting and additional savings in electricity, added free Wi-Fi so patrons could log on to the Internet while doing their laundry, and created a website promoting his business and sustainable laundry methods.
“It looked beautiful” when completed, Thompson says. So beautiful, in fact that the business next door painted the building and put up new signs. The new sense of pride continues to spread.
“It’s extremely expensive doing business in California,” he says. “I really don’t see myself doing it without these incentives.”
For Sean Stellar, the owner of Stellar Prosthetics and Orthotics, www.stellarpro.com, a medical services company that produces custom-made prosthetics and orthotics, the Enterprise Zone significantly aided his ability to invest in his company’s future.
Stellar moved his business to the city in 2007 and for the first two years knew nothing about the program. Becoming a participant made a world of difference for his business.
The $100,000 he estimates he has saved through the state tax credit program has allowed him to invest in new technology, such as the $30,000 laser machine that he uses to create 3-D images of corrections being made with orthotics to the shape of an infant’s head.
“For us little guys,” he says, “it really helps us.”
For more information about Pasadena’s Enterprise Zone program, contact Melissa Alva, Enterprise Zone Manager, (626) 744-7347, or by email to email@example.com.