If Gov. Jerry Brown goes ahead with his proposal to eliminate the state's enterprise zone program, it could cost the state -- and Hesperia, which now has an enterprise zone of its own -- more than cutting the program would save.
That's among the conclusions from a new study commissioned by San Bernardino Valley Enterprise Zone (a separate zone than Hesperia's) and released on Thursday.
The study, conducted by Lee Hanson, a professor of management studies at Cal State San Bernardino, looked at eight small businesses in the SBVEZ.
"Given the fairly representative characteristics of the study firms - their small size and local ownership, their primarily local, regional or statewide market orientation, their mostly moderate growth, and their industry diversity - it is reasonable to posit that the results could be similar for many other zones around the state," Hanson's study reads in part.
Businesses can earn state tax credits by operating in an enterprise zone, particularly by hiring qualified unemployed or underemployed residents. Hesperia's enterprise zone covers the location of more than 90 percent of the city's existing businesses, making most of them eligible for tax credits.
"The value of the average Hiring Tax Credits generated by each firm in the study was $68,255, or around $6,000 per Qualified employee based on a three-year average of 12 Qualified employees in the sample firms," according to Hanson's study. "Taking account of factors like specific skills or experience needed for a position, Qualified individuals were likely to be considered for employment over persons who did not qualify for the Hiring Tax Credit."
Hesperia's enterprise zone businesses are unlikely to have a problem finding applicants that would qualify for the hiring tax credits: The city's 18 percent unemployment rate is one of the highest in the region.
"Proportion of Qualified employees in all eight firms rose from about 7 percent in 2007 to 18 percent in 2009," the study continues. "One business that grew from about 80 to 130 employees simultaneously more than tripled its tally of Qualified employees, from about 15 in 2007 to almost 50 in 2009, much of which involved new hiring."
Brown put the state's enterprise zone program in the crosshairs as a cost-cutting measure, but Hanson's study suggests that the state gets back far more from the program than it puts into it.
"Compared with an average annual total of $130 million in payroll and purchasing expenditures generated by the eight firms between 2007 and 2009, they generated an average annual total in Hiring Tax Credits of just $550,000 - a cost to the state of well below 1% (.004) of the value of what the businesses injected into the economy," Hanson's study reads in part.
And beyond just subsidizing jobs for the unemployed and underemployed, the tax credits had other benefits, according to the study:
"Businesses reinvested their EZ tax credits. Seven of the eight said they had reinvested some of their EZ tax credit 'revenues' to improve operations and competitiveness."
Although Hesperia's enterprise zone was only officially recognized by the state in April 2010, city officials have said local businesses, including the recently opened businesses Golden Corral, Ross Dress for Less and Marshall's have benefited from the hiring credits.
Beau Yarbrough can be reached at 760-956-7108 or at firstname.lastname@example.org. Follow us on Facebook at Facebook.com/Hesperia.Star.