California, it is oft-noted, has a larger economy than all but a handful of countries in the world. And the ongoing state budget deficit suggests the government could use more tax revenue. Yet the economic development bills that lawmakers introduced this year are a motley collection.

Many of the bills are in “spot” or “intent” form, meaning that the details are yet to come, or that the bills might be amended easily to address another subject. None of the legislation appears to propose broad policy changes. If there is a common theme, it is a call for better accountability of existing programs and tax breaks. Lawmakers want to know if the government is getting its money's worth from existing economic development programs, which has been a concern of the State Auditor and the Legislative Analyst's Office for some time (see CP&DR Economic Development, May 2003).

One of the more interesting proposals is SB 552 by state Senators Elaine Alquist (D-San Jose) and Abel Maldonado (R-Santa Maria). The bill would suspend the gross receipts sales tax now paid by manufacturing and R&D companies - but only if the state budget is balanced. Furthermore, cities and counties would have the option of reinstating the tax in their jurisdiction.

The bill is intended to provide incentives to manufacturers, and it already has a bi-partisan list of Assembly co-authors from areas with large technology or manufacturing bases. However, one state Capitol analyst questioned how far the bill would go this year, and how effective the program would be if cities and counties could exempt themselves.

While SB 552 would have statewide consequences, two other potentially important economic development bills are targeted at specific areas. Assembly Bill 350 by Tracy Democrat Barbara Matthews would authorize the formation of infrastructure financing districts (IFDs) within designated jobs-housing opportunity zones. The legislation would apply to the “interregional partnership” area that consists of Alameda, Contra Costa, Santa Clara, San Joaquin and Stanislaus counties.

Similar to redevelopment agencies, IFDs issue bonds to pay for infrastructure. The bonds get paid off with tax increment. Under AB 350, the financing plans in the jobs-housing opportunity areas would need approval of the Infrastructure and Economic Development Bank. That level of state oversight would work as a tradeoff of sorts for the lack of a blight requirement. Last year, a similar Matthews bill failed in the Senate.

Assembly Bill 1330 (Karnette) is an even more direct intervention in local activities. The bill names Los Angeles's Harbor District Development Authority as a redevelopment agency and specifies that conditions at the harbor district qualify as blight.

Like all redevelopment agencies, the Authority would have the ability to adopt a redevelopment plan. However, under AB 1330, the Harbor District redevelopment plan would receive an exception to California Environmental Quality Act requirements. The Authority would still have to certify an environmental impact report - but could do so up to 18 months after the redevelopment plan's effective date. The bill also carves an exception in redevelopment law to permit the Authority to pay for normal maintenance and operations of public facilities with redevelopment funds.

This bill is almost certain to run into resistance at the committee level.

Among other economic development bills alive in the Legislature this year are these measures:

o AB 31 (Parra) calls for the creation of the Interagency Task Force for the Economic Development of the Central San Joaquin Valley to coordinate local, state and federal economic development efforts.

o AB 37 (Torrico) calls for creation of the Quality Job Creation Tax Credit to encourage employers to create high-paying jobs.

o AB 199 (Tran) increases the maximum number of enterprise zones - which provide tax and regulatory incentives to relocating, new and growing businesses - from 42 to 52.

o AB 251 (Haynes) creates the New Markets Venture Capital Program, under which the Business, Transportation and Housing Agency would help the private market invest in low- and moderate-income areas. Investors would receive tax credits as incentives. AB 285 by the same author states a similar intent.

o AB 623 (Gordon) authorizes cities in Los Angeles County to spend redevelopment tax-increment revenue on a Los Angeles Air Force Base retention program. The Air Force Base amounts to a large office complex in El Segundo (the bill's author, Democrat Mike Gordon, is a former mayor) that directly employs about 7,500 people and indirectly affects thousands of other jobs. Cities in the area have been fighting for years to prevent the base from closing (see CP&DR Deals, September 2003, April 1992).

o AB 732 (Leslie) creates the California Neighborhood Initiative, under which 25 “renewal communities” would be designated for preference in receiving state and federal resources.

o AB 735 (Arambula) requires the Legislative Analyst's Office to report every two years on tax breaks for businesses.

o AB 1139 (Dymally) requires the Department of Finance to present an annual “unified economic development budget” that lists all tax breaks and economic development expenditures. Additionally, county assessors would be required to report annually on any real property that receives tax reductions. The bill also sets up a new process for granting a “development subsidy.”

o AB 1497 (Baca) requires the Department of Housing and Community Development to designate an enterprise zone in a specific part of the City of San Bernardino.

o SB 6 (Ducheny) permits enterprise zones created since 1990 to request five-year extensions. Only pre-1990 zones have this ability now. Without extensions, enterprise zones expire after 15 years. AB 1361 (Dymally) would permit enterprise zones in Los Angeles County to seek five-year extensions.

o SB 593 (Alarcon) requires a city or county that receives an application from a “superstore retailer” to prepare an economic impact report. The provision would apply to stores of more than 130,000 square feet that generate at least 10% of total sales from nontaxable items. Gov. Schwarzenegger vetoed a nearly identical bill last fall.

Thus far, none of the economic development bills has received a committee hearing.