EAST VALLEY ENTERPRISE ZONE AXED GOVERNOR DOESN'T RENEW STATUS ALLOWING TAX BREAKS.

Byline: RICK ORLOV Staff Writer

In a stinging blow to revitalization efforts in the east San Fernando Valley, state officials on Friday revoked the enterprise zone status that has been credited with creating thousands of jobs in the Pacoima area in the past two decades.

The move stunned local officials, who just three months ago persuaded Gov. Arnold Schwarzenegger to change state regulations in an effort to retain the Northeast Valley Enterprise Zone, which gives tax breaks to companies that create jobs.

``They promised they would try to allow us to keep the area out here and then they come out with this decision. It just doesn't make any sense,'' said City Councilman Tony Cardenas, who represents part of the area.

``I don't think these bureaucrats appreciate how much this is needed and what it means to take it away at this point.''

Officials had been grappling earlier this year with state guidelines that require an enterprise zone to have at least 51 percent of its land zoned for commercial or industrial use.

A construction boom in the Northeast Valley reduced available land, and the area could no longer qualify without a change in state law.

In August, officials hailed a Schwarzenegger administration agreement to change state law and take public investments into consideration as part of the overall ratio in establishing enterprise zones.

But state officials said Friday that the enterprise zone -- the only one in the Valley -- still failed to meet standards.

``This is an incentive from the state of California to a targeted area,'' said Sunne Wright McPeak, secretary of the state's Business, Transportation and Housing Agency.

``The East Valley did not score well. We are working with the East Valley zone on what they can do to improve their application, and they can apply again in two years.''

In announcing 23 enterprise zones in the state -- including seven new areas -- McPeak said the east San Fernando Valley zone was the only one that was not renewed.

New enterprise zones created in Los Angeles County were for the Hollywood-Central area and Santa Clarita.

McPeak said the state will continue to work with East Valley community leaders to determine whether there are other ways that they can continue to receive tax credits.

Looking for a fix

Mayor Antonio Villaraigosa said he will get involved.

``This is a setback but I think there is opportunity over the next several weeks to correct this and make sure we continue to invest in the East San Fernando Valley,'' Villaraigosa said in a statement.

``What's important now is that we are not losing the tax credits for existing jobs and we will work to correct this.''

Councilman Alex Padilla, who also represents a portion of the area and is expected to be elected to the state Senate next week, said he is willing to introduce legislation next year to restore the enterprise zone status, if necessary.

``It's a huge mistake on behalf of the state,'' he said Friday afternoon. ``The Governor's Office couldn't answer what, in their eyes, made this application not as competitive as the 23 areas of California that were selected.

``I'm not going to let the state off the hook.''

Lynn Jacobs, director of the state Department of Housing and Community Development, which made the recommendation, said tax credits provided in the East Valley zone will continue for five years and that she will try to find ways to accommodate the area.

One provision of new state law allows an enterprise zone to include some land not directly within the zone as part of its designation.

Jacobs said she believes the East Los Angeles zone and the new Hollywood zone might be able to take in part of the East Valley area.

While that could offer a temporary solution, some said it still leaves businesses in the area uncertain on whether to make investments or hire workers.

Credits and contracts

The Northeast Valley Enterprise Zone was created in 1986 and redrawn in 1994, after then-President Clinton refused to designate it one of the nation's empowerment zones, which would have provided direct investments in addition to tax credits.

The enterprise zone designation is seen as a valuable tool to spark investment in economically deprived areas.

It provides tax credits of up to $31,234 for new jobs, tax credits of up to $20 million on machinery, preferences on state contracts and other tax benefits.

Roberto Barragan, head of the Valley Economic Development Corp. that works with the program, said he was stunned.

``We thought everything had been taken care of and this would be a routine approval,'' Barragan said. ``Today, Pacoima and the East Valley lost big-time. I'm not sure how we can recover from this type of setback.

``We thought we were fine, that everything was hunky-dory. Then the news came and I haven't been able to catch my breath. What we have to do is take a look at this and see what we can do to make sure we don't lose what we have and bring in more business to the San Fernando Valley.''

rick.orlov(at)dailynews.com

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