Off to a fast start.

Santa Ana's new enterprise zone is a big hit with the city's businesses

Two months into the Santa Ana Enterprise Zone program, more than 50 employees have been certified as enterprise zone-qualified. This translates to at least $950,000 of California Income Tax Credits for businesses participating in the program.

This is only the tip of the iceberg. There are approximately 10,000 businesses actively operating in the Santa Ana Enterprise Zone. According to CB Commercial Real Estate Group, at least 3.6 million square feet of industrial space is available for business expansion and relocation.

Marketing for the program thus far has been achieved by:

* News articles.

* Group workshops.

* Retention interviews where city staff members proactively seek one-on-one presentations with local business executives.

* Referrals from commercial real estate brokers and city staff who interact with the public on a daily basis, such as those who work in the planning, building and fire departments.

Phenomenal response

The community response has been phenomenal. The Economic Development Office receives an average of 40 phone inquiries a day. Overall, approximately 75 percent of the inquiries come from Santa Ana companies, with the remaining coming from businesses in the surrounding areas.

Since the enterprise zone lasts for 15 years, businesses can accumulate income tax credits at any point in time when hiring from the enterprise zone qualified employee pool and when purchasing production- and process-related machinery.

Should a business become unable to use the credits earned in the same year, it is allowed to carry over 100 percent of the credits until it can take advantage of them. For example, a biomedical startup may hire 10 assembly workers and purchase $100,000 of testing and production equipment without having to pay state income tax. In its first year it will earn an estimated $63,700 in credits (assuming it hires all 10 assembly workers through the program) and $7,750 of sales and use tax credits that can be carried over 100 percent to the years when income tax liability is incurred.

Long-term benefits

"Businesses are finally realizing that there are long-term benefits from the enterprise zone incentives program. At the same time, they find themselves tapping into other economic development programs, such as the Targeted Job Tax Credit (TJTC), Employment Training Panels, Private Industry Council (PIC), SBA loans and others. All these save companies money up front," said Kelly Bluth, the enterprise zone specialist for the California State Franchise Tax Board.

"The enterprise zone program is really designed for Santa Ana because it has so many manufacturers. There is tremendous expertise found in the Santa Ana manufacturing community. The sales and use tax credits, particularly, will encourage automation so that we may become more competitive in the global marketplace," Bluth added.

Many businesses also find the enterprise zone program a timely tool. Since most businesses have downsized during the recession, many project to take advantage of the credits when production capacity rises, while some businesses are already accumulating the credits.

Effects of recession

"The recession has forced some of our competitors out of business, and we were able to pick up some new accounts. We are excited about the zone, particularly the hiring and the sales and use tax credits. We will take advantage of the tax credits as much as we can," said Paul Wilkins, vice president of Profab, a highly customized machine ship in Santa Ana. The company has added 10 employees during the last 12 months, and in August alone was expecting to add three new employees. The company is also planning to purchase new machinery in the near future.

"In the past we had to import workers from surrounding counties to work in Orange County. With 90,000 people out of work in Orange County (as of June, according to the state Economic Development Department), there are plenty of people available at all skill levels to accommodate business growth. We are working hard to identify those who may be qualified for tax credits to be placed in the enterprise zone," said Patti Nunn, Economic Development Manager for Santa Ana.

Reconsidering California

Some business which at one point were considering relocation out of California are either having second thoughts or have changed their minds. Harold Urbach, director of western operations for FPI Thermoplastic Technologies had looked at relocating its Santa Ana manufacturing plant outside of California. The company investigated Colorado, Nevada and Arizona, but recently it renewed a long-term lease with its Santa Ana landlord. "There are enough locations and incentives to say," said Urbach. The company specializes in plastic hose for recreational vehicles, industrial and household use.

The success of the Santa Ana Enterprise Zone will depend largely on our ability to pull other resources together to provide fully integrated customer service to businesses from initial program presentation to obtaining an occupancy permit.

The State Franchise Tax Board and the California Trade and Commerce Agency, the South Coast Air Quality Management District (AQMD), Southern California Edison Co., the Orange County Hazardous Waste Division, the Santa Ana Planning and Building departments, and the Santa Ana Fire Department are all active in facilitating business development in the zone.

"It is a satisfying experience to bring about a government program that can really make a difference for the business people," said Cynthia Nelson, executive director for the Santa Ana Community Development Agency.

Statewide program

At the state level, there are 30 enterprise zones in California. According to Sam Parades, director of the enterprise zone program, the new zones such as Santa Ana are kicking off with impressive momentum.

In addition, a historic workers' compensation reform has been signed in California. The reform is expected to reduce workers' compensation costs by at least $1.5 billion, or nearly 14 percent of the current $11 billion system. Half of the savings will go to reduce premiums for employers, and half will be used to increase benefits for injured workers over the next three and a half years.

In April, the governor also signed SB 31 into law. Such legislation will greatly reduce the medical and legal costs associated with workers' compensation and save employers $300 million to $400 million a year.

"I see my competition leaving California. I am going to tough it out because, for those of use who stay, I think we are going to be well taken care of," said an executive of an electronics firm who is considering the purchase of a building in the Santa Ana Enterprise Zone.

Bonnie Birch is an economic development specialist with the City of Santa Ana.