Gov. Jerry Brown signed legislation on Thursday overhauling an economic development program in an effort to encourage manufacturing and job growth in California.
The governor initially sought to eliminate the state's $750 million enterprise zone program, which he called outdated and inefficient, but later compromised and agreed to revamp the program after pushback from businesses.
"This legislation will help grow our economy and create good manufacturing jobs," Brown said in a statement after he signed AB93 and SB90 at Takeda California, a biotech firm, in San Diego.
The bills will extend a sales tax exemption for manufacturing and research-and-development equipment for eight years and provide hiring credits for businesses in areas with high unemployment rates. The legislation includes a tax credit to encourage businesses to expand and retain jobs in California.
Local governments opposed the bills out of worry over losing the economic development program, but labor groups and some businesses backed the changes.
Brown and supporters had said communities abused the incentive program by providing unneeded tax breaks to businesses that pay low wages.
"The enterprise zone program represented some of the worst abuses of taxpayer money this state has seen," California Labor Federation Executive Secretary-Treasurer Art Pulaski said Thursday in a prepared statement. "Instead of using taxpayer funds to create jobs, the broken enterprise zone program subsidized strip clubs, card rooms and big corporations like Walmart."
Craig Johnson, president of the California Association of Enterprise Zones, said Brown was making a "grave mistake" in signing the bills because the changes effectively phase out a tool to help economically distressed areas.
"Signing these bills eliminates the program and greatly affects millions of Californians who live in these regions as well as minorities, veterans, displaced workers, recipients of government assistance and others in need of jobs," Johnson said in a statement.
SB90 specifically excludes strip clubs from receiving hiring tax credits, as some did in Sacramento County. It also allows hiring credits for businesses that employ welfare-to-work participants.
The overhaul marks Brown's second major victory over local business-incentive programs in the past two years. He previously eliminated community redevelopment agencies, saying they directed property tax revenues into slush funds for private developers rather than distributing money to school districts and police and fire departments.