Business & Economy

California board OKs nearly $50M in tax credits statewide

The board of California Competes approved $48.9 million for all the credits recommended for 63 companies by the staff of Gov. Jerry Brown's GO-Biz agency, including video game, video production and pharmaceutical companies.
The board of California Competes approved $48.9 million for all the credits recommended for 63 companies by the staff of Gov. Jerry Brown's GO-Biz agency, including video game, video production and pharmaceutical companies.
Photo by Mark Sebastian via Flickr Creative Commons

A state economic development board approved nearly $50 million in tax credits Thursday for 63 companies that promised to create a total of 11,000 jobs in California, including a $15 million credit for electric vehicle-maker Tesla Motors.

The board of California Competes approved all the credits recommended for 63 companies by the staff of Gov. Jerry Brown's GO-Biz agency.

The California Competes program, signed into law by Governor Jerry Brown in 2013, allows companies to compete for tax credits based on factors including the projected number of jobs created, average wage, and economic impact.  For the fiscal year ending June 30, the program was allotted $150 million.  

The companies winning the latest round of tax credits run the gamut of size and notoriety.  The biggest player is Tesla Motors.  If the automaker follows through on a plan to create 4,426 jobs through 2019 in Fremont, Palo Alto, Lathrop, and Hawthorne, it will receive a total of $15 million dollars in tax credits.   But the target average salary of those jobs is $55,000 per year, according to data on the program released Thursday by GO-Biz, the Governor's office of Business and Economic Development.

"This program is not a blank check," said GO-Biz deputy director Brook Taylor. "The companies have annual jobs milestones, and when they hit those milestones then they receive the tax credit.  If they do not,  they don’t receive the credit for that year," he explained. 

Other better known companies in Southern California to receive the credit:  L.A.-based video game developer Riot Games, Inc.; Environmental Systems Research Institute, Inc. (Esri) in Redlands; and BeachBody, the health product and video maker in Santa Monica. 

"We’re looking at companies that are creating high-value jobs in sectors like manufacturing, finance, technology," Taylor told KPCC. "In other states, they’re really taking the approach of ‘do whatever it takes to get these big marquee companies’.  In California, we're taking a smart and thoughtful approach."

The Temblor Brewing Company is hardly a marquee company.  Its web site says it will open a craft brewery in Bakersfield in September.  Its tax credit allocation is a sip compared to Tesla's gulp:  Temblor will receive a total of $27,000 in tax credits if it hires four new full-time employees at a minimum salary of $40,000.

Brook Taylor of GO-Biz says over the next five years, the office will offer roughly $780 million in tax credits to companies ready to expand in California, with a quarter of that earmarked specifically for small businesses.

"You're going to see companies adding one job or adding a thousand apply for and receive tax credits under this program,"  Taylor said. 

The credit for Tesla was approved on a 4-1 vote, with board member Madeline Janis opposed. Tesla said it would invest another $2.4 billion in California as part of the deal with the state. Janis questioned whether any of that money would be from other public sources because Tesla has notably sought public subsidies.

Last year, Tesla pitted several states against each other in a bidding war over which state would be the site of its new $5 billion battery factory. Nevada won after offering $1.3 billion in tax breaks.

"All of this is private, your own money. The new jobs, this tax credit will be the only public money in that pot?" she asked Diarmuid O'Connell, vice president of business development for Tesla.

"Yes," he replied. "We're a public company. We raise money through bonds."

O'Connell said that despite the fight over the battery plant, the Fremont, California-based company is committed to California. Tesla is now California's largest manufacturing employer, with 9,000 jobs in the state, he said.

Janis, who was appointed to the board by Assembly Speaker Toni Atkins, D-San Diego, asked several of the applicants to provide information about the percentage of women on their staff.

"Almost every one of these companies is a very traditional male field," she said. Janis added that she would like to see greater diversity in the kinds of companies that are recommended for the credits.