Valley Voices

Taking away sales tax incentives will kill Fresno’s best economic development weapon

Amazon's 855,000- square-foot customer fulfillment center in south Fresno.
Amazon's 855,000- square-foot customer fulfillment center in south Fresno. Fresno Bee file

Fresno recently had cause to celebrate: the city’s May unemployment rate was 4.8 percent, which marked a record low after decades of double-digit unemployment. Without a doubt, the city’s three new e-commerce centers played a major role in this reaching this historic benchmark.

But all of this progress will come to a screeching halt if the Legislature passes and the governor signs SB 531, a bill by State Sen. Steve Glazer from Orinda, which would eliminate the ability of Fresno to use sales tax incentives to attract other businesses like Amazon, Ulta Beauty and The Gap. SB 531 has already been approved by the Senate and is headed to the Assembly floor.

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Fresno Mayor Lee Brand City of Fresno Courtesy

Together, these three e-commerce centers have created about 4,000 good-paying jobs in Fresno, which have largely been filled by city residents. In addition, studies show an additional 700 indirect jobs were likely created by this activity.

Every day Fresno is working to improve these numbers. These jobs provide our residents with good pay well above the minimum wage, but also health benefits, 401K retirement and college tuition reimbursement. These jobs help people and families improve their quality of life.

These jobs make real differences in the lives of many Fresnans. Housing costs in Fresno are a quarter to a third of what they are in Northern or Southern California. A couple who both work at an e-commerce center here would have the income to qualify to buy a home in Fresno.

Some of those hired were former welfare recipients, while others left previous, lower-paying jobs. Other companies have raised their wages to remain competitive in our local job market, which helps other families.

Many people in California cannot comprehend Fresno and the Central Valley. Orinda, the hometown of SB 531’s author, has a median-household income of $186,075. In Fresno, it is $44,853. According to the U.S. Census Bureau, the official U.S. poverty rate is 12.3 percent. California’s is 13.3 percent. In Fresno, it is 28.4 percent — more than double the state and federal averages.

The most common complaint is that these agreements are tax giveaways to big corporations. Not in Fresno. These are performance-based incentives for companies that create 500 or more new good-paying jobs. They are capped based on a formula for the number of jobs a company creates. If the jobs aren’t created, the incentive isn’t offered. If fewer jobs are created, the incentive drops proportionately.

After 30 years or upon fulfillment of the cap, the agreements sunset, and while these e-commerce companies do get some sales tax dollars rebated, it is not all — not even close. Over the life of the agreements with Amazon, Ulta and The Gap, Fresno is projected to net $99 million in new tax dollars after paying the performance incentives. That is an average of $3.3 million annually that would not be in our general fund if these businesses weren’t in town.

Even in this good economy, Fresno struggles to deliver the level of service expected by our residents. Our property tax and income tax bases do not create enough revenue to fund everything the city needs in order to provide public safety, parks, good streets, sidewalks and so much more. If that $3.3 million was not in the budget, Fresno’s financial situation — and the services it provides — would definitely be much worse.

And it’s not just the city. Over 30 years, Fresno County will see more than $164 million in new tax dollars and Fresno Unified will gain close to $52 million to help educate students in one of the state’s largest school districts. Just these three e-commerce companies are estimated to generate $322.4 million in new tax revenue to local governments and $4.96 billion in payroll over 30 years!

Proponents of SB 531 argue that even without incentives, e-commerce companies would still locate in California, and on the surface, this would appear to level the playing field between Fresno and other struggling inland California cities that badly need jobs and have used incentives to attract e-commerce centers.

The reality, however, is different. This is a competition that doesn’t know state lines. For Fresno and other California cities working to improve the lives of their residents, cities in Nevada and Arizona can and do take these companies and these good-paying jobs by offering incentives.

In the end, if SB 531 is approved, Fresno will lose a key tool in its economic development arsenal. And it will continue a California narrative where the rich get richer and the poor get poorer.

There is a better, fairer and more equitable way to address this very real public policy issue. We should work together toward that goal, one in which all of California – both coastal and inland – benefit.