Valley Voices

Is Sacramento trying to erode Valley economic competitiveness? Tax bill does that

This is an open letter responding to an op-ed published in The Bee on July 21. The senator from Contra Costa County authored Senate Bill 531, which would disallow cities like Fresno from offering financial incentives to stimulate economic development. Central Valley residents should not be misled — SB 531 is a power grab, pure and simple. Not only would this legislation infringe upon local control, but it would ultimately undermine our market competitiveness.

As long as the benefits to a community truly exceed the cost of providing financial incentives they may be worthy of consideration by local leaders. Municipalities often rely on the ability to provide financial and land use incentives to stimulate economic development in regions like the Central Valley. Unfortunately, this local control tool is being threatened by coastal powerhouses with ports of entry and distribution networks seeking to expand their tax base at the expense of the Central Valley.

It is important to recognize that part of Fresno’s economic vitality is a result of the ability of local governments to recruit businesses into the region and help existing local businesses expand with land use and other financial incentives. According to city of Fresno projections, contracts with large employers like Amazon and Ulta are expected to contribute $99 million to the city’s general fund over the next three decades. Fresno Mayor Lee Brand has promoted that these two businesses alone create more than 4,000 jobs — not including the indirect jobs that support them.

Further, land value and cost of living are far more affordable in the Central Valley, giving businesses good cause to house their facilities and workforce here. Successive legislation to this bill might intentionally erode our economic competitiveness by modifying “point of origin” designation for tax purposes. This could mean the taxable event might become based on where the distributed product would be destined, as opposed to where it originated, or trigger complex revenue sharing requirements. For distribution centers in the Central Valley, this could present a significant loss, the likes of which could not be recalculated by local leaders through financial accommodations under this proposed legislation.

SB 531, further exacerbating the problem, will invariably prompt more business to flee California. Far too many businesses have already fled the state or expanded operations elsewhere, taking their jobs and economic growth with them. States such as Texas, Nevada and Arizona continue to provide even greater economic and infrastructure incentives to lure business away from California. Ultimately, passage of SB 531 will aid and abet the ability of other states to poach businesses from California.

California should continue the free market tradition of allowing local governments the legal authority to attract, retain and cultivate businesses. While there are a variety of ways to help stimulate the Central Valley economy, including workforce development and vocational training among others, one important and remaining component is the role of government in making the Central Valley attractive to those in industry.

Municipalities should retain their free market authority so Central Valley communities can compete with other areas of the state. Therefore, I urge my colleagues on both sides of the aisle in the State Legislature to oppose SB 531.

Andreas Borgeas of Fresno represents the 8th District in the state Senate.