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Tax Credits for Strip Clubs? How Enterprise Zones Are Undermining California's Economy

A program tha provides $700 million in tax breaks for companies that set up business or move to one of 40 zones within the state needs a serious rethink.

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Doug Bloch, Teamsters political director for the Central Valley and Northern California, says that the situation involving VWR and BlueLinx epitomizes all that is wrong with the enterprise zone program.

“Our union is all for programs that create jobs in economically distressed areas,” Bloch says. “This program doesn’t create jobs.”

The situation involving the layoffs of existing workers when VWR and BlueLinx moved to enterprise zones, he says, “was really perverse. Their tax dollars were given to their employers to replace their jobs.”

“I lost my job and a lot of people got devastated.” says Thomas, now 62. “They pirated jobs from the people at Brisbane and moved to Visalia – and [the company] got paid for it.”

Burkhardt, 58, who has been out work since BlueLinx closed its Newark warehouse, agrees. “You’re taking some people off unemployment and putting some on unemployment.”

Update: Strip Club Approvved for Tax Credits

California’s controversial $700 million enterprise zone program has long been shrouded in secrecy. But now Frying Pan News has obtained documents showing that the Rancho Cordova strip club Gold Club Centerfolds has been approved for enterprise zone tax credits. The documents show that the gentlemen’s club has received credits worth up to $37,440 apiece for nine employees — sales associates, door hosts and security officers — who are paid from $8 to $9.25 an hour.

See Gold Club Centerfolds’ tax credit documents here.

The documents reflect only a portion of all approvals for Gold Club Centerfolds. The approvals were granted by Sacramento’s enterprise zone manager and came in 2011. The documents were obtained by the California Labor Federation under a public records request. The labor federation also requested records to see if another Rancho Cordova strip club, Déjà Vu Showgirls, has similarly been approved for tax credits, but that request has not been granted and officials have not provided those records.

As Frying Pan  News reported May 28, Gold Club Centerfolds and Déjà Vu Showgirls were just two businesses applying for the enterprise zone tax credits. The article also reported that the program — which is supposed to spark investment in economically distressed areas and create jobs — has resulted in the loss of well-paying union jobs, rewarded employers for moving from one location to another and helped companies in well-off areas, including San Francisco’s Financial District and the corporate center of downtown Los Angeles.

“I’m reading the article about the strip clubs and it just amazes me,” state Senator Jerry Hill (D-San Mateo) told Frying Pan News. “How can you determine if a program works, how it’s being used or abused if you don’t know where the money’s going and who’s getting it? That’s in Rancho Cordova, but what about downtown San Francisco or South of Market [San Francisco] or downtown Los Angeles? Where’s the money going there, and how much do they need it for economic development in those areas? I would think not much.”

Hill has proposed legislation to reform the program and make it more transparent.

Gary Cohn is a Pulitzer Prize-winning journalist who has worked for the Los Angeles Times, Baltimore Sun and Wall Street Journal. Reach him with comments or ideas at gcohn@fryingpannews.org.

 
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