The main advocacy group for California’s enterprise zones on Thursday criticized a tax credit loophole in state law after Voice of OC reported that management at the Honda Center would be eligible for millions of dollars in job creation tax credits when more than 400 food service workers are laid off and replaced next month.
Honda Center management also announced Thursday that it would not use the tax credits for the replacement workers.
“Current law already prohibits any employer from claiming any tax credit for employees they’ve fired and rehired,” declared Craig Johnson of the California Association of Enterprise Zones. “Any action to circumvent these rules by firing one group of employees and rehiring another group to claim tax credits is equally unconscionable.”
The group is exploring changes to the law, according to the statement it issued:
“This morning our team has been actively working with legislators to identify the appropriate statutory changes that are needed to ensure that any attempts, by any company, to game the system by circumventing existing laws will not be tolerated.”
The association’s effort also came as Honda Center management broke its silence and announced it would not seek the tax credits.
“Our decision to take food service in-house was based solely on our relentless pursuit of giving our customers the very best entertainment experience possible,” declared a statement from Michael Schulman, chairman of Anaheim Arena Management.
Schulman added that the company “never had any intention of utilizing” the tax break.
The company is eligible to take advantage of the tax credits, according to city staff, because it is within the Anaheim’s enterprise zone, a program designed to spur investment and job growth in economically depressed areas.
Soon after layoff notices were issued to the 500 current workers, the company announced it will hire 500 new food employees at the city-owned arena, which is home to the National Hockey League’s Anaheim Ducks.
If the new hires meet certain criteria such as being a veteran or a resident of certain neighborhoods in the city, the company would qualify for a tax credit worth up to $37,000 per employee over five years, according to the city.
Almost 2,000 people have applied for the 500 food service jobs, according to arena management.
The Honda Center story comes at a particularly sensitive time for enterprise zones. Gov. Jerry Brown is proposing to eliminate them as part his budget proposal.
Brown has “criticized the tax credit for failing to create new jobs and rewarding employers for moving existing jobs from one place to another within California,” according to the Los Angeles Times.
Anaheim business leaders, meanwhile, are standing strongly behind their zone.
“California’s enterprise zones, the state’s strongest economic development tool, continue to be an effective program to expand, attract and retain jobs in the state and in our city,” Todd Ament, president of the Anaheim Chamber of Commerce, declared in an email Thursday.