LONG BEACH — When Douglas Aircraft Co. buys $13-million worth of equipment next year, it will receive a $107,000 tax break. If Long Beach officials build a proposed mega-shopping center, shop owners and builders could receive hundreds of thousands of dollars in tax credits.
It's enough to drive some state officials crazy.
Douglas Aircraft and the proposed shopping center owners and builders can take advantage of special tax breaks because their property sits in a revitalization zone--an area created to help businesses and residents devastated by last year's riots. But because the zone's boundaries were broadly drawn, neither of the properties is located in neighborhoods hit by the riots.
In fact, some of the city's biggest businesses, in some of the nicest parts of town where not a single building was burned nor one store looted, can receive the tax breaks.
This is not what was supposed to happen, said Assemblywoman Marguerite Archie-Hudson, (D-Los Angeles), who drafted the legislation creating revitalization zones.
Long Beach officials argue that the entire city will benefit, and that what they are doing is innovative, not insidious. They are quick to point out that they broke no rules. "There was nothing secretive, nothing dishonest about it," said Gerald Miller, manager of the city's Economic Development Bureau.
In fact, the state Business, Transportation and Housing Agency approved the map of the Long Beach revitalization zone in December without question, even though its boundaries appear to violate agency regulations.
"That the map was approved is astounding to me," Archie-Hudson said. "While frankly, I think (Long Beach officials) were being opportunistic and I am annoyed that they did it. . . . It's not like they were sneaking around. The fact is the state signed off on it. I want to know why."
Assembly Bill 38a signed by Gov. Pete Wilson in September, 1992, allowed 10 Los Angeles County cities to draw boundaries around areas that "suffered substantial property damage to businesses as a result of the civil disturbances of April 29, 1992." Besides Long Beach, the cities are Los Angeles, Compton, Hawthorne, Huntington Park, Inglewood, Lawndale, Lynwood, Pomona and Signal Hill.
The law was intended to help people such as Kathy and Ralph Neal. Four months ago, the young couple refinanced their North Long Beach home to open their first business. Henri's Discount Mart sits in a cluster of four other small businesses in a gleaming white mini-mall on the former site of the Foodland grocery store, which burned during the riots.
"Basically, what we've tried to do is give hope to the community and become a role model, particularly to the Afro-American community," Kathy Neal said, watching people come in and out of the store. "We want to say, 'You can own your own business,' and we also want to be able to hire people from the area and put them to work."
Because their Pacific Avenue store is located in the revitalization zone, the Neals can receive credit for the 8.25% state sales tax they paid on their freezers, cash register, food racks--in fact, for almost all furniture, fixtures and equipment they purchased. The state will pay for part of their only employee's salary because he lives in the zone. In addition, the law allows business owners more complicated tax benefits to help reduce operating losses.
Basically, it means if the Neals end up owing the state $100,000 in taxes, and they receive $15,000 in tax credits, they will pay the state $85,000. They can use the credits only to offset taxes they owe to the state at the end of the year.
The tax credits expire in December, 1997, and the total cost to the state is estimated at $150 million.
Sam Parades, who now oversees the program in the Trade and Commerce Agency, said state officials let Long Beach and other cities define their own zones.
"They know what is best for their communities, and they know what areas will generate jobs better than we do."
However, Parades said, agency staff members are discussing with Archie-Hudson and the governor's office whether the agency did something wrong, and if so, what to do about it. Parades declined to elaborate on what options are being considered.
The assemblywoman was alerted about three months ago that it wasn't just people who lived in the riot-damaged central and north Long Beach areas who were taking advantage of the zone.
Lakewood city officials, who are engaged in a bare-knuckle campaign to keep Long Beach from building a shopping center on the site of the Naval Hospital--just three miles from Lakewood Center mall--realized the site is in the revitalization zone even though it is about five miles from the closest riot damage.
They examined the boundaries of the Long Beach revitalization zone and saw it included not only that property, but the Marina Pacifica shopping center, the Long Beach Marina, Los Altos shopping center, 7th Street in front of Cal State Long Beach and even fashionable 2nd Street.