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San Bernardino County Leverages Enterprise-Zone Status

Jan. 25, 2011
Hiring-tax credits, affordable real estate are helping the region grow its manufacturing base.

California's San Bernardino County boasts a "fascinating history of manufacturing" as well as a "very strong blue-collar workforce," notes Mary Jane Olhasso, administrator for the San Bernardino County Economic Development Agency.

Once home to a massive Kaiser Steel Corp. mill that supplied steel for U.S. ships during World War II, the county has leveraged its proximity to Los Angeles-the county begins about 30 miles east of downtown L.A.-and abundance of affordable commercial real estate to lure manufacturers and logistics providers over the past few decades.

But like many manufacturing-rich regions in the United States, the area has fallen on hard times in recent years.

"When consumer spending stopped, we screeched to a halt in growth and development," Olhasso says.

San Bernardino County, Calif., once was home to this Kaiser Steel Corp. mill that supplied steel for the construction of U.S. ships during World War II. The mill shut down in the early 1980s after the company went bankrupt. Part of the site was redeveloped to accommodate the Auto Club Speedway, while the mill portion is operated by California Steel Industries Inc. to produce flat-rolled steel sheet and pipe products.In October 2006, the California Department of Housing and Development designated parts of the county as an enterprise zone, making several state tax incentives available to businesses. The state establishes enterprise zones to stimulate growth in economically distressed areas.

Since then, the county has been able to notch a number of wins in the manufacturing sector. In 2009, Isolatek International, a Stanhope, N.J.-based maker of passive fireproofing materials for the construction industry, opened a new 65,000-square-foot warehouse and manufacturing facility in the city of San Bernardino.

A company official said Isolatek picked San Bernardino because of its proximity to the company's western markets as well as the hiring tax credits available through the enterprise zone.

"The enterprise zone allows companies to trim their operating costs, making them more competitive in the marketplace," said Tom Lund, director of operations at Isolatek, in August 2009.

In 2010, Carthage, Mo.-based diversified manufacturer Leggett & Platt Inc. inked a deal to lease a distribution center in San Bernardino; and Glenwillow, Ohio-based Royal Appliance Manufacturing Co., which makes Royal, Hoover and Dirt Devil vacuum cleaners, signed a five-year lease for a 415,825-square-foot manufacturing facility in San Bernardino.

Both companies cited the enterprise-zone tax incentives as a major factor in their decision to come to San Bernardino County, says Wendy Clements, zone manage for the San Bernardino Valley Enterprise Zone.

"In the last couple of years we've had real estate brokers and developers calling us and asking for more information about [the enterprise zone], because it does help any company, whether it's a manufacturer or warehouse logistics," Clements says. " ... It really is a no-brainer because the incentives are so lucrative."

The enterprise-zone incentives, which are based on state income taxes, are:

  • Tax credits of up to $37,440 for each qualified employee hired over a five-year period.
  • Sales-tax credits on purchases of up to $20 million per year of qualified machinery and parts.
  • Up to 100% net-operating-loss deduction and 15-year carry-forward.
  • Upfront expensing of certain depreciable property.
  • Net-interest deductions for lenders to businesses within the zone.
The enterprise zone, which encompasses the cities of San Bernardino and Colton as well as other parts of San Bernardino County, is in effect for 15 years from its date of designation.

'Highly Trained, Skilled Workforce'

With its enterprise-zone status and inherent strengths, Olhasso believes that the county has a compelling story to tell.

The county is just a stone's throw away from Los Angeles but offers commercial real estate that, on average, is available at a third of the price, she says, with an abundance of clear-height space for logistics providers.

The county is at the center of one of Southern California's transportation hubs, served by Interstates 10 and 215 as well as the 210, 91 and 60 freeways, and is close to the ports of Long Beach and Los Angeles as well as three international airports and two of the busiest rail lines in the nation.

Olhasso also points to the county's "highly trained, skilled workforce" of 900,000 people, part of an overall population of 2 million people.

"If you expand into parts of adjacent counties, you could easily say there are a million workers within our region," Olhasso notes.

For existing and new businesses, the county offers job-training assistance and incentives through its Workforce Development Department. For example, when a business is training a new employee, the county may reimburse the company for up to 50% of the wages paid to the employee during the training period, for up to six months.

Such programs are particularly helpful in retaining businesses, Olhasso notes.

"A lot of times, those job-training dollars will make the difference between keeping an employee and not or scaling back hours versus a 40-hour week," she says.

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