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Wednesday, Nov 29, 2023

Development—State eyes expanding Otay tax credit zone

Grow your business and save money too.

That’s the prospect for corporations like BFGoodrich Co. and Raytheon Co., plus enterprises big and small, which could soon get tax breaks if they expand operations in certain South Bay neighborhoods.

There is one big “if”: The California Trade and Commerce Agency must re-draw a special South Bay tax zone. The staff-level decision could come in the next three weeks, said an agency spokesman, who said the plans are now “under review.”

The proposal would expand the borders of the existing San Ysidro/Otay Mesa Enterprise Zone to encompass extra land in San Diego and Chula Vista. Most of the proposed expansion is on the bayfront.

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Companies within enterprise zones receive state income tax credits on new equipment purchases, and for hiring people from disadvantaged backgrounds or neighborhoods.

One big beneficiary would be the Aerostructures Group of BFGoodrich Aerospace. The company anticipates $1.35 million in sales tax credits for purchasing new equipment within the first year alone of the zone, according to a report from the city of Chula Vista.

The document said BFGoodrich officials also projected a 12 percent per year growth in employment.

Art Sellgren, the company’s local director of facilities and environmental matters, said the 12 percent figure is a sales growth goal that “will positively impact company jobs.”

Company spokeswoman Valorie McClelland said there would be no “cause and effect” between the zone’s arrival and the hiring of staff.

“Hiring people depends on business needs,” she said.

Sellgren added the $1.35 million credit is the maximum amount BFGoodrich could gain if it makes $20 million of purchases , the maximum annual amount the state allows for purposes of calculating the credit.

The enterprise zone would extend to other bayfront land, including the proposed Pond 20 development near Imperial Beach, the Duke Energy plant and an area near the Chula Vista marina that Lennar Partners has eyed for a mixed-use development.

The zone would also touch inland properties like the new Raytheon Training and Services building off Interstate 5, and the proposed peak load power plant on Chula Vista’s Main Street, near Albany Avenue.

Raytheon officials in Massachusetts and Chula Vista did not return calls to comment on the zone. Neither did a spokesman for Duke Energy.

Dan Mesple, project developer for the peak-load plant, called the zone an “incentive to make investment decisions.” Pacific Gas & Electric Corp.’s dispersed generating business is transferring project ownership to San Diego-based Ramco Inc.

The zone should help leasing and attract users and tenants, observed Allen Jones, vice president of H.G. Fenton Co. The San Diego-based real estate developer is working on plans for bayfront land straddling the San Diego/Chula Vista boundary, which by one account could house “big box” retail stores.

BFGoodrich Aerospace officials said the zone would help their company cut costs, bid on new programs, and be competitive in the global marketplace.

Sellgren said the zone will give BFGoodrich “more bang for the buck” when making its yearly equipment buys.

The company would receive a state income tax credit for the amount of sales or use tax paid on machinery or information technology equipment, according to an analysis prepared for a BFGoodrich consultant and obtained from Chula Vista City Hall.

“For example, if a business purchases qualified property for $1 million and the sales tax rate is 8 percent, the business could claim an income tax credit of $80,000,” said the analysis, prepared by John Sawicki of the downtown Los Angeles office of Deloitte & Touche LLP.

BFGoodrich became acquainted with the state’s enterprise zone system during the mid-1990s, Sellgren said, when the company added its Riverside plant to such a zone.

“We thought, why can’t we do that with Chula Vista?” he said.

Yet company officials said the effort to expand the enterprise zone should not be interpreted as a BFGoodrich-driven initiative.

Extending the zone, Sellgren said, has been a “team effort” involving elected officials from the cities of San Diego and Chula Vista, the county and the San Diego Unified Port District, plus their staffs, as well as the San Diego Regional Economic Development Corp.

He said the city of San Diego, which houses and administers the San Ysidro/Otay Mesa zone, deserves praise for thinking regionally and allowing the zone to extend into Chula Vista.

Chula Vista Mayor Shirley Horton also praised the “spirit of cooperation” among the two cities and the port district.


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