Gov. Gavin Newsom vetoed a bill that would have barred California cities from striking tax-sharing deals with retailers like Amazon and Apple, finding that rural communities rely on the agreements to spur employment.
The legislation aimed to end what state Sen. Steve Glazer, D-Orinda, called a “perverse” tax incentive in which he said cities hand “billions of dollars in tax revenue to private corporations” who otherwise don’t need the financial break.
“These deals take money from every city in the state and give it to some of the richest corporations in the world,” Glazer said during a May Senate floor debate. “That’s just wrong.”
It’s unclear how many local governments have used the tax-sharing pacts, which they offer to large employers as a recruitment incentive.
Sacramento County entered into an agreement for a warehouse in 2015 with Macy’s. Fresno has four, including with Amazon and Ulta. Cupertino has paid Apple nearly $70 million to host its headquarters over the past 20 years, according to reports by Bloomberg.
Proponents for the agreements argue they’re worthwhile.
For Cupertino, the city’s general fund has “more than doubled,” according to Bloomberg, to a projected $87 million. That’s compared to an inflation-adjusted $41 million fund since it struck the deal with Apple in 1997.
Fresno Mayor Lee Brand said that without the annual $3.3 million earned from the agreements, the city’s financial outlook “would definitely be much worse.”
“Thousands of new jobs have been created. We have companies of significant stature, with huge name identification in our community,” said Assemblyman Jim Patterson, R-Fresno, to his colleagues during a legislative debate.
Critics of the practice also say local residents are cheated out of local services that the taxes help pay for. Glazer argued that the jobs promised by these companies are often “grueling, low wage and without benefits.”
The California Labor Federation and the League of California Cities supported the legislation.