Enterprise Zone Was a Winner Before the Race Began : Jobs: Even before it opened last week, the promise of tax credits, deductions and fee waivers made the idea a hit with workers and employers.

PASADENA — The Altadena-Pasadena Enterprise Zone had scored big even before it officially opened its doors last week in Northwest Pasadena.

The owners of Servo Products Co., a machine tool manufacturer, had been talking about moving to another city after 30 years in Pasadena. Their lease is up on the factory on North Fair Oaks Avenue, and lower-rent space was available 15 miles up the 210 Freeway.

If that didn’t pan out, Servo President Alan Kaestle said, there were always other states.

Then, two months ago, somebody told Kaestle about the Enterprise Zone’s rich blend of tax credits, deductions and fee waivers for businesses in Northwest Pasadena and West Altadena.

That clinched it. Servo intends to stay in Pasadena, keeping about 100 jobs in the community. “We really wanted to stay if we could,” Kaestle said. “Most of our employees, probably 60%, live within 2 1/2 miles of our location.”

The Enterprise Zone, whose office opened last Monday in Hen’s Teeth Square on North Los Robles Avenue, focuses financial incentives on a 200-acre stretch of Pasadena and Altadena where about 900 businesses operate.

The idea is to give one of the region’s most downtrodden areas, where the unemployment rate is close to double that of Pasadena as a whole, a leg up, says the zone’s manager, Kenneth Jackson. “Quite simply, we’re trying to bring in jobs,” he said.

Assemblyman Pat Nolan (R-Glendale) proposed the idea in 1984, and the first state enterprise zones were established a year later. There are 29 in the state. President Bush this month vetoed a federal enterprise zone measure that would have provided federal tax incentives for businesses that relocate to low-income areas and hire workers there.

The Pasadena-Altadena zone, a rare joint venture between the city and the county, won approval in April. A board of directors made up of business people from the community will oversee the $300,000-a-year operation. Among the benefits to new or expanding businesses in the zone:

* Sales tax credits on new machinery. Corporations and individuals can claim credits for buying machinery used for manufacturing, producing renewable energy resources or controlling pollution. Corporations receive a credit equal to the amount of tax paid for the first $20 million of equipment purchases; individual business people, the amount of tax paid for the first $1 million.

* Hiring credits. Employers who hire workers from federal or state training and employment programs can claim state business tax credits of up to 50% of their wages, amounting to as much as $19,000 per employee over five years.

* Business expense deductions. Businesses can deduct from their state taxes part of the cost of new equipment, which is to be used solely in the zone.

Zone businesses also receive tax breaks in being able to carry over operating losses from one year to the next, and lenders who make loans to zone businesses get deductions on earned interest.

And the City of Pasadena and Los Angeles County kick in benefits of their own, mostly by waiving or reducing fees for zone businesses.

All in all, it is an attractive package of incentives, said Jackson, 30, a graduate of Howard University with a master’s in business from Harvard. But it doesn’t mean overnight prosperity for the area, he said.

“It’s a mistake to suggest that enterprise zones can be the panacea for all the economic problems besetting any area,” Jackson said. “It’s one of many tools.”

Nevertheless, inquiries were coming in at a rate of from 30 to 40 a day last week. Jackson, who was hired in early October, is meeting individually with many businessmen in the zone.

“Before I can help them, it’s important for me to understand their businesses,” Jackson said. “That way, we can work hand-in-hand, and I can help to cut through some of the red tape.”

Interest may be high in the new program, but there is skepticism too. There are few benefits in the package for black entrepreneurs, said City Councilman Isaac Richard, who represents a large part of the zone. And there are no guarantees that those benefiting from the program will hire minority workers who live in the zone, he said.

“It’s really just another gravy train for white businesses,” said Richard, who nevertheless approved of the aim of finding jobs for area residents.

Jackson acknowledged that the Enterprise Zone has no money to loan to minority entrepreneurs. But the program will seek to influence banks and developers to invest in the zone, he said. “We have to work closely with the banking community and educate the real estate and development community,” Jackson said. “We have to remove the stigma of doing business north of the 210 Freeway.”

As for hiring, employers must use trainees from such programs as the state GAIN (Greater Avenues for Independence) and the federal Job Training Partnership Act, which are training programs for low-income workers, many of them minority group members.

But even businessmen who support the Enterprise Zone acknowledge that prosperity in Northwest Pasadena and West Altadena will require more than modest tax breaks.

“On the face of it, the five or six benefits are all nice,” said Dennis Gertmenian, president of Ready Pac Produce, which employs 450 people at two processing plants in Northwest Pasadena. “But take any of them and go to the bank and say, ‘We’ve a great tax benefit here,’ and they’re not going to be that excited.”

The lenders must see the Enterprise Zone as an opportunity to become involved in a community, Gertmenian said. “If a group goes to the bank--with the city and the county--then you’ll see more interest,” he said.

Bill Moore, president of an electrical equipment distribution company and chairman of the zone’s seven-person board, is optimistic. “Typically, in any low or moderate-income areas, a dollar goes into the community, it circulates once and it’s out,” Moore said.

But with a stabilized business community and prospects for new businesses, that could change, he said. “We’ll have economic revitalization in the sense that the dollar circulates more than once,” he said.

Whatever happens from here on, the Enterprise Zone has already won some adherents at Servo Products. Hector Chavez and Shondell Moore, for example. The two young men live less than two miles from the Servo plant--Chavez in Northwest Pasadena and Moore in Altadena--and they drive to work together.

If the company moved, the two would probably not have gone along, they said.

“This is a local company, and most of the people here are local,” Chavez said. “I could probably find another job closer to home.”

Moore’s incentives to stay close to home are even greater. “I don’t own a car,” he said.