Proposed Repeal Of California Enterprise Zone Benefits Would Violate The Contracts And Due Process Clauses Of The California And United States Constitutions


Communities to Save Enterprise Zones has asked Reed Smith to articulate the legal case against Governor Brown's proposal to repeal the benefits associated with California's Enterprise Zone Program, including elimination of Enterprise Zone Benefits already earned and vested. In the pages that follow, we explain why the proposed repeal is more than just poor public policy. (That much is intuitive: Government should not target a specific group by deliberately inducing them to engage in specific, substantial action and then – after convincing them to perform those actions – take away the vested rights members of that group earned in exchange.) The purpose of this memorandum is to explain the reasons why this particular poor public policy is also illegal state action, and thus just as impermissible as it is imprudent.


In 1984, the California Legislature determined that certain areas of California were economically depressed. In response, the Legislature enacted the Enterprise Zone Program to “stimulate business and industrial growth in the depressed areas of the state by relaxing regulatory controls that impede private investment.”2 In enacting this program, the Legislature stated, “[i]t is in the economic interest of the state to have one strong, combined, and business-friendly incentive program to help attract business and industry to the state, to help retain and expand existing state business and industry, and to create increased job opportunities for all Californians.”3

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