California gives about $300 million a year in tax benefits to businesses in 42 distressed and blighted areas, including parts of Fresno, Madera, Merced, Porterville, Lindsay and Kings County.

Tax breaks in these so-called "enterprise zones" are supposed to attract new, thriving businesses and workers, which would stimulate an area's economy and make it a more attractive place to work and live.

Economic development officials, including those in Fresno, say enterprise zones are hugely successful. They credit the zones with improving the economic and business climates of the state's poorest communities.

But state statistics that would show how well the program works don't exist.

Assembly Member Juan Arambula, D-Fresno, is leading an effort to determine exactly how successful the statewide program has been. The program is more than 20 years old, but basic questions cannot be answered, such as how many and what kind of jobs it has helped create.

"We really don't know whether the areas are in fact distressed," Arambula said, adding that, under the current program, an upscale department store could be receiving tax credits in a ritzy neighborhood of San Francisco.

"The state administration knows so little about what results we're getting," he said. "The benefit should be greater than the cost, and those enterprise zones that are working successfully should be allowed to continue. Those that have not been successful should give way to other cities and regions."

Arambula, chairman of the Assembly Jobs, Economic Development and the Economy Committee, is conducting hearings on the issue.

The second of three hearings is scheduled for today in Fresno, where local enterprise zone and business officials will share their experiences.

Arambula says past legislatures and administrations have not kept tabs on the program. Audits were not completed according to statutory timelines, so now, as the Legislature looks to overhaul the program, it has little information on which to base its decisions.

Eighteen zones -- including those in Fresno, Porterville and Merced -- are expiring by the end of 2006.

Pending legislation would extend the life of some zones by five years. The measure deals with zones in Lindsay, Merced and Kings County. Zones in Fresno, Porterville and Madera have received previous extensions and would not be affected by the legislation.

Other legislation would change the qualification rules for enterprise zones, including unemployment rate and household income thresholds. It also tinkers with how the tax incentives are calculated.

Arambula says lawmakers don't know enough about the success of the existing zones to make informed decisions on the pending bills or new legislation.

One reason, perhaps, is the program's history.

California's enterprise zone program was created in 1984 as two programs: The Enterprise Zone Act, which provided tax credits for businesses, and the Employment and Economic Incentive Act, which provided benefits to businesses that hired certain numbers of residents living in distressed areas.

In 1996, legislation by then-state Sen. Jim Costa, D-Fresno, merged the two programs into the Enterprise and Employment Zone Act. Costa now represents the Valley in Congress.

Eight years later, the state Technology, Trade and Commerce Agency, which oversaw the program, was eliminated. Responsibility was transferred to the state Housing and Community Development Department.

Officials at HCD had to get up to speed quickly. They found that some audits were overdue and that some businesses found the program confusing because each zone was run differently.

"This lack of predictability made the program less attractive as a business stimulus," Richard Friedman, acting deputy director for HCD's Division of Financial Assistance, said at a hearing in Sacramento last week.

In recent months, HCD has worked to catch up on the audits and is preparing a report to the Legislature. Economists at the University of Southern California are putting together an analysis of the effectiveness of the enterprise zone incentives.

Arambula says state officials should have kept better watch over the program.

"The Legislature ... has not conducted oversight hearings in prior years and has not insisted on finding out how well the administration was running the program," he said. "There is more than enough fault to go around."

Fresno economic development officials say the local enterprise zone has stimulated the business climate, but more work needs to be done.

About 120 businesses ranging from manufacturing companies to law practices in the Fresno enterprise zone took advantage of the hiring tax credit in fiscal year 2004-05. The credit allows business owners to save on their state business income taxes for hiring eligible employees.

Other tax benefits include credits when business owners buy new machinery or pollution-control devices.

Fresno's zone includes downtown, parts of the airport area and the large industrial area along the southern Highway 99 corridor.

Kelly Trevino, an economic development analyst with the city of Fresno, said an estimated 1,700 jobs were created last fiscal year in the enterprise zone.

"It's been huge for the city of Fresno," Trevino said. "It has stimulated jobs. It has helped businesses stay in the city."

Fresno's zone expires in October 2006. City officials want legislation that would grant them a zone extension or a new zone designation.

"It's definitely a high priority for us," Trevino said.

David Spaur, president and chief executive officer of Fresno County's Economic Development Corporation, said the zone program has helped keep companies in California.

But thanks to what he calls a "hostile" business climate, some companies have come to depend on the tax benefits. He said an honest, in-depth review of the program is needed.

Not all Valley communities that asked for zone status were successful.

In the 1990s, a partnership among the cities of Fowler, Parlier, Reedley, Sanger and Selma applied. The state turned it down because another applicant had put together a more lengthy proposal, said D-B Heusser, city manager of Selma.

The cities were encouraged to apply again, but they decided money that would have been spent on a presentation could be used better elsewhere.

Heusser supports Arambula's inquiry.

"Some of the criteria and judgment hasn't been very good," Heusser said. "I think it's very good that he's bringing it up."

The reporter can be reached at jfitzenberger@fresnobee.com or (916) 326-5541.