Top Democrats War Over Tax Break to Lure Firm to Fresno

SACRAMENTO — A proposal designed to make Fresno more attractive to the Gap Inc. has touched off a tug of war between the Legislature’s top two Democrats.

Assembly Speaker Cruz Bustamante (D-Fresno) and other Fresno-area lawmakers of both parties are pushing a bill to give the clothing retailer a tax break to locate a sprawling distribution center in the San Joaquin Valley.

Calling it “bad tax policy,” Senate Leader Bill Lockyer (D-Hayward) is strongly opposed to the legislation (SB 31) by Sen. Ken Maddy (R-Fresno). While Lockyer’s opposition is likely to scuttle the proposal, supporters are scrambling to find another way to sweeten the deal for the Gap.

In fact, Bustamante and Lockyer were attempting to iron out their differences late Thursday. “It’s about keeping important jobs in California where they belong,” said Bustamante spokesman Ron Gray.

Jockeying over the issue reflects the hothouse atmosphere at the end of the 1997 legislative session. Legislators are bombarded with scores of bills and buttonholed by high-priced lobbyists at every turn.

It’s crunch time at the Capitol, especially for veteran lawmakers as they seek to cut deals on a range of pet projects, dealing with such narrow issues as lucrative casinos located near cemeteries, the safety of a reservoir in San Marino and redevelopment of Treasure Island in the middle of San Francisco Bay.

Critics say Maddy’s bill is one of the special interest, high-stakes economic measures yet to be resolved. Maddy’s measure is intended to provide an additional incentive for San Francisco-based Gap to locate its western distribution center in Fresno instead of Reno.

The $40-million facility could bring 600 to 1,000 jobs to the Fresno area, according to an Assembly analysis of the measure.

Maddy’s bill, co-authored by Bustamante, would extend a manufacturing tax credit to warehousing and distribution operations throughout the state, not just those established by the Gap. The Franchise Tax Board estimates the state would face revenue losses of $6 million in the current year, rising to $32 million by 2000.

Earlier this week, Lockyer said the bill would set a bad precedent. Citing special handling given the project in Fresno, Lockyer said the company “‘has gotten every kind of break you can imagine.”

“If we’re going to do something for the Gap, we ought to just write them a check, not write bad tax policy that will be a virus for decades,” Lockyer said.

On Thursday, a spokesman for the Gap strongly disagreed, saying the change in tax policy is a small price to pay for the jobs and revenue that would be generated by the project.

“It’s been characterized as everything from bad public policy to outright pork and I think nothing could be further from the truth,” said Jonathan Mudd, the Gap’s director of public affairs.

Mudd said that because of growth in the Gap’s sales, especially its Old Navy subsidiary, the company needs a distribution center west of the Rockies.

Maddy’s bill “or something equivalent” is a deal-maker. “We’re a California company. We want to be here,” said Mudd, adding that the company hopes to break ground this fall.

As the Legislature’s senior leader, Lockyer also played a role in a tiff over a controversial gaming measure sought by Assemblyman Lou Papan (D-Millbrae). On Thursday, Lockyer took the highly unusual step of summoning Papan to his office so that Papan could apologize to three Democratic women senators.

Papan is a burly former FBI agent who was reelected to the Assembly in 1996 after a 10-year absence. During his previous tenure, he was known as “the Enforcer” for his legendary bullying tactics.

Currently, he is the author of a bill (AB 158) that could overturn a decision by voters in the tiny cemetery community of Colma to allow casino-style gambling in their San Francisco Peninsula town.

The bill, which had stalled in the Appropriations Committee, was approved by the panel late Thursday and sent to the Senate floor.

Sources, who asked not to be identified, said Papan had hinted that unless certain Senate Democrats voted for his bill in the committee, he would not support their bills in the Assembly, where Democrats hold only a narrow margin.

Sens. Betty Karnette (D-Long Beach), Dede Alpert (D-Coronado) and Barbara Lee (D-Oakland), all members of the Appropriations Committee, took exception to what one source called Papan’s “implied threat” to kill bills.

Seeking to restore harmony, Lockyer called Papan to his office for a meeting Thursday with the three women, in which Karnette said Papan apologized. “‘He was very gracious,” she said.

But none of the three women supported his bill.

Times staff writer Dan Morain contributed to this story.