Section III—Enterprise Zones: Case Studies and State Reports
- March 31, 2005
Researchers compiled detailed studies at 10 sites, including a total of 182 site interviews. The 10 sites were Bridgeport, Connecticut; Chicago; Dayton, Ohio; Louisville, Kentucky; Macon, Missouri; Michigan City, Indiana St. Louis, Missouri; Thief River Falls, Minnesota; Tampa, Florida; and York, Pennsylvania. Each case study includes details about the characteristics and development of the State and local enterprise zone programs; the physical, social, and economic characteristics of the zone; impacts on the area since the designation as a zone; and assessments by State and local officials of their enterprise zone experience. According to the authors, "Zone designation appears to produce a positive and tangible impact on business investment in the ten zones. Zone designation itself, the catchy and flexible concept of an enterprise zone, in many cases appears more important in generating new investment than the specific package of incentives offered. Designation provides a significant marketing tool for the zone in particular and for the city as a whole." An executive summary provides other conclusions from the study as a whole, but makes no claims about their applicability to all zones.
Summary and Analysis of State Enterprise Zone Legislation, ACCN-5472
U.S. Department of Housing and Urban Development, Office of Program Analysis and Evaluation 1989, 66 pp.
Available from HUD USER, P.O. Box 23268, Washington, D.C. 20026-3268
This analysis summarizes features of 36 State enterprise zone statutes that can be useful in assessing existing programs and developing new or revised enterprise zone legislation. The summaries contain highlights of State and local program administration, selection criteria, and incentives. Among the specific topics included in the summaries are the statutory authority and requirements for State administration of the program, key elements of local plans and programs necessary for zone designation, and organizational innovations at the State and local level. Special features of State selection criteria systems include size, population and demographic requirements and competitive factors for enterprise zone designation. Of particular note is an analysis of how States balance economic development goals and distress criteria in the selection process. Also included in the State summaries are innovative tax and nontax incentives for the zones and eligibility requirements for those incentives such as residency and income thresholds for employees. Provisions for paybacks and benefits, as well as evaluation and reporting requirements, are also analyzed.
Michigan’s Enterprise Zone Program: Progress, Prospects, Problems and Recommendations
Ann Workman Sheldon and Richard C. Elling
April 1988, 146 pp.
Available from Center for Urban Studies, College of Urban, Labor, and Metropolitan Affairs, Wayne State University, Detroit, MI 48202
An evaluation of Michigan's enterprise zones, commissioned by the Michigan Department of Commerce, found that the program has been an important factor in stimulating State and local efforts to strengthen economic development efforts. Following an evaluation of the program's impact on the State's first enterprise zone in Benton Harbor, researchers at Wayne State University's Center for Urban Studies noted that the infusion of State and county resources is likely to lead to increased public-private cooperation and the channeling of additional private resources into enterprise zones. Although interest in the program incentives during the first 18 months was more limited than expected, it is recommended that the program be continued with modifications to make business development in the zones more attractive. In addition, the program should be expanded to permit designation of additional zones in a limited number of economically distressed communities. Additional incentives should be directed toward improving the physical condition, infrastructure, and municipal services in the zone; stimulating greater private involvement in the local program; and increasing the business community's confidence in the future of enterprise zones.
The San Jose Enterprise Zone Program, ACCN-5473
Peter Burwell Williams
May 1988, 124 pp.
Available from HUD USER, P. P.O. Box 23268, Washington, D.C. 20026-3268
A coordinated and comprehensive local economic development strategy with linkages to the local business community may be the best benefit of the enterprise zone program, according to a planning report evaluating components of the San Jose, California, program. The San Jose enterprise zone program is mainly the result of a State policy with local applications. The principal incentive is a State corporate income tax credit for firms that hire from specified job training programs administered through Santa Clara County. Some of the other tax incentives include a 15-year net operating loss carryover, a first-year business expense deduction for part of the cost of certain property purchased for use within the zone, and tax-free interest on certain investments. In addition to the package of State-sponsored incentives, the program offers several local incentives, including a suspension of local construction-related taxes within the zone. Firms that purchase new machinery and equipment for use exclusively within the zone are also eligible for a sales tax credit.
Evaluation of Effectiveness and Efficiency of Enterprise Zones in Illinois
Ann H. Elder and Ira Cohen June 29, 1989, 41 pp. Available from Community Research Services, Illinois State University, Normal, IL 61761
An evaluation of enterprise zones in Illinois, conducted under a grant from the Governor's Office of Planning, notes that attracting business to economically distressed areas is influenced by a wide range of characteristics of the area itself-tax climate, quality of life, availability of sites for development, government services, and market accessibility. Consequently, government intervention can affect only part of the benefits or liabilities of a particular area, but it can be important, according to a study of 12 enterprise zones in the State. The study found that enterprise zones are more likely to make marginal changes in economic development in an area than spark major redevelopment. Zones, in combination with other incentives, may result in more business creation than might otherwise occur, but they may be insufficient to reverse severe economic decline. The most successful enterprise zones, it is noted, are located in areas with adequate infrastructure and public services. Another characteristic they seem to have in common is a strong zone organization with experienced administrators and a coherent local plan for economic development. The report includes recommendations for improving the State's enterprise zone program. Among them is that zones should be separated into two categories: those that are economically distressed and in need of special assistance because of their location; and non-distressed areas in which zone designation will assist the State as a whole.
The Syracuse Economic Development Zone Analysis and Recommendations for Evaluation, ACCN-5474
Department of Public Administration, Maxwell School of Citizenship and Public Affairs, Syracuse University June 10, 1988, 73 pp. Available from HUD USER, P.O. Box 23268, Washington, D.C. 20026-3268
The impact of an enterprise zone on economic development can only be assessed by contrasting what would have happened without the zone with what actually happened, concludes a study of the Syracuse, New York, Economic Development Zone program. Most program evaluations focus on descriptive statistics-the number of new jobs created, the amount of capital investment, and the public cost per new job. To make a fair estimate of the real impact of the zone involves collecting data on several variables at the zone level and comparing them over time, then comparing those same variables at the county and State levels. The study also concludes that an economic development program aimed at enticing new businesses dilutes the potential effectiveness of enterprise zones. Programs directed at increasing the total value of the labor, goods, and services that a city "exports" to markets outside the zone will improve its citizens' economic circumstances by bringing money into the community. Economic development policies are effective only when they cause behavior that would not have occurred otherwise. Consequently, enterprise zone incentives must be narrowly targeted toward those firms most open to influence.
The New Jersey Urban Enterprise Zone Program: An Evaluation July 10, 1989, 88 pp. Available from New Jersey Department of Commerce, Energy, and Economic Development, Trenton, NJ 08625
An economic model is used to estimate the impact of New Jersey's Urban Enterprise Zone Program on the State's economic and fiscal bases. The data used in this study, prepared for the New Jersey Department of Commerce, Energy, and Economic Development, were derived from a survey of "qualified" firms that had been in the program for at least 1 year as of June 30, 1988. Based on those responses, the study concludes that the program has improved the relative position of the State's most distressed communities and has had an overall positive economic impact. On average, employment in the 10 enterprise zones grew at a slower rate than in non-enterprise zone cities prior to the program's inception, but at a faster rate after implementation. The study also found that program benefits were more important to larger firms. The influence of individual program benefits on business location and expansion decisions varied widely, with respondents reporting that sales tax exemptions were more influential than the corporate business tax credits and the unemployment insurance tax rebates in these decisions.
Business Impacts of Enterprise Zones, ACCN-4579 Susan A. Jones, Allen R. Marshall, and Glen E. Weisbrod 1985,147pp.
Available from HUD USER, P.O. Box 23268, Washington, D.C. 20026-3268
Case studies of eight enterprise zones (in Norwalk, Connecticut; St. Louis, Missouri; Philadelphia; Baltimore; Dayton, Ohio; Topeka, Kansas; Decatur, Illinois; and Louisville, Kentucky) sought to answer four questions: What result have the zones had on business entry and exit and employment trends? Have zones showed reversal of negative economic trends over time? Have zones shown economic growth that differs from that of the cities of which they are a part? Are there consistent factors that seem to affect these results? The study found diversity in economic targeting strategies and incentives; three zones report higher participation by new businesses than old. All show high numbers for job creation and retention, especially by large businesses. Many zone-located businesses do not participate in zone incentives, but the zone may have been an incentive for their locating there. Total business activity increased in all zones examined, though half of them declined in overall employment. The mix of business appears to be broadening from traditional heavy manufacturing.
Enterprise Zone Programs and Neighborhood Revitalization: The First Two Years Earl R. Jones 1985,30pp. Available from the University of Illinois at Urbana-Champaign, Department of Urban and Regional Planning, 1003 West Nevada Street, Urbana, IL 61801
In order to determine whether enterprise zone programs had begun to stimulate neighborhood revitalization, a legislative analysis examined the extent to which State zone programs provided new employment opportunities, job training, citizen participation, venture capital, and reduction of neighborhood displacement. In addition, an indepth study was conducted of the enterprise zone in Bridgeport, Connecticut, and a nonzone comparison area. There was no significant difference in real estate transfer activity between the two areas. Building permit activity increased substantially in the zone immediately after designation, but activity in the comparison area also rose, and the difference was not statistically significant. The report concludes that, at this point, enterprise zones may not be stimulating revitalization.
State Enterprise Zone Roundup
National Association of State Development Agencies 1985,36pp. Available from National Association of State Development Agencies, Hall of States, Suite 526,444 North Capitol Street NW., Washington, DC 20001
This report presents succinct one or two-page summaries of enterprise zone programs in 26 States. Included are name of State department; name, address, and telephone number of State contact; program status; number of zones; eligibility criteria; incentives offered; and an update on recent developments. The update provides such information as, for Alabama, "As of August 1985, only the city of Prichard in Mobile County had created a local enterprise zone"; for Missouri, "24 zones as of September 1, 1985 applications received continuously"; or, for Tennessee, "No zones yet designated."
$6 Billion Invested in Enterprise Zones Phyllis Messer Herman Plants, Sites & Parks, v. 1 (May-June 1986): 1, 6B, 135-137, 139, 142
A survey reveals that $6 billion has been committed by 3,100 firms to new or expanded facilities in the 677 enterprise zones of 15 States since 1981, although the figures are incomplete. Six States in the Midwest account for 65 percent of all investments. The article sketches developments since a HUD estimate 6 months earlier of $2.5 billion invested and 75,000 jobs; new activity is traced in Michigan, Illinois, Indiana, Kansas, Missouri, Minnesota, Ohio, Connecticut, Delaware, Maryland, New Jersey, Pennsylvania, Alabama, Tennessee, Florida, Georgia, Arkansas, Kentucky, Louisiana, Mississippi, Virginia, Oklahoma, Texas, and Oregon.
Connecticut Enterprise Zone Study: Findings and Recommendations
State of Connecticut Governor's Development Cabinet February 27, 1987, 8 pp. Available from Connecticut Department of Economic Development, 210 Washington Street, Hartford, CT 06106
Connecticut enterprise zones have had a positive impact on urban blight, bringing new incentives to the State's central cities, and should be integrated with other State programs, according to an examination of the program. In addition to encouraging business investment and job creation and retention in the State's six enterprise zones, the program has so evolved that it can now address the housing and human service needs of those areas. The report recommends that the program be expanded to include education, skills training, transportation, child care, health services, employment preparation and support services, and permanent, rewarding jobs for zone residents. In one zone, a pilot program offers welfare recipients job training and counseling. Recommendations for similar programs involve collaboration among various State agencies and with local governments. To promote this collaboration, it is recommended that the Connecticut Department of Economic Development coordinate the many State resources bearing on urban problems to improve the quality of life in the zones.
Enterprise Zones: The Connecticut Experiment 1985,43pp. Available from Connecticut Department of Economic Development, 210 Washington Street, Hartford, CT 06106
Originally prepared as a report to four members of the State General Assembly's Joint Planning and Development Committee, the document traces the 4-year history of enterprise zones in Connecticut. It claims the State is unique in having the first State-designated zone program, for the program's strong neighborhood emphasis, breadth of incentives, and simplicity, and for targeting the six most deteriorated urban neighborhoods. Claimed results include a positive effect on urban blight, new investments in central cities, a projected creation of over 4,300 new jobs, and retention of 4,200 existing jobs. The commercial-retail-service category surprised program designers by drawing $84 million in investment and adding 3,355 new jobs; the report suggests that despite good industrial job retention, the program's incentives may not be strong enough to draw as much new industry as desired. The six sites are Bridgeport, Norwalk, New London, New Britain, New Haven, and Hartford; the report recommends establishing zones in three more cities and expanding the area of two existing zones. Appended is a response to committee questions asked after the report was first submitted; among other recommendations, the appendix supports Federal enterprise zone legislation but says the State program would continue without it.
Progress Report on Maryland's Enterprise Zones, ACCN-4572 Richard N. Funkhouser and Edward Wise
Available from HUD USER, P.O. Box 23268, Washington, D.C. 20026-3268
After 1 to 2 years experience with the 10 enterprise zones in Maryland, the authors find evidence supports neither advocates' claims that the zones are worthwhile nor opponents' contentions that the concept is unworkable. As an experimental program, the zones could not be a cure-all for unemployment or any other socioeconomic problems of the depressed areas they cover. Corporate income tax credits of $28,000 for hiring 49 new employees and property tax credits of $162,000 were substantially lower than the $3.8 million in capital investment and 1,964 new jobs reported by 24 firms. (A lag in reporting may explain much of the difference.) Property tax credits were taken more widely, or at least more quickly, than income tax credits. Of the total public cost of the 10 zones, the largest was public infrastructure expenditures of $2.4 million, 84 percent of the $2.8 million cost. The report concludes that more time is required to determine the effectiveness of the zones.
Minnesota Enterprise Zone Status Report 1984 Minnesota Department of Energy and Economic Development 1985, 16pp. Available from Minnesota Department of Energy and Economic Development, 900 American Center Building, 150 East Kellogg Boulevard, St. Paul, MN 5510l
The Minnesota statute authorizes three types of enterprise zones: border cities, which seek to reduce the cost of doing business in Minnesota compared with neighboring States, mainly through tax equalization; competitive cities, encouraging economic growth in depressed areas; and federally designated zones, not yet operative. Through maps, photographs, and statistics, this brochure presents the progress of the State program and its 22 zones through summer 1985.
Illinois Enterprise Zone Program, Second Annual Report Illinois Department of Commerce and Community Affairs 1985,43pp. Available from Illinois Department of Commerce and Community Affairs, 620 East Adams Street, Springfield, IL 62701
Illinois had 32 enterprise zones when this document was issued, but the report focuses on the 20 that were in operation in the year ending June 1985. Before State certification, a locality must present its own plan for the zone and pass a local ordinance specifying boundaries and the local tax incentives to be offered. A proposed zone must meet at least one of four criteria defined by measuring poverty, low income, unemployment, or population loss. State-provided incentives include investment tax credits, sales tax exemptions, job tax credits, income tax deductions, utility tax exemptions, and bonding authority. An Enterprise Zone Training Fund was established with a Federal grant under the job Training Partnership Act (JTPA). The report describes the zones and lists several Department of Commerce and Community Affairs initiatives that have aided the program.
Tax Incentives for Community Revitalization in Florida Coopers & Lybrand
Available from State of Florida Department of Community Affairs, 2571 Executive Circle East, Tallahassee, FL 32301
The report explains tax credits available to firms paying Florida corporate income taxes that invest in economically oppressed areas of the State. The credits apply to contributions to community development projects, creation of jobs in businesses that may employ residents of enterprise zones, and new businesses or expansion of business located in enterprise zones. Each of the three analyses covers intent of the program, advantages, eligibility requirements, application instructions, operating constraints, and sources of additional information. Two additional sections analyze tax incentives provided under Federal tax legislation passed in 1981 and 1982 and State and local development incentives including industrial revenue bonds, tax increment financing, and tax abatement. Findings include: (1) The tax credit makes the real cost of a contribution significantly less than the actual donation. (2) The real cost of the contribution decreases as the size of the firm increases. (3) Tax savings from the jobs incentive decrease as the size of the firm increases. (4) For the new or expanded business credit, the savings decrease as the size of the firm increases.
Florida's Enterprise Zones 1983, 53pp.
Available from House Committee on Tourism and Economic Development,
324 House Office Building, Tallahassee, FL 32301
The report presents a survey of all local Florida governments that approved enterprise zones before September 1983 and a statistical analysis of zones in six metropolitan areas. After reviewing the history of the enterprise zone concept and its development in Florida and in other States, the report notes that the 154 zones approved in the State overlap so that the actual total is 109, with 55 jurisdictions represented. Average zone population is 11,425. When one county with large zones is excepted, average area is 3.29 square miles. All but four local governments have acted to enhance State incentives, most frequently by use of Federal redevelopment funds, mainly Community Development Block Grant (CDBG) funds. Thirteen counties have voted a total of 23 industrial revenue bond issues for their zones. More than 50 percent of zone lands are zoned residential. In municipalities with more than one zone, one, usually the largest and located in an inner city, tends to be far more distressed. The report concludes that present zones are too large for proper impact targeting and that greater city-county participation is needed. More precise targeting and designation procedures are urged.
Virginia Enterprise Zones: Measuring the Impact
June 1987, 24 pp. Available from Virginia Department of Housing and Community Development, 205 North Fourth Street, Richmond, VA 23219
Feedback from the business community and statistical information on Virginia's enterprise zone program is presented in this report by the Virginia Department of Housing and Community Development (DHCD). Based on a survey of businesses in the State's enterprise zones and accounting firms that have helped businesses qualify for State tax credits, as well as data provided by the Virginia Department of Taxation and DHCD, the program has achieved limited success. Fewer than 30 of the 3,700 firms operating in the 12 enterprise zones at the time of their designation have applied for tax credits, and only five new firms have qualified for the program since it began in 1984. One reason for this lack of participation, the report notes, is that the Federal income tax lowers the value of State tax inducements for new business and to encourage expansion of existing operations in distressed areas. State tax credits that a business receives from the enterprise zone program must be declared as income on its Federal tax return, thereby increasing the firm's Federal tax liability. The report also contains a number of recommendations for improving the program. Among these are proposals to: limit the number of enterprise zones; extend the period of eligibility in which firms may be reimbursed for unemployment tax payments; and give enterprise zones priority in awarding State economic development aid.
Virginia Urban Enterprise Zone Program Report for 1984 August 29, 1985, 3pp.
Available from Virginia Department of Housing and Community Development
205 North Fourth Street, Richmond, VA 23219
The report offers a cumulative report on business and investment activity in the six original zones -- Danville, Lynchburg, Newport News, Norfolk Portsmouth, Roanoke, and Saltville. Information on six new zones (Chesapeake, Hampton, Hopewell, Petersburg, Wythe-Carroll Counties, and South Hill) will be incorporated in 1986 reports. The original six zones together reported 205 new firms, 257 expanding firms, 3,532 new jobs, 162 business closures, and 1,715 job losses. Investment activity reported was limited to construction permits, of which 953 were issued at a value of $5.5 million.
Rebuilding Our Cities: The Case for Enterprise Zones New York Legislative Commission on Public-Private Cooperation
Available from State of New York Legislative Commission on Public-Private Cooperation, Room
310, Legislative Office Building, Albany, NY 12247
Recommending quick passage of State enterprise zone legislation, without waiting for Federal action, the Commission finds: (1) Enterprise zones are effective in improving chronically depressed neighborhoods. (2) Twenty-five States have such programs, with 1,281 zones in 524 local jurisdictions. (3) The form and size of zones differ among States, and elements are changed as experience grows. (4) Zone programs seem to be more effective when areas must compete for designation rather than qualifying automatically or meeting criteria. (5) Criteria most often used include unemployment 1.5 times or more greater than the State average, a 10 percent loss in population since 1970, a percentage of families with incomes below the poverty line that is greater than the State average, and eligibility for Federal Urban Development Action Grants (UDAG). (6) Incentives may include tax credits for new employees hired, exemption from sales taxes on materials used for construction within the zone, real estate tax abatements, tax credits or deductions for improvements or employee training programs, easy borrowing from economic development agencies, fast processing of permit applications, and access to improved roads and water and sewer service. (7) Enterprise zones primarily result in new, not "pirated," business. The report recommends: (1) Prompt passage. (2) Zones should be competitively designated by a nonpartisan panel. (3) Large and small cities, plus rural areas, should be included. (4) A "significant number of zones should be created ... promptly." (5) A variety of tax incentives should be created to appeal to a variety of business types. (6) Health, safety, and environmental standards should be maintained but paperwork and delay reduced. (7) Community participation should be encouraged. (8) Each zone should have an adequate, locally based staff. (9) Zones should get priority for help from existing State economic development programs. (10) Localities should be authorized to reduce local taxes and regulations within their zones. (11) A special enterprise zone task force should be created within an appropriate State agency.