Enterprise zones

[Mark Giebels]

REPLY TO: D66 at nic.surfnet.nl


De Contra Costa Times (San Jose,CA,US) heeft wat onderzoek over
zogenaamde 'enterprise zones' bij elkaar gesprokkeld. Werken ze of
werken ze niet en wie profiteert er het meest van? Geen eenduidige
conclusies maar toch wel interessante info. Enfin, hieronder heb ik het
'onderzoeksartikel' en de 'editorial' erover gecopy-paste.

Mijn indruk is dat het meeste geld gaat naar slimme bedrijfjes die ze
gebruiken als tax loopholes en naar de reeds op een bepaalde locatie
gevestigde bedrijven die deze wetgeving gebruiken om de ROI van hun
politieke campagnegelden te verhogen.

Groeten,
Mark Giebels

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Posted on Sun, Apr. 10, 2005
TIMES WATCHDOG

Boom or bust? Zone studies conflict

By Jessica Guynn

CONTRA COSTA TIMES

In economic circles, they are zones of contention.

Touted as an economic elixir for high rates of poverty and unemployment,
enterprise zones offer special tax breaks to businesses in an effort to
bring money and jobs to 39 struggling communities in California. But
economists and planning experts disagree sharply on the healing power of
the two-decade-old program.

Bottom line: Economists lack conclusive evidence that enterprise zones
work. The root causes of economic growth are too complex and difficult
to isolate. And the state does not collect the kind of hard data that
economists need to analyze if tax breaks spark new economic activity.

Consequently, studies nationwide and in California have yielded
conflicting results.

One recent study commissioned by the trade association representing
California's 39 enterprise zones found a substantial upside. The 2003
research study estimated that the program cost the state $570 million
from 1986 to 2002, but reaped nearly $1.8 billion in benefits.

"We showed that the zones are getting more jobs, sales tax and corporate
taxes," said Ted Bradshaw, a UC Davis community development professor.
"The growth is paying off in increased revenue for the state."

Workers' wages -- particularly those of low-income workers -- also get a
small boost in enterprise zones, a recent study by University of
Southern California professor Raphael Bostic and Franchise Tax Board
economist Allen Prohofsky found. But the researchers could not establish
whether the jobs or income gains lasted longer than the five years
during which companies can collect the hiring credits.

But other research studies dispute that enterprise zones are good for
anyone but businesses.

A 2003 report from the nonpartisan Legislative Analyst's Office
concluded that enterprise zone incentives increase economic activity
within small areas, but are "very costly" and have "little if any impact
on the creation of new economic activity or employment."

The report cited other barriers to private investment in economically
depressed areas, from aging infrastructure to lack of adequate public
services to a shortage of qualified workers.

"To the extent that the Legislature wished to expand the economic base
of the state as a whole, the use of (enterprise zone) incentives would
not appear to be a particularly effective means," the report found.

Alan Peters, a University of Iowa professor who co-authored a book on
enterprise zones, says these corporate tax incentives that target
communities for economic boom have been a bust.

"These programs deliver tax breaks to businesses. That's what they do,"
he said. "Surely, it would be better to fundamentally alter the state
tax codes rather than have special areas where you give special stuff
away. Why not bring down business taxes in general rather than give out
incentives in politically designated zones?"

Enterprise zone coordinators defend millions in tax breaks with
anecdotes. Ursula Luna, who manages Pittsburg's enterprise zone, says
she knows from experience that targeting blighted commercial districts
works.

Pittsburg has one of the smallest zones in square miles and tax dollars
spent. But a growing number of businesses from a Harley-Davidson
dealership to a rail manufacturer are moving there in part to take
advantage of the tax breaks, giving jobs and hope to low-income
residents, Luna said. One of the city's largest employers, USS-Posco,
which at the time was booming along with the steel industry, was left
out of the city's enterprise zone to reward new, not old, investment.

"Enterprise zones benefits don't last forever. But if you can get
somebody started in one of these areas, there is a high chance of them
staying," said John Troughton, a Cushman & Wakefield broker in Contra
Costa County. "If you do that, then you are doing something."


------------------------------------------------------------------------
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Posted on Wed, Apr. 13, 2005
EDITORIAL

Mend enterprise zones


BACK IN THE 1980s, one of the more promising ideas to combat poverty in
economically depressed areas was the establishment of so-called
enterprise zones. The policy is commendable, using substantial tax
breaks to attract businesses to move to poor neighborhoods with high
rates of unemployment and hire local people.

Unfortunately, enterprise zones, in California at least, are not living
up to the rosy forecasts about their effectiveness. The problem is not
so much with the concept behind the zones, but the manner in which the
zones have been created and the lack of oversight regarding the extent
of their success or failure.

In some cases, the tax incentives have worked well, bringing new
businesses into depressed areas or preventing businesses from leaving.
But too often the enterprise zones have not delivered on their promises,
according to a Times study.

Time and again, enterprise zones have been drawn to accommodate existing
businesses that were not likely to move. Richmond's zone, for example,
was configured to include the ChevronTexaco refinery, an operation that
had no plans to relocate.

In Oakland, much of the city was placed inside the enterprise zone,
including the airport and shipping port. These facilities have drawn new
businesses, but were likely to do so with or without the enterprise
zone.

In San Francisco, only six of the 69 census tracts that make up that
city's enterprise zone meet two of the three criteria that would qualify
the zone now. Instead of bringing new businesses to poor neighborhoods,
the enterprise zones are using taxpayer money to fatten the profits of
companies that have long been in the area and were not apt to leave.

There is also a major problem with accountability. One of the most
lucrative tax breaks companies receive is based on hiring credits. But
there is inadequate and sloppy data on the number of jobs created in
many of the enterprise zones, particularly in Oakland.

We still believe enterprise zones can be valuable tools in improving
economic conditions in impoverished areas, but changes are necessary.
The zones need to be more tightly drawn, based on accurate and current
data on unemployment, household income and blight. Tax breaks should be
restricted to new hires inside the enterprise zone. Most important,
up-to-date information on hiring and retention of workers must be
compiled.

Without such reforms, enterprise zones are more likely to be drains on
state revenues at the expense of taxpayers and public services. That is
not acceptable.





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