The Attraction of Enterprise Zones: Tax Benefits and Incentives for Businesses
Locating a business in a designated enterprise zone can often provide incentives unavailable in other areas. But the incentives offered are beginning to change - and there may be tradeoffs that could devalue the financial advantages.
Mark Crawford (Nov 08)
(page 2 of 2)
A Changing Game
zones overall aren't as eye-catching as they once were, because nearly
every state provides them and they are all basically the same.
"Companies today are looking for much more flexibility and higher-value
incentives," says Colson. "Communities are getting more creative with
the incentives they offer, especially with payroll taxes. Cities can
use their bonding capacity to create financial structures for capital
improvements. Building permits are being approved more quickly."
the inception of Wisconsin's enterprise zone program in 1997, 150
businesses have received enterprise development zone awards totaling
$203 million in allocated tax credits. These projects represent a total
of $3.3 billion in capital investment and the creation of 30,510 new
jobs. Wisconsin was also one of the first states to create Technology
Zones to build its biotechnology and high-technology sectors. Now,
according to Tony Hozeny, communications director for the Wisconsin
Department of Commerce, Wisconsin is combining all its tax credit
programs to make the state more attractive to companies. "The proposal
is before the legislature right now," he says.
the enterprise zone approach is continuing to evolve away from a strict
focus on economically distressed areas. "We're seeing more of this
overseas in places like India, where the government is setting up
enterprise zones in areas that have the best potential for continuous
growth and long-term success - which aren't disadvantaged." He says a
similar approach is being taken by southeastern Michigan in
establishing an "aerotropolis" centered on the Detroit airport, where
enterprise zone-like incentives will apply to the entire region, not
just poorer communities within it. Wayne County, Detroit Renaissance,
the Detroit Regional Chamber, and the seven communities in the corridor
are collaborating to establish and market this area.
A Word of Caution
Canup, managing principal of global location strategies for Fluor in
Greenville, South Carolina, cautions that enterprise zones are created
for very real reasons. "Either these areas were losing significant
amounts of existing business and industry, or they had never succeeded
in attracting development," he says. "Most enterprise zones are very
weak from a work force standpoint. Many have high poverty levels." He
suggests that when doing a site selection analysis on an enterprise
zone, try not to be swayed by focusing only on the money. "First, be
sure that you can be successful there without the incentives. If the
other key factors - labor, labor skills and trainability, access and
logistics, infrastructure - all come together and you have a choice of
similarly qualified sites, that's where the enterprise zone incentives
can really make a big difference in the decision-making process."
enterprise zone is not necessarily a silver bullet," says Mel Tull,
director of the Silver Spring Enterprise Zone in Maryland, which was
established in 1996. "It is a very good incentive, but you usually need
other things to go along with it to really make the deal happen." He
also points out that enterprise zones can be the tool that gets
discussions started. "Offering an enterprise zone can initiate a very
important dialog with company executives that will hopefully lead to
finding out what they really need."