Whatever happened to enterprise zones?

Twelve years after the idea was first introduced in Congress, efforts to create a national enterprise zone strategy are still stalled by setbacks and skepticism. Although many states enacted local enterprise zone legislation during the 1980s, the results have not lived up to expectations. Minorities have received few benefits from the zones, and some legislators are now questioning whether the program needs to be recast or dismantled.

The enterprise zone concept was adopted by the Reagan-Bush administration and continued by the Bush-Quayle administration as a way to review America's most economically depressed areas. Specially designated areas would provide tax incentives and regulatory relief intended to create new jobs and to encourage private investment and economic redevelopment. In his State of the Union Address to the U.S. Congress in January, President George Bush renewed his call for congressional support of enterprise zone legislation, citing the program as a way to "empower the poor" and to "get businesses into the inner city."

Observers say there have been 14 versions of federal enterprise zone legislation proposed since former Reps. Jack F. Kemp (R-N.Y.) and Robert Garcia (D-N.Y.) first introduced it in 1980. Despite its promise and the desperate needs of decaying inner cities, Congress has never passed the legislation, which prompted 36 states and the District of Columbia to enact local enterprise zone laws starting in 1981.

U.S. Department of Housing and Urban Development (HUD) Secretary Jack F. Kemp, a strong supporter of the zones, has showcased them as the GOP's answer to the problem of stimulating economic development in troubled areas. According to HUD's 1991 State Enterprise Zone Update, the estimated 2,260 zones have created 258,395 jobs and spurred $28 billion in capital investment since they came into existence. "With American cities crying for help, enterprise zones offer a solution," Kemp says.

Despite HUD's findings, members of the Congressional Black Caucus dispute the effectiveness of the zones. "Enterprise zones have had almost no economic effect on the inner cities," says Eleanor Holmes Norton, congressional delegate from the District of Columbia. Norton says many public officials support enterprise zone proposals because they have not developed other, more effective alternatives to rebuild urban areas.

"There can be no substitute for a comprehensive urban policy that revives the great cities of the country and their [ailing] economies," Norton asserts. She accuses President Bush of "neglecting the domestic economy."

Dr. Glenda Glover, founder of the Washington, D.C.-based National Center for Enterprise Zone Research, questions the zones' ability to help minorities. Glover, who is also an assistant professor of accounting at Howard University, surveyed 155 zones from 28 states and concluded that, "while enterprise zones have contributed substantially to business development . . . only 5.3% of the firms [within the zones] were minority-owned."

Glover believes that the tax incentives that most enterprise zones offer are not enough to help minority firms participate. She says that because many minority firms lack start-up capital and face a number of other barriers in the business world, "what is critically required in the legislation for minority firms, particularly newer firms, is the inclusion of some type of incentive based on either the capital or equity position of the firm."

A closer examination of enterprise zones brings Glover's comments into focus. "We have tax incentives at the local level, but with the economic hard times we are experiencing now, the local governments can't be expected to fund all the needs of economically depressed areas by themselves," says John Moore, development zone administrator for Washington, D.C.

Moore says that despite being designated an enterprise zone in 1988, Southwest Washington's Anacostia community has continued to languish in urban blight. The problems of high crime, high insurance and the reluctance of banks to lend money have outweighed the benefits of tax incentives. "There needs to be more teeth in the legislation to attract firms," Moore says. "There must be massive incentives from the federal level."

The latest effort to provide federal incentives comes from congressman Charles B. Rangel (D-N.Y.). Rangel's Enterprise Communities Act of 1991 is a three-year plan to provide $300 million for anti-crime/anti-drug efforts, $150 million for the creation of affordable housing and $300 million in operating and programming capital for nonprofit community development corporations in 50 newly created federal enterprise zones. According to Rangel, the act "attempts to collect those things in our domestic economy that we know are working, and target them in ways that will bring back destitute areas." He is hoping it will bring back enthusiasm for enterprise zones as well.