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Ending the zone wars.

With an assist from the Los Angeles riots, the creation of federally sponsored enterprise zones (EZs) may be an idea whose time has come. Inevitability, however, does not preclude think-tank, congressional or executive branch pouting, carping or kicking. In recent years, many federal and congressional EZ acts have been defeated by Congress or the White House. Democrats disparaged Republican supply-side incentives, while GOP members blanched at the price and alleged social tinkering aspects of Democratic initiatives. Consequently, the EZ initiative swung to the states. Since 1982, 37 states plus the District of Columbia have created 600 EZs. (See chart, "How Enterprising Are Enterprise Zones?").
 HOW ENTERPRISING ARE ENTERPRISE ZONES?
 Jobs(*) Investment(*) Number of Year
 Created ($ billions) EZ areas Enacted
Illinois 54,422 $ 4.0 82 1982
New York 34,705 $ 2.9 10 1983
Ohio 34,000 $12.0 193 1982
Louisiana 25,361 $ 2.2 750 1981
Kentucky 18,154 $ 1.7 10 1982
(*)Cumulative from the year the zone was enacted to June 1991.
Source: Housing and Urban Development, Office of Economic Development, Division
of
Community Development, State Enterprise Zone Update, Washington, D.C., 1991.


EZs have ardent detractors and supporters. Critics contend that EZ jobs created for zone residents cost more than jobs created for nonresidents. They charge that resident EZ employees are paid less than nonresident EZ employees and that EZ jobs are not newly created ones. Instead, they are low-paying jobs, transplanted from other areas.

Supporters say business and community incentives are considerable. From the businessperson's perspective, these inducements include reduced or minimal taxes for investors, use of a lower-skilled, less-expensive work force and oftentimes easy access to transportation hubs. Residents of EZs are expected to view the zones as environments of financial stability and increased income. A frequent ancillary impact may be increased security and local government attention.

To Rep. Charles Rangel (D-NY), the current federal approach amounts to penny-tossing. That is why he is sponsoring a new EZ act, which incorporates aspects of both past Democratic and Republican initiatives, to bring "self-sufficiency back to those American neighborhoods."

Last April, President Bush vetoed a tax bill containing another EZ act, H.R. 4022, which advocated creating 50 EZs over four years. But Rangel was not discouraged. His new bill, the Enterprise Communities Act of 1992, would create 100 superzones nationwide. And surprisingly, it has some similarities to President Bush's EZ proposals. One, they both advocate $1 billion in tax incentives. Two, they also have a "weed-and-seed" facet--an iniative designed to reduce crime and build businesses. The Bush "weed" proposal relies heavily on the Justice Department. Rangel suggests community policing and alternatives to crime grants. Three, both advocate that the "seed" programs be federally administered. That's where the similarities end.

Among other items, Rangel's bill addresses drug abuse, capital formation, job creation and the extension of existing tax credits to stabilize neighborhoods. Suggestions include targeting the demand side of the drug culture by creating a substance abuse training corps and programs for pregnant addicts and drug-abused children. To strengthen an EZ's financial infrastructure, Rangel advocates creating enterprise community partnerships to provide capital for nonprofit community development corporations, loan funds and credit unions. The Bush proposal, which would be available to any poor urban area, would cost $470 million to implement. Rangel's legislation, which would be confined to 100 poor areas, would cost $582 million. Rangel does not want to limit the response to urban need to short-term financial assistance. "The ultimate goal of the zone must be to encourage economic self-sufficiency through long-term investments that lead to stable employment, affordable housing and personal opportunity," he says.

At press time, prior to Congress' summer recess, the Rangel act had not been voted on. Its chances of approval appeared mixed, and a final version, if passed, could be altered significantly from Rangel's original proposal.
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Title Annotation:enterprise zones
Author:McCoy, Frank
Publication:Black Enterprise
Article Type:Column
Date:Sep 1, 1992
Words:637
Previous Article:Look before you leap.
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