How do you lure firms -- and jobs -- into areas of high unemployment and physical decay? The standard answer back in the Great Society days of the mid- 1960s was "urban renewal" -- which usually meant erection of expensive office buildings, hotels, or civic centers. The only problem, as local authorities quickly discovered, was that despite the construction of huge concrete and steel edifices the "permanent" jobs that were finally created tended to go to middle-class or suburban workers with only a minimal addition of real new wealth for the depressed community.Skip to next paragraph
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Now, in becoming the first state to try a totally new approach to arresting urban blight and joblessness, Connecticut finds itself at the cutting edge of a goal advocated by President Reagan. That is the establishment of urban "enterprise zones" -- granting unique tax incentives to business firms locating in designated sections of cities having high unemployment and economic problems.
Precisely because of Mr. Reagan's general backing of the concept, the Connecticut approach will be an important case study for other states as well as the federal government. That is particularly true since Connecticut's embrace of enterprise zones gives a bipartisan imprimatur to the idea. Gov. William O'Neill, who recently signed legislation setting up the zones, is a Democrat.
Connecticut's plan combines tax features that should prove appealing to businesses, such as slashing the state's 10 percent corporate income tax in half for 10 years for manufacturing firms that locate in enterprise zones. Firms will be given a $1,000 grant for each job created, plus an 80 percent reduction in property taxes for a five-year period.
In formulating its plan, Connecticut is already setting up a $1 million venture-capital fund to provide low-cost loans to qualifying firms. The state has also sought to head off the most serious argument against the zone concept -- namely, that busineses would merely shift existing facilities out of areas where high wage levels prevail and move into the lower-wage-scale areas of the designated zones. To forestall such possibilities Connecticut is properly requiring that at least 30 percent of each new firm's employees must live within the zone itself.
With enterprise zones actually create new jobs? The jury is still out on British zones set up during the past several years. Congress is currently exploring legislations co-sponsored by Congressmen Jack Kemp and robert Garcia of New York that would create some 30 to 75 zones around the US during the next three years, with as many as 2,500 zones eventually being established.
As of now, the zones would seem to represent a way of communities to work in tandem with businesses to stimulate new enterprise without the need to resort to the huge direct federal financial outlays and massive building programs of the 1960s. Connecticut thus deserves bouquets for in effect testing out a new solution for a problem faced by scores of American communities.