Aid for a run-down New Haven area comes in a package
For the past 100 years, the oldest black neighborhood in New Haven, Conn., has revolved around a Winchester Arms factory. Today, the site is run down. Buildings with smashed windows face littered streets -- not exactly an inviting place for new businesses.
Last year the factory workers went on strike. As a result of the worker unrest, which helped draw public attention to the area, Yale University, the Olin corporation, and the City of New Haven came up with a plan to build a nonprofit industrial "science" part. Geared to high-technology companies, the park is to be carved out of an 80-square-block area around the factory. Yale borders the neighborhood and Olin Corporation has a research lab near the arms factory.
Much of the funding for the project came from a traditional source, a federal Urban Development Action Grant. Now, the State of Connecticut is also moving is some not-so-traditional ways to feed its economically starved urban areas. Last month it passed the Enterprize Zone Act -- which defines areas as "economically distressed" and then offers incentives for businesses to move there.
In passing the act, Connecticut joined what is so far a small group of states embracing a concept that won highly publicized support from President Reagan in his campaign.
In addition to Connecticut, enterprise-zone legislation has passed in only seven other states: Florida, Maryland, Illinois, Missouri, Pennsylvania, Indiana , and Oregon. But according to the American Legislative Exchange Council, an individual-membership organization of state legislators, at least 70 enterprise-zone bills have been introduced in statehouses across the country.
Edgar Vash, a legislative analyst with the council and an expert on enterprise-zone legislation, says that all states already have "distressed-community statutes" but that they often constitute "one or two disparate tax credits or are vague. Enterprise zones offer a seriesm of breaks and are geared toward a seriesm of investments."
Connecticut's first experiment with attracting businesses to depressed urban areas was the Urban Jobs Program of 1978. The program involved 200 manufacturers and 20,000 jobs. About half of the jobs were new; the others were retained by persuading companies not to leave the state.
The Urban Jobs Program attracted business through incentives: an 80 percent local property-tax abatement for five years; $500 for each new full-time permanent job resulting from the new investment; a 25 percent reduction in state corporation tax for 10 years; and loans to small businesses.
The Enterprise Zone legislation, proposed by state Sens. Wilbur G. Smith and Russell L. Post Jr., fits snugly with Urban Jobs. "There was nothing wrong with Urban Jobs," says David Driver, executive assistant to Connecticuts's commissioner of economic development. "But we needed a bill that was powweful enough to entice companies to [develop] in the really hard-core neighborhoods."
Connecticut figures the way to get jobs into "hard core" neighborhoods and to hire locally is to increase incentives. The new legislation doubles two of the Urban Jobs benefits. It allows $1,000 for each new full-time permanent job and a 50 percent reduction in state corporation tax for 10 years (provided 30 percent of the company's employees live in the zone).It sticks with the 80 percent property-tax abatement.
But it also has new features. It guarantees job training grants to employers whose workers live in enterprise zones. Prospective employees can obtain state vouchers to prove eligibility for training and tax credits. "This [voucher] is unique in the nation," says Ron Van Winkle, director of planning for the state Department of Economic Development.
The legislation also puts a seven-year freeze on the value of improved property in an enterprise zone, provides venture capital for small businesses, and gives tax exemptions for machinery replacement.
Though the Enterprise Zone Act won't come into effect until the zones can be defined by 1980 census data (probably by the start of next summer), Ron Kysiak, coordinator of New Haven's science park, feels sure the science park will qualify.
"The Enterprise Zone fits quite nicely," he says. It will provide additional incentives to get tenants in our park." He adds that the park will provide 1,800 new jobs, one-third of which are slated for neighborhood residents.
Within the next two years it is expected that federal enterprise-zone legislation will join such state legislation. The bill getting most attention now is the Urban Jobs and Enterprise Zone Act of 1981, proposed by two New York congressmen, Republican Jack F. Kemp and Democrat Robert Garcia.
Basically, the bill focuses on tax credits. It would eliminate capital-gains taxes; release half of all income earned by zone businesses from taxation; grant a 5 percent refundable personal income-tax credit for zone employees; and grant a 5 percent refundable business income-tax credit equal to 5 percent of the wages paid to eligible zone employees.
"The Kemp-Garcia bill couldn't do anything but complement [state enterprise-zone legislation] -- mostly because the federal bill is not that effective," says Edgar Vash.
He explains that the reason it is not"that effective" is that the states -- through deregulation -- have the most power to dissolve business disincentives. Entrepreneurs consider property taxes, sales taxes, state taxes, rent control, zoning laws, and building codes as disincentives, and they say it is the state's responsibility to alleviate these burdens.
Mr Vash is glad the federal bill "forces the states to make regulation changes."
But the it is also "forcing" states to pass their own bills faster. Says Connecticut's Mr. Driver: "A lot of diddling needs to be done on the federal bill. We just didn't feel we could wait any longer."