'Enterprise zones': latest effort to halt urban decay. President looking at plans; states starting up their own
Boston — An idea born in Britain - ''urban enterprise zones'' - is emerging as the Reagan administration's first big move to boost the nation's depressed inner-city areas.
A plan now receiving the President's final review will soon be pushed in Congress. Meanwhile, several congressmen are shoving their way into the action by introducing their own bills.
A big rush is on in many states, too, as 76 proposals are being dangled before state legislatures to create state and local enterprise zones.
The enterprise zone concept involves offering special incentives to businesses to start up within certain areas designated as economically depressed. The administration plan is a revised version of the Kemp-Garcia urban jobs and enterprise zone bill presented to Congress in 1980. That bill was harshly criticized by community and civic groups for offering ''too little'' to the poor and jobless, by local public officials for seeking to impose federal standards without regard for local conditions, by small business entrepreneurs for ''favoring'' big business, and by labor unions for suggesting a waiver of minimum wages inside the zones.
The Kemp-Garcia bill was submitted by Reps. Jack F. Kemp (R) and Robert Garcia (D) of New York as a new approach to urban renewal. Mr. Kemp is a political conservative from Buffalo, N.Y.; Mr. Garcia represents an economically depressed area in the Bronx borough of New York City.
The idea of enterprise zones was first proposed in Britain in a speech by Sir Geoffrey Howe, a member of Parliament, in 1978. Two years later, the Parliament approved 11 enterprise zones, with government support committed for 10 years. The zones - one each in Scotland, Wales, and Northern Ireland, and eight in England - average 600 acres of industrial and commercial real estate, but range in size from 125 to 1,000 acres. Eight are already in operation.
No specific number of zones is proposed for the United States, but the Kemp-Garcia bill suggests establishing up to 25 zones a year for the next three years. Most of these would comprise areas of about 4,000 population, mostly in cities.
After White House review, the revised Reagan plan is likely to include:
* Federal tax breaks, such as a 5 percent refundable tax credit for wages paid to low-income employees, and an end to the capital gains tax for businesses within the zone.
* Additional tax relief provided to new businesses that hire at least 40 percent of their work force from among CETA-eligible (low income) persons. Relief would include a 50 percent cut in income taxes; optional use of cash accounting for small businesses, and extension of current loss carry-over allowance from seven to 20 years. Income tax would be cut in half on loans made to firms within zones.
* Incentives to established firms already in zones if they increase their number of employees by 10 percent, at least 40 percent of whom are low income.
* Urging of local governments to reduce taxes and cut bureaucratic requirements.
The adminstration hopes that eager entrepreneurs will want to test the zone idea. One Washington, D.C., black businessman, Robert Quinichett, says he is ready. Mr. Quinichett founded Sterling Systems, a computer-consultant firm that has grown from $400,000 worth of business and 25 employees in 1977 to 500 employees and an anticipated $12 million to $15 million income in 1981.
The son of a black custodian at a radio station in his native Urbancrest, Ohio, Quinichett says that ''enterprise zones offer us an opportunity to expand into new areas. At the same time, we can provide a service - bring jobs to communities and to people who may have lost hope.''
Five states - Florida, Indiana, Maryland, Connecticut, and Louisiana - have passed their own enterprise zone laws. Four states - Missouri, Pennsylvania, Delaware, and Oregon - have approved legislation authorizing tax credits for business investments in depressed areas. Illinois passed similar legislation only to have it vetoed by the governor. Ohio and New York are to vote on proposals by the end of 1981.
Connecticut claims a head start with its law, passed July 6. It authorizes six zones, three in cities of 80,000 and above and three in towns with less than 80,000 population. The law builds on the state's three-year-old urban jobs program, which has involved 200 manufacturers in developing 20,000 jobs, says Edward J. Stockton, commissioner of economic development.
To qualify, areas in Connecticut must be economically depressed. They must show 25 percent unemployment, 25 percent of residents below poverty level in income, or 25 percent receiving public aid. The state offers a 50 percent reduction in corporate business taxes for 10 years, low-interest loans, a $1,000 grant for each job created, 80 percent abatement of local property taxes for five years, and job-training grants to employers who hire zone residents.
Among cities, St. Louis has set up its own local enterprise zones, and Philadelphia is working out plans to do likewise.
At least one economic analyst, Edgar Vash of the American Legislative Exchange Council, says states and local governments can do more than Uncle Sam to develop zones that will effectively create new jobs.
''The federal government alone cannot create successful enterprise zones. Only states and local governments can offer basic incentives - change zoning regulations, redefine land-use requirements, and scissor reams of red tape - that reduce obstacles to the revitalization of depressed areas.''
Another agency studying enterprise zones, the National Association of Counties Research Inc. in Washington, agrees, saying the role of the national government should be to support local government in making an enterprise zones work.