State enterprise zones provide gentle incentive But Md. program is no urban cure-all

May 17, 1992|By Sandy Banisky | Sandy Banisky,Staff Writer

Burton Monroe remembers back a dozen years, back to when there were assaults, sometimes shootings, in Northwest Baltimore's Park Circle Industrial Park. Coming to work there was "like walking into the Wild West."

No more. Today, the desolate buildings that attracted muggers have been reborn as a thriving business center.

Ten years ago, Maryland designated the Park Circle Industrial Park a state enterprise zone. Since then, businesses have been claiming tax breaks for moving and building there.

It is one of 17 zones, both urban and rural, that have been established around the state. The Department of Economic and Employment Development estimates that the zones have spawned $208 million in new investment over 10 years.

Now, President Bush, fresh from the tragedy of Los Angeles, touts a federal enterprise zone program as a fix for urban ills.

But Mr. Monroe, a mechanic at Cindarn Plastics in Park Circle, shakes his head.

"It's not magic," Mr. Monroe said last week. "It's not an overnight thing. He's looking at a long-term project, a 10- to 15-year project. He's got to walk and crawl along with the community."

In Washington, enterprise zones -- an idea around since the late 1970s -- are suddenly new again. Republicans and Democrats are proposing competing programs that combine tax incentives for urban investment with other social programs.

No one's sure what the final product -- if Congress and the White House can agree on one -- will look like. The president is believed to favor breaks in capital gains taxes. Democrats tend to lean more toward tax incentives for hiring low-income people or incentives for banks to move into poorer areas.

The new investment is intended to create jobs and, thereby, raise the income of nearby residents. But leaders in both parties have been saying that enterprise zones must be teamed with welfare reforms, job-training programs and anti-crime efforts if the cities are to be helped.

The debate has gone on for years. Tired of waiting for the federal government to move, 36 states over the past 10 years have set up their own enterprise zone programs. Each is different. Some focus on tax incentives. Others add loan programs or job training or breaks on motor vehicle registration fees.

Now, with a decade of experimenting to assess, questions are unanswered.

Do enterprise zones help draw investment? Even skeptics concede: Yes, to some extent.

Do they save communities? Even the program's fans say: No.

By themselves, researchers in Washington say, enterprise zones are only a gentle incentive to businesses.

The states that have had the most success generally are those that combined tax breaks with other lures: a job-training program tailored for the company, stepped-up police efforts, neighborhood drug rehabilitation centers, funds for new streets, lighting and sewers.

"I think on balance the program has been effective at the margins," says Jerry Wade, Maryland's enterprise zone administrator.

"This thing isn't a panacea," Mr. Wade said. "It helps stabilize an area."

On street corners near Park Circle, unemployed city residents still hang out, idling away sunny afternoons. Along Reisterstown Road and Park Heights Avenue, boarded-up houses still ruin the view. Crime hasn't relented in the surrounding neighborhoods.

But Mr. Monroe has seen change.

"Before, it was just empty lots, not a lot happening," said Mr. Monroe, who has advanced from the loading dock to mechanic. "Vacant buildings. Nobody working in them.

"When everybody started putting businesses here, the move downhill stopped."

Ursula Powidski, senior vice president for business development the Baltimore Development Corp., thinks the experiment is not a cure-all.

"Is it going to turn around the Park Heights neighborhood? No," she said. "Park Circle is an industrial park. It's just an industrial park."

Wim Wiewel, director of the Center for Urban Economic Development at the University of Illinois at Chicago, says that research shows enterprise zones are beneficial.

"They do create jobs over and above what would have happened in an area that is not totally devastated. Obviously, it is like bringing a bucket of water to a fire. . . . It ain't going to put it out."

The biggest incentives for companies to move into Maryland enterprise zones are the tax breaks.

For five years, companies that build or add to buildings in enterprise zones pay only 20 percent of the property taxes assessed on the new investment. Over the second five years, the tax credit tapers off.

Companies also get a one-time $500 tax credit for each new full-time job created in the enterprise zone. If the person hired for the job is poor -- as defined by a government formula -- the tax credit is $1,500 the first year, $1,000 the second and $500 in the third year.

Maryland's program was designed to spur investment all over the state -- not just in the cities.

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