‘Zone’ proposals get a new look

This past fall, the vice presidential candidates went toe to toe on the issue of inner city redevelopment. Jack Kemp, of course, was one of the original advocates of enterprise zones, both before and during his tenure as secretary of the Department of Housing and Urban Development (HUD) in the Bush administration.

Al Gore chairs the Community Empowerment Board, which is responsible for the Clinton administration-erected Empowerment Zone and Enterprise Communities program run out of HUD.

Kemp and Gore differ on what incentives the zones — empowerment, enterprise or otherwise — should offer businesses. But, to paraphrase a popular movie line, both men believe that “if you build them, they will come.”

So far, though, there has not exactly been a rush of companies to the 11 empowerment zones and 84 enterprise communities created by the Clinton administration in December 1994. “The general consensus,” says Urban Institute analyst Chris Walker, “is ‘ain’t nothing going on there yet.”‘

The six big-city empowerment zones received $100 million in 1995. Cleveland and Los Angeles were later named “supplemental” zones, getting $90 million and $125 million, respectively.

The money is supposed to help with local training, education and other programs designed to bring the skills of local residents up to snuff. Additionally, companies that locate within the designated areas receive a $3,000 wage tax credit per local resident hired.

The enterprise communities get about $3 million a year but receive no tax credits.

Mike Steele, president and CEO of Elder Health, a health care center for frail adults in inner-city Baltimore, says he opened his business there partly because of an empowerment zone designation. Steele’s company employs 45 people, two-thirds of whom drive in from outside the zone. Those are the employees with the medium- to high-skill jobs. Steele says that he is attempting to train some of the lower-skilled local residents, but he acknowledges that only time will tell if Elder Health can meet that challenge.

Randy Arndt, a spokesperson with the Washington, D.C.-based National League of Cities, says he cannot judge the effectiveness of the administration’s efforts because “we haven’t seen much happen yet.”

Lack of results may account for the Clinton administration’s efforts to sweeten the pot. In September, the Department of Commerce issued a proposed rule on “empowerment contracting,” which would offer companies locating in areas with a poverty rate of more than 20 percent advantages in bidding for federal contracts.

That 20 percent threshold exceeds requirements for empowerment zones and enterprise cities. Additionally, 15 percent of the companies’ workforce would have to be local residents.

Sen. Christopher Bond (R – Mo.), chairman of the Senate Small Business Committee, has proposed a GOP alternative that would create Historically Underutilized Business Zones (HUB zones).

Under this designation, small businesses employing local residents for at least 35 percent of their workforce would get preference over even minority business enterprises in the federal contracting game.

That is sure to foster significant opposition within Congress.

Still, some observers like Ron Utt, a senior fellow at the conservative Heritage Foundation, argue that regardless of the names the zones are given — or the incentives offered — businesses will remain leery of locating within any designated area if they cannot draw a workforce without even very basic skills.