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Taking the EZ Way Out
Targeted "enterprise" zones offer businesses strong incentives to grow in previously distressed areas
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Business New Haven
9/18/2000
By: Linda G. Mele
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In 1982, Connecticut was the first state to establish Enterprise Zones within selected municipalities “to encourage the re-use of the state's established industrial areas,” most of which at that point had seen better days.
In the beginning, six towns/cities were designated; today, there are 17 zones in the state encompassing targeted census tracts or population areas both primary and secondary, including in Bridgeport, Bristol, East Hartford, Groton, Hartford, Hamden, Meriden, Middletown, New Britain, New Haven, New London, Norwalk, Norwich, Southington, Stamford, Waterbury and Windham.
In addition, the program also includes “Enterprise Corridor Zones,” “Targeted Investment Communities,” “Railroad Depot Zones, “Information Technology Zones” and “Entertainment Districts.”
To qualify for EZ status, municipalities must meet certain criteria and the primary census tract must:
• Have a poverty rate of 25 or higher;
• Have an unemployment rate 200 or more percent higher than the state average; or
• Have at least 25 percent of the tract's population receiving public assistance.
The secondary census tract must:
• Have a poverty rate of at least 15 percent;
• Have an unemployment rate of at least 150 percent of the state average; or
• Have at least 15 percent of the tract's population receiving public assistance.
New Haven's EZ encompasses more than 700 acres, making it the largest in the state. According to the state's Department of Economic & Community Development (DECD), the program “endeavors to bring economic incentives and benefits to targeted areas in order to stimulate business growth, residential investment and job creation.
“The program was selected as a finalist in the 1997 All-America City competition sponsored by the National Civic League, and was cited as one of the ten best in the country by HUD Secretary Andrew Cuomo.”
Eligible projects must include one of the following:
• The “substantial renovation of an existing facility involving capital expenditures of at least 50 percent of the assessed value of the facility prior to its renovation”;
• The construction of a new facility (the expanded portion of an existing facility is considered “new” construction); or
• The “acquisition of a facility by new owners after having been idle for at least one year prior to the acquisition,” with certain exceptions.
Locating within an EZ provides a host of benefits to a business, including real-estate and personal-property tax abatements and state corporation business-tax abatements as well as job creation and residency incentives.
These include:
• A five-year, 80-percent abatement of local property taxes on “qualifying real and personal property, subject to the property being new to the grand list of the municipality as a direct result of a business expansion or renovation project”;
• A ten-year, 25-percent credit on “that portion of the state's corporation business tax that is directly attributable to a business expansion or renovation project”;
• A $750 grant “for each new, full-time position that is created over a period of 24 months as a direct result of a business expansion or renovation project”;
• And, if at least 150 workers or 50 percent of new, full-time employees are residents of the EZ or are JPTA-eligible residents from other areas of the city, “the job grant increases to $2,250 per position,” with some exceptions.
Helen Rosenberg, business services officer for New Haven's Office of Business Development, explains that the EZ program initially applied only to manufacturing businesses. Since then, research-and-development firms, pharmaceutical and photonics companies, information technology and biotech firms and certain service and entertainment businesses have been added.
At the same time, the maximum amount the Connecticut Development Authority can lend an EZ business under the Connecticut Growth Fund has been increased from $250,000 to $300,000.
“About 60 companies in New Haven have taken advantage of the Enterprise Zone benefits over the last 18 years,” Rosenberg says. “That's not as many as could have, but everybody is not aware of the program or that they might be eligible for it.”
Nolan Industries took advantage of the program in 1998, when its owners purchased an 8,000-square-foot building at 67 Mill River Street and moved the company's tool-and-die shop from quarters on Chestnut Street, according to treasurer Dan Nolan.
“We bought a semi-abandoned building,” Nolan explains, “and took advantage of the tax abatements and a brownfields initiative.”
The company, founded in 1988, today employs ten people including Nolan and his brother. The siblings relocated because of space limitations at the old site and because they wanted to own their own building, Nolan says.
Statewide, 1999 represented “one of the most successful years” of the state's EZ program, according to DECD.
Last year's highlights include:
• One hundred one companies located or expanded in EZs and were certified by DECD for benefits;
• More than 2.8 million square feet of floor space was certified under the program;
• Of the 101 companies certified, 67 were eligible to participate in the Job Incentive Grant Program for grants up to $75,000;
• DECD completed 25 job audits for the Job Incentive Grant Program, which represented 547 new, full-time jobs; and
• The EZ Web site (at www.decd.org) was accessed 929 times.
Across the state, there were 2,926 existing jobs in eligible companies located in EZs in 1999, and an additional 3,393 jobs were created in those companies.
With regard to square footage, 2,870,879 square feet of space was either built, leased or purchased in 1999 by new or existing companies located in the state's EZs.
“The major benefit to locating in an Enterprise Zone is in tax abatements,” Rosenberg says, “but there are many other programs business owners can take advantage of.”
Those programs include:
• New Haven's Small Business Revolving Load Fund;
• The Urban Jobs Program;
• The Business Retention & Expansion Program;
• The Greater New Haven Chamber of Commerce's business, site and technical assistance program;
• The Architecture, Engineering & Planning program;
• The Commercial Crime Prevention Program;
• The Regional Workforce Development Board, the Jobs Center and the Hispanic Employment program;
• The Subsidized Transitional Employment Program (STEP);
• The Committee for Biotechnology Development in New Haven; and
• The New Haven Enterprise Community Council.
The EZ application process is straightforward and a preliminary application will determine eligibility, but it's important to note that “a business may not initiate a project that could qualify for incentives without first requesting and obtaining the approval of the commissioner of the DECD,” according to a department spokesperson.
The Naugatuck Valley Development Corp. administers Waterbury's designated EZ and offers benefits similar to those of New Haven, as well as:
• The state portion of the real-estate conveyance taxes on property transfers is waived;
• There is a sales-tax exemption on the purchase of replacement parts for machinery/equipment used in the manufacturing process;
• A seven-year, graduated tax deferral of increased taxes resulting from real property improvements for commercial and residential building owners; and
• An exemption from the state portion of the real estate conveyance tax for commercial and residential building owners.
In Bridgeport, the Bridgeport Economic Resource Center markets both state and federal programs that benefit businesses, according to Edward Lavernoich, director of the Park City's Office of Planning & Economic Development.
Lavernoich says Bridgeport was one of the original six cities designated an EZ with two census tracts and that it has expanded twice - once in 1988 to four tracts, and again in 1998 to 16 tracts.
“The larger expansion was possible because we were designated a federal Enterprise Community,” Lavernoich explains.
According to Lavernoich, some of the newest designated tracts “are in the most distressed parts of the city and they have other problems, too.”
“While Enterprise Zone neighborhoods are all better today because of the designation, the designation itself is not a cure-all,” says Lavernoich.
Bridgeport's EZ program is administered through the Bridgeport Economic Resource Center (BERC), according to its president, Kevin Nunn.
Nunn says that while people interested in starting a business tend to know little about the available incentive programs, his agency handles few start-ups, concentrating on expansions or working with companies interested in relocating to the Park City.
“Most owners of companies who are looking to relocate here know the state has incentive programs, they just don't know what they are,” says Nunn.
“Unfortunately, many existing businesses aren't too familiar with all the programs, especially the job-training incentives, or how they can be accessed,” Nunn adds.
In Meriden, director of economic development Randy Kamerbeek says the city's downtown was designated an EZ in 1985 as part of the state program's second-round initiative.
“Nearly 100 companies have taken advantage of the incentives,” Kamerbeek notes.
Meriden has also been revitalizing its downtown center and railroad station areas, which helped attract business to the EZ, according to Kamerbeek.
In 1998, New Haven - in partnership with the New Haven Enterprise Community Council (ECC), the six Neighborhood Implementation Committees, institutional partners, the regional business community and the city of West Haven - also applied for and received federal “Empowerment Zone” status.
The ECC had been addressing the neighborhoods' most critical issues and was recognized by HUD for that effort. HUD designated the city as one of the “top performing Enterprise Communities.”
The four major thrusts of the Empowerment Zone plan include:
• Economic development and the creation of 2,000 new jobs over a two-year period;
• Empowering individuals and families to develop responsive community support to improve residents' quality of life;
• Improving educational opportunities for young people; and
• Strengthening neighborhoods to create safe, family-friendly communities.
According to the Empowerment Zone application, it's expected that such neighborhoods “will thrive socially and economically to the extent our neighborhood residents are prepared for and gain access to good jobs paying living wages both within the Empowerment Zone and throughout the region.”
The program goals also include partnering with established manufacturing, biotechnology, retail and service businesses, Yale University and arts and cultural organizations to “yield jobs and income for residents who are prepared for them.” Empowerment Zone tax incentives, it notes are “an integral part” of that strategy.
“There are a lot of programs out there,” says Rosenberg, “and I meet with representatives of new companies that wish to relocate here. We do as much outreach as we can with established firms, but we can't reach everybody.”
Rosenberg says her best advice to business owners is to contact the economic development office in the city in which they would like to operate or the state DECD. Taking theEZ
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