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A GENTLE INCENTIVE But enterprise zones not a cure-all


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.

The Salisbury-Wicomico County enterprise zone comprises Salisbury's business district and an industrial park. In Southern Maryland, the Calvert County enterprise zone advertises for light manufacturing, research and warehousing operations that want a rural setting. The Frostburg-Allegany County zone offers special training programs at Frostburg State College and low-interest commercial loans.

In Baltimore, Park Circle is the darling of Baltimore economic development officials. Fourteen hundred people work there now, 49 acres with new landscaping and neatly paved streets. Parks Sausage relocated from Camden Yards to a dramatic new Park Circle building last year. Londontown Corp., the raincoat manufacturer, has 500 employees there.

But city officials have a harder time describing the economic benefits of Baltimore's three other enterprise zones.

They cannot give figures for new investment or new jobs created the Waterview Industrial Center, in Southwest Baltimore; at Port Covington, also in the southwest part of the city; or in a large enterprise zone that comprises 225 residential, industrial and commercial acres in West Baltimore.

Some of the jobs at businesses in those zones were simply relocated there from other parts of the city, said Susan Eliasberg, a spokeswoman for the Baltimore Development Corp. But for a poor, old city, retaining jobs is as important as creating new ones, she said.

The enterprise zone alone did not create success at Park Circle. The city aggressively pushed loan and grant programs to complement the enterprise zone tax breaks. The city also kicked in $7 million in roads, sewers and other public improvements to help attract businesses.

"Enterprise zones that work are successful because they're part of a whole arsenal of economic development programs," said David Gillece of Gillece & Associates, a consultant who formerly headed the Baltimore Development Corp.

"Parks Sausage wouldn't have moved to Park Circle because of tax breaks alone."

The program "doesn't save a neighborhood," he said. "It has a positive effect, but if you've got dropout problems, drug problems, crime problems -- those people aren't going to be the ones hired in an enterprise zone. You need other help for them.

"Tweaking the tax system won't do it."

A federal enterprise zone program may be useful, Mr. Gillece said. But its benefits should not be exaggerated.

"It may create some wonderful photo opportunities for the president down the road," he said, "but it's not going to save urban America."

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