Urban Enterprise Zone
Encyclopedia
In the United States
, Urban Enterprise Zones (UEZs), also known as Enterprise Zones, are intended to encourage development in blighted neighborhoods through tax and regulatory relief to entrepreneurs and investors who launch businesses in the area. UEZs are areas where companies can locate free of certain local, state, and federal taxes and restrictions. In other countries, a region that offers this type of special economic incentive is often referred to as a Special Economic Zone
.
The enterprise zone concept was introduced in the United Kingdom
during the mid-1970s by centre-left geographer/economist Sir Peter Hall
(Hall 1991), then a professor at University of Reading
and the University of California, Berkeley
, as a way to revive Britain's declining industrial cities. His plan included removing taxes and regulatory barriers from distressed business communities. A series of Demonstration Zones were established in the most depressed parts of that nation's cities. "Professor Hall’s enterprise zone concept called for reduced governmental regulation within economically depressed urban communities as a means of stimulating economic growth within those areas. With reduced regulation, lower taxes, and other financial incentives for businesses, economic activity would increase due to the reduced cost of operating businesses within those areas." (Hyman 1998: 146).
In the UK, enterprise zones were introduced by the Thatcher
Government in 1979. They were urban areas (usually the "worst" areas of job loss and capital flight) granted freedom from normal planning controls
with a ten-year relief from local rates
. Eleven enterprise zones were established in 1980 and a further thirteen in 1982. They varied from inner cities
to areas of post-industrial dereliction. A notable example of an enterprise zone in this era was the Dudley
Enterprise Zone in the West Midlands
, developed on a mix of disused farmland and industrial land. This scheme began with industrial estates in the early 1980s but is now dominated by the Merry Hill Shopping Centre
which was developed between 1985 and 1989.
The concept was re-introduced in the United States by Stuart Butler
of the Heritage Foundation
in 1979. Enterprise Zones caught the attention of then-Rep. Jack Kemp
, R-N.Y., who co-sponsored legislation in Congress (with then-Democratic Rep. Robert García
of the South Bronx
) based on Butler’s idea. Originally sponsored only at the federal level, UEZs have become increasingly popular with state governments as well. Louisiana
was the first state to adopt such legislation, in 1981, and was followed by seven other states in 1982 and seven more in 1983.
, for example, a municipality may request that the New Jersey Urban Enterprise Zone Authority designate part of a city, usually about 30%, as a UEZ. UEZs are usually located in the industrial and/or commercial portions of a city, within a continuous boundary. A 50% reduction in the general Sales tax
rate (from 7% to 3½% as of July 15, 2006) and hiring incentives, are designed to reinvigorate the business climate within the Zone. These incentives have led to the construction of numerous malls and big-box retailers in parts of the development zone located near major highways, such as the Elizabeth Center
and Jersey Gardens
Outlet Center in the largely industrial city of Elizabeth
along the New Jersey Turnpike
. More than thirty of New Jersey's 566 municipalities now participate in the program.
and Hong Kong
where Hall was looking for inspiration in the 1970s) can transition successfully into sustainable economic growth as the zone is wound down, or whether by special pleading or inertia, breaks and incentives remain in place to stop 'capital flight'. A persistence of low-wage jobs, rapid turnover of firms, little inward investment, or persistent subsidy to enterprise, would not indicate a successful transition.
in the West Midlands
, which largely consisted of stores which had relocated from the nearby town of Dudley
), only 13,000 net jobs had been created; a possible reason why the government began to prefer urban development corporations
as its main vehicle for urban renewal
. However, a notable success has been the London Docklands, largely derelict and with unsatisfactory transport infrastructure thirty years ago when a zone was first established, now a financial and media powerhouse.
On Wednesday 23 March 2011. Chancellor George Osborne announced that 21 new Enterprise Zones will be created in England. The first of the new zones will be based in Leeds, Liverpool, Sheffield and Greater Manchester, and The West of England. The North East of England will see one based in the Tees Valley. The Midlands, Nottinghamshire, The Black Country and Derbyshire will benefit, and a suitable area in London has been selected by the Mayor of London, Boris Johnson, in the form of the Royal Docks in the borough of Newham. Other authorities have been asked to tender applications for the remaining zones.
Enterprise Zone Program was established in 1984 as one of Indiana
's first five enterprise zones. A study published in 1989 by Barry M. Rubin and Margaret G. Wilder examined the 2.1 mi.2 area using the technique of shift-share analysis
to determine whether the zone was having a measurable impact on local economic development. (The choice to use the shift-share analysis method with the larger metropolitan area as the reference region allowed Rubin & Wilder to go a step further than previous studies and exclude "external effects" that might be stimulating or depressing regional economic growth and development.) The study found that the Evansville zone did provide significant employment growth that could not be accounted for by external effects or the industrial composition of the zone itself. The zone was also found to be extremely cost-effective in its job creation.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, Urban Enterprise Zones (UEZs), also known as Enterprise Zones, are intended to encourage development in blighted neighborhoods through tax and regulatory relief to entrepreneurs and investors who launch businesses in the area. UEZs are areas where companies can locate free of certain local, state, and federal taxes and restrictions. In other countries, a region that offers this type of special economic incentive is often referred to as a Special Economic Zone
Special Economic Zone
A Special Economic Zone is a geographical region that has economic and other laws that are more free-market-oriented than a country's typical or national laws...
.
Overview of purpose of enterprise zones
The enterprise zone concept evolved from a combination of theories, policies and social forces. The philosophy is most closely associated with the theory of supply side economics and the assumption that employers will respond positively to tax incentives and reduced government regulation. The enterprise zone philosophy suggests that by encouraging the production of goods, investment will improve; therefore, the supply of goods and services and the providing of job opportunities will increase accordingly.Origin
In July, 1967, Senator Robert Kennedy introduced legislation in the United States known as the "Urban Employment Opportunities Development Act of 1967." (S. 2088) (113 Cong. Rec. 18443-18457, July 12, 1967). The purpose of the bill was to provide federal tax credits, accelerated depreciation schedules and job-training programs as incentives for employers to locate industry in urban poverty centers. Kennedy was killed in June 1968 and the bill never passed Congress.The enterprise zone concept was introduced in the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
during the mid-1970s by centre-left geographer/economist Sir Peter Hall
Peter Hall (urbanist)
Sir Peter Geoffrey Hall, FBA is an English town planner, urbanist and geographer. He is the Bartlett Professor of Planning and Regeneration at The Bartlett, University College London and President of both the Town and Country Planning Association and the Regional Studies Association.He is...
(Hall 1991), then a professor at University of Reading
University of Reading
The University of Reading is a university in the English town of Reading, Berkshire. The University was established in 1892 as University College, Reading and received its Royal Charter in 1926. It is based on several campuses in, and around, the town of Reading.The University has a long tradition...
and the University of California, Berkeley
University of California, Berkeley
The University of California, Berkeley , is a teaching and research university established in 1868 and located in Berkeley, California, USA...
, as a way to revive Britain's declining industrial cities. His plan included removing taxes and regulatory barriers from distressed business communities. A series of Demonstration Zones were established in the most depressed parts of that nation's cities. "Professor Hall’s enterprise zone concept called for reduced governmental regulation within economically depressed urban communities as a means of stimulating economic growth within those areas. With reduced regulation, lower taxes, and other financial incentives for businesses, economic activity would increase due to the reduced cost of operating businesses within those areas." (Hyman 1998: 146).
In the UK, enterprise zones were introduced by the Thatcher
Margaret Thatcher
Margaret Hilda Thatcher, Baroness Thatcher, was Prime Minister of the United Kingdom from 1979 to 1990...
Government in 1979. They were urban areas (usually the "worst" areas of job loss and capital flight) granted freedom from normal planning controls
Town and country planning in the United Kingdom
Town and Country Planning is the land use planning system governments use to balance economic development and environmental quality. Each country of the United Kingdom has its own planning system that is responsible for town and country planning devolved to the Northern Ireland Assembly, the...
with a ten-year relief from local rates
Rates (tax)
Rates are a type of property tax system in the United Kingdom, and in places with systems deriving from the British one, the proceeds of which are used to fund local government...
. Eleven enterprise zones were established in 1980 and a further thirteen in 1982. They varied from inner cities
Inner city
The inner city is the central area of a major city or metropolis. In the United States, Canada, United Kingdom and Ireland, the term is often applied to the lower-income residential districts in the city centre and nearby areas...
to areas of post-industrial dereliction. A notable example of an enterprise zone in this era was the Dudley
Dudley
Dudley is a large town in the West Midlands county of England. At the 2001 census , the Dudley Urban Sub Area had a population of 194,919, making it the 26th largest settlement in England, the second largest town in the United Kingdom behind Reading, and the largest settlement in the UK without...
Enterprise Zone in the West Midlands
West Midlands (county)
The West Midlands is a metropolitan county in western central England with a 2009 estimated population of 2,638,700. It came into existence as a metropolitan county in 1974 after the passage of the Local Government Act 1972, formed from parts of Staffordshire, Worcestershire and Warwickshire. The...
, developed on a mix of disused farmland and industrial land. This scheme began with industrial estates in the early 1980s but is now dominated by the Merry Hill Shopping Centre
Merry Hill Shopping Centre
Westfield Merry Hill is a shopping centre in Brierley Hill near Dudley, West Midlands, England. It was developed between 1985 and 1990, with several expansion and renovation projects taking place since. The original developers and owners were Richardson Developments but the Centre has had a number...
which was developed between 1985 and 1989.
The concept was re-introduced in the United States by Stuart Butler
Stuart Butler
Stuart Butler is the Director of the Center for Policy Innovation at The Heritage Foundation, a conservative think-tank in Washington, D.C. He is a health care analyst and commentator, and he has also written extensively about urban policy and welfare, credited with introducing the idea of urban...
of the Heritage Foundation
Heritage Foundation
The Heritage Foundation is a conservative American think tank based in Washington, D.C. Heritage's stated mission is to "formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong...
in 1979. Enterprise Zones caught the attention of then-Rep. Jack Kemp
Jack Kemp
Jack French Kemp was an American politician and a collegiate and professional football player. A Republican, he served as Housing Secretary in the administration of President George H. W. Bush from 1989 to 1993, having previously served nine terms as a congressman for Western New York's 31st...
, R-N.Y., who co-sponsored legislation in Congress (with then-Democratic Rep. Robert García
Robert García
Robert García is a former Democratic United States Representative who represented New York's 21st district between 1978 and 1990.-Biography:...
of the South Bronx
South Bronx
The South Bronx is an area of the New York City borough of The Bronx. The neighborhoods of Tremont, University Heights, Highbridge, Morrisania, Soundview, Hunts Point, and Castle Hill are sometimes considered part of the South Bronx....
) based on Butler’s idea. Originally sponsored only at the federal level, UEZs have become increasingly popular with state governments as well. Louisiana
Louisiana
Louisiana is a state located in the southern region of the United States of America. Its capital is Baton Rouge and largest city is New Orleans. Louisiana is the only state in the U.S. with political subdivisions termed parishes, which are local governments equivalent to counties...
was the first state to adopt such legislation, in 1981, and was followed by seven other states in 1982 and seven more in 1983.
Examples of urban enterprise zones
In New JerseyNew Jersey
New Jersey is a state in the Northeastern and Middle Atlantic regions of the United States. , its population was 8,791,894. It is bordered on the north and east by the state of New York, on the southeast and south by the Atlantic Ocean, on the west by Pennsylvania and on the southwest by Delaware...
, for example, a municipality may request that the New Jersey Urban Enterprise Zone Authority designate part of a city, usually about 30%, as a UEZ. UEZs are usually located in the industrial and/or commercial portions of a city, within a continuous boundary. A 50% reduction in the general Sales tax
Sales tax
A sales tax is a tax, usually paid by the consumer at the point of purchase, itemized separately from the base price, for certain goods and services. The tax amount is usually calculated by applying a percentage rate to the taxable price of a sale....
rate (from 7% to 3½% as of July 15, 2006) and hiring incentives, are designed to reinvigorate the business climate within the Zone. These incentives have led to the construction of numerous malls and big-box retailers in parts of the development zone located near major highways, such as the Elizabeth Center
Elizabeth Center
The Elizabeth Center is a power center located off Exit 13A on the New Jersey Turnpike in Elizabeth, New Jersey. The location near the exit is incorporated into the center's logo, as El13Abeth Center. The first tenant, IKEA, opened in 1990...
and Jersey Gardens
Jersey Gardens
Jersey Gardens is a two-level indoor outlet mall in Elizabeth, New Jersey. The mall opened on October 21, 1999, and is the largest outlet mall in New Jersey, and much closer to New York City than its largest outlet mall competitor, Woodbury Common....
Outlet Center in the largely industrial city of Elizabeth
Elizabeth, New Jersey
Elizabeth is a city in Union County, New Jersey, United States. As of the 2010 United States Census, the city had a total population of 124,969, retaining its ranking as New Jersey's fourth largest city with an increase of 4,401 residents from its 2000 Census population of 120,568...
along the New Jersey Turnpike
New Jersey Turnpike
The New Jersey Turnpike is a toll road in New Jersey, maintained by the New Jersey Turnpike Authority. According to the International Bridge, Tunnel and Turnpike Association, the Turnpike is the nation's sixth-busiest toll road and is among one of the most heavily traveled highways in the United...
. More than thirty of New Jersey's 566 municipalities now participate in the program.
Asia
The general critique of enterprise zones is whether the system of tax-breaks and easing of planning regulations (as has occurred in Asia, notably in free trade zones of SingaporeSingapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
and Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
where Hall was looking for inspiration in the 1970s) can transition successfully into sustainable economic growth as the zone is wound down, or whether by special pleading or inertia, breaks and incentives remain in place to stop 'capital flight'. A persistence of low-wage jobs, rapid turnover of firms, little inward investment, or persistent subsidy to enterprise, would not indicate a successful transition.
United Kingdom
In the UK, a government-commissioned evaluation in 1987 found that from 1981 to 1986 the enterprise zones had cost nearly £300 million, but 2,800 firms were established in them, employing over 63,000 people. Taking local transfers into account (a notable example being the Merry Hill Shopping CentreMerry Hill Shopping Centre
Westfield Merry Hill is a shopping centre in Brierley Hill near Dudley, West Midlands, England. It was developed between 1985 and 1990, with several expansion and renovation projects taking place since. The original developers and owners were Richardson Developments but the Centre has had a number...
in the West Midlands
West Midlands (county)
The West Midlands is a metropolitan county in western central England with a 2009 estimated population of 2,638,700. It came into existence as a metropolitan county in 1974 after the passage of the Local Government Act 1972, formed from parts of Staffordshire, Worcestershire and Warwickshire. The...
, which largely consisted of stores which had relocated from the nearby town of Dudley
Dudley
Dudley is a large town in the West Midlands county of England. At the 2001 census , the Dudley Urban Sub Area had a population of 194,919, making it the 26th largest settlement in England, the second largest town in the United Kingdom behind Reading, and the largest settlement in the UK without...
), only 13,000 net jobs had been created; a possible reason why the government began to prefer urban development corporations
Quango
Quango or qango is an acronym used notably in the United Kingdom, Ireland and elsewhere to label an organisation to which government has devolved power...
as its main vehicle for urban renewal
Urban renewal
Urban renewal is a program of land redevelopment in areas of moderate to high density urban land use. Renewal has had both successes and failures. Its modern incarnation began in the late 19th century in developed nations and experienced an intense phase in the late 1940s – under the rubric of...
. However, a notable success has been the London Docklands, largely derelict and with unsatisfactory transport infrastructure thirty years ago when a zone was first established, now a financial and media powerhouse.
On Wednesday 23 March 2011. Chancellor George Osborne announced that 21 new Enterprise Zones will be created in England. The first of the new zones will be based in Leeds, Liverpool, Sheffield and Greater Manchester, and The West of England. The North East of England will see one based in the Tees Valley. The Midlands, Nottinghamshire, The Black Country and Derbyshire will benefit, and a suitable area in London has been selected by the Mayor of London, Boris Johnson, in the form of the Royal Docks in the borough of Newham. Other authorities have been asked to tender applications for the remaining zones.
United States
The Evansville, IndianaEvansville, Indiana
Evansville is the third-largest city in the U.S. state of Indiana and the largest city in Southern Indiana. As of the 2010 census, the city had a total population of 117,429. It is the county seat of Vanderburgh County and the regional hub for both Southwestern Indiana and the...
Enterprise Zone Program was established in 1984 as one of Indiana
Indiana
Indiana is a US state, admitted to the United States as the 19th on December 11, 1816. It is located in the Midwestern United States and Great Lakes Region. With 6,483,802 residents, the state is ranked 15th in population and 16th in population density. Indiana is ranked 38th in land area and is...
's first five enterprise zones. A study published in 1989 by Barry M. Rubin and Margaret G. Wilder examined the 2.1 mi.2 area using the technique of shift-share analysis
Shift-share analysis
Shift/share analysis is a widely used analytical technique sometimes used for retrospectively decomposing changes, usually in employment, in a set of urban areas or regions...
to determine whether the zone was having a measurable impact on local economic development. (The choice to use the shift-share analysis method with the larger metropolitan area as the reference region allowed Rubin & Wilder to go a step further than previous studies and exclude "external effects" that might be stimulating or depressing regional economic growth and development.) The study found that the Evansville zone did provide significant employment growth that could not be accounted for by external effects or the industrial composition of the zone itself. The zone was also found to be extremely cost-effective in its job creation.
Further reading
- Peter Hall. 1991. The British Enterprise Zones. in Roy E. Green (ed). Enterprise Zones: New Directions in Economic Development. Sage.
- Hyman, W. 1998. EMPOWERMENT ZONES, ENTERPRISE COMMUNITIES, BLACK BUSINESS, AND UNEMPLOYMENT. Washington University Journal of Urban and Contemporary Law. 53: 143-170.
External links
- New Jersey Department of Taxation
- http://www.floridaenterprisezones.com/PageView.asp?PageType=R&edit_id=1
- Enterprise Zones: Historical Perspective and General Background
- Race, Entrepreneurship, and the Inner City by John Sibley Butler
- Enterprise Zones: A Review of the Economic Theory and Empirical Evidence
- Imperial Valley Enterprise Zone