Coalition charts a way to save cities
An unusual coalition of blacks, conservative economists, socialists, urban planners, and liberal officeholders is taking shape here to push a bold new effort to save central cities from urban blight.
Dubbed "enterprise zones" by proponents, the concept is relatively straightforward: remove most zoning, taxation, and federal and local business regulations from carefully defined central city district. The upshot, in the eyes of proponents, would be to encourage new industrial and commercial development, including jobs, in those same areas.
The concept has not yet been formally tested out in North America -- despite somewhat similar but more restricted ventures, such as "free-trade zones," now under way in 40 US jurisdictions. However, as many as seven enterprise zones are now expected to begin operation later this year in the United Kingdom.
Stuart M. Butler, an economist with the conservative based Heritage Foundation, a Washington research group, sees "strong interest" in the enterprise zone concept from diverse political and economic groups.
The reason, says Dr. Butler, is that given tight pressures on the federal budget, the zoning taxation approach offers a "practical, low-cost" method of attempting to lure business back into central city areas.
Republican presidential contender Ronald Reagan has already made "enterprise zones" one of the cornerstones of his urban political agenda.
But support for the special zones goes far beyond merely the Republican Party. In fact, a version of the concept in the House of Representatives is co-sponsored by conservative upstate New York Republican Jack Kemp and liberal Democrat Robert Garcia, whose district encompasses the South Bronx, one of the most blighted urban areas in the US.
"We were supporting this concept long before Mr. Reagan was nominated," argues Jeff Noah, an aide to Representative Garcia. "We've tried just about every possible federal urban renewal program in our district (the South Bronx). They haven't worked. That's why we're willing to try this approach."
The Kemp-Garcia bill is now before the House Ways and Means committee. It has already snapped up support from 40 lawmakers from all sides of the political spectrum, including members of the black caucus.
A similar bill has been introduced in the Senate.
The enterprise zone concept was first developed in England several years ago -- the work of Sir Geoffrey Howe (Chancellor of the Exchequer in the present Conservative government) and Peter Hall, an urban planner (and Socialist).
Under the British concept, zoning regulations in a specified industrial area would be dropped on commercial and industrial property.
Business taxes -- as well as capital gains taxes -- would be lowered. Minimum wage laws and the closed shop would be eliminated. If possible, free trade zones would be included within the larger enterprise zones.
Earlier this year the British government announced that it would be going ahead with some six enterprise zones. That number has since been boosted to seven.
Though no such zones are yet under way in the US, a bill to establish one experimental plan lost by one vote last year in the Illinois legislature.
The Kemp-Garcia bill -- the urban jobs and enterprise zone act -- deliberately skirts "local jurisdictional issues such as zoning. The bill also does not call for elimination or lowering of the minimum wage.
Rather, the emphasis is primarily on lowering taxes. There must be a permanent reduction of not less than 20 percent of the effective real rate on property taxes.The capital-gains deduction would be increased from 60 percent to 80 percent on personal property used essentially for business purposes in the zone. Corporate tax rates would be sharply reduced.
One key criterion for the zone, however, would be that firms must employ at least 50 percent of their work force from the zone area to qualify for most of the various tax reductions. Other firms with a smaller percentage of the work force from the area would have more limited tax advantages.
Opposition to the enterprise zone concept centers around the possibility that such trade-commercial areas might be used to exploit workers. At the same time, the current Republican political identification with the plan almost prohibits Carter administration support.
Supporters of the plan, however, note that Treasury Secretary G. William Miller has asked his staff for a careful review of the concept.
Proponents base their case for the zones on the relatively low Treasury loss involved in the various tax reductions. By contrast, they point out, the administration's planned "reindustrialization tax cut" package revealed this week is in the $25 billion range.
Is the US -- like its British cousins abroad -- ready for enterprise zones? The answer to that, say analysts, may depend on the outcome of the US election. Mr. Reagan would surely boost the concept. The betting is that Mr. Carter, ever the pragmatist, might also give a favorable consideration after a successful re-election effort.
Meantime, some US political jurisdictions are already close to the concept. In Ohio, some jurisdictions, according to Heritage Foundation economist Butler, are now providing substantial abatement of property taxes.