ENTERPRISE ZONES MAY BE TIGHTER

JEFFERSON CITY - Providing local governments more input into decisions on enterprise zone designations and limiting the benefits from such zones to firms that provide manufacturing jobs, are goals of legislation moving through the General Assembly this session.

Enterprise zones are designated in economically distressed areas of the state and give businesses locating in the areas an opportunity to receive property tax abatements of 50 percent for 10 years.

But some taxing entities, especially school districts, have complained that many of the businesses taking advantage of enterprise zone tax credits are not retail or service businesses that do not provide a lot of new jobs, and that the enterprise zone was not an incentive for them to locate in the area.

Rep. Larry Thomason, D-Kennett, who has been working with Rep. Joe Driskill, D-Doniphan, to make changes in the enterprise zone laws, says he is concerned that eventually some of these shortcomings will lead to a revolt against the zones.

"Because the tax credits are being granted so freely, there was a great fear we would lose the entire program," he said. "That brought about the necessity for making changes and will help make it a viable tool for economic development for future years."

One bill, which is on the governor's desk after winning final approval in the House and Senate last week, would take the authority to designate enterprise zones away from the Legislature and leave the decision up to the Department of Economic Development, subject to review by the Joint Committee on Economic Development.

Driskill explained the legislation allows the department to name up to 50 enterprise zones for the state, which means 11 more could be named. The joint committee, made up of senators and representatives, could veto any zones recommended by the department.

"The theory is that it will be more difficult for us in the future to change that 50 cap and to piecemeal more zones," said Driskill. "How do you vote against another legislator's enterprise zone? There is not real good reason to if it qualifies under the Department of Economic Development standards."

As the law stands now, said Thomason, if you have a powerful or influential senator or representative, they have the ability to get a county an enterprise zone, even though a county may not have the need for it.

"It is a poor process. Political power should not be the determining factor; the determining factor should be need," said Thomason.

"As it is now, if a county can comply with the criteria they can just about get an enterprise zone regardless of their ability to attract industry. This bill will prevent needless designations."

The bill was sponsored in the Senate by President Pro Tem James Mathewson and handled in the House by Thomason. The measure was considered in the House by the Commerce Committee, which is chaired by Driskill.

There is some question whether Gov. John Ashcroft will sign the bill.

Thomason said one of the governor's concerns is that the designation of enterprise zones should be kept in the executive branch and not include the joint committee.

"I don't totally disagree with that, but even people in the executive branch say politically they can't refuse anybody an enterprise zone that meets the basic criteria," said Thomason.

The other bill, sponsored by Driskill, will go to a House-Senate conference committee.

"We want to give more local control over property tax abatements which has angered some local governments, especially school districts," said Driskill.

Under his bill, city councils and county commissions could abate property taxes up to 25 years at any percentage, with a minimum of 10 years and 50 percent. The tax credits could be taken only by a business that would create 50 or more full-time jobs and it is up to the governing body whether that should be restricted to manufacturing firms only.

The bill also requires the governing bodies to notify all taxing entities that would be affected by the enterprise zone of public hearings.

Thomason said that many businesses taking advantage of enterprise zone incentives are only doing it as an afterthought.

"If there are not substantial jobs involved, there should not be the tax credits," said Thomason. "Right now there are many cases where the enterprise zone is an afterthought. Under this bill, to qualify for the credits, a business must apply before starting construction.

"The idea of this program is to provide an incentive to locate in an economically depressed area. If this is not an incentive, why should anyone be allowed to take advantage of it?"