MEDO Industries, the world's largest maker of auto air fresheners, found the sweet smell of success when it set up shop in Baltimore's Empowerment Zone. About 70 of Medo's 305 workers at the Baltimore plant live in the Empowerment Zone, so MEDO earns up to $3,000 annually for each of the 70 workers as a federal tax credit. State tax credits are also available to MEDO and other Empowerment Zone employers through the Maryland state government.

In Detroit, Ideal Steel has thrived since it rehabbed an abandoned General Motors plant on the Motor City's southwest side, within an Empowerment Zone (EZ).

"For a manufacturer, setting up a plant within an EZ makes a lot of sense," said Frank Venegas, Ideal Steel's founder. "We have found a good quality work force, as well as fairly significant tax incentives within the EZ. Since we moved to the EZ in 1996, our business has grown to the point where we put up a new building in the zone. We have expanded from a 25,000 square foot facility to one that exceeds 50,000 square feet." Ideal Steel is a structural and miscellaneous steel fabricator.

MEDO and Ideal Steel are just two of many businesses that have discovered the advantages of placing new facilities in Empowerment Zones and federally-sponsored Renewal Communities.

The federal Department of Housing & Urban Development (HUD) designated the first six of the current 30 Urban Empowerment Zones in 1994. They were created in an effort to rebuild America's poverty-stricken areas through incentives that would entice businesses back to the inner cities. In 1998, HUD expanded the concept, incorporating an additional 15 zones and changing the designation of two Supplemental Empowerment Zones to full zone status.

In 2002, HUD announced its Initiative for Renewal Communities that named 40 urban and rural Renewal Communities and eight new Urban Empowerment Zones. This newest initiative, which runs through 2009, offers $17 billion in tax incentives to stimulate job growth, promote economic development, and boost construction of affordable housing.

Past efforts by HUD to stimulate economic growth in inner cities included the creation of Enterprise Communities back in 1994. This 10-year program is set to expire in 2004.

Cornucopia of benefits

Businesses that hire and retain EZ residents can earn wage credits that they can apply against their federal tax liability.

"It's a fairly simple, straightforward process to qualify," said Stuart Walman vice president and general manager at MEDO Industries' Baltimore Empowerment Zone plant. "There's a computer program you can use that identifies where your employees live, and it verifies that they have been working for your business, and after they've been on the payroll for 90 days, you automatically qualify for the credit."

Web-based employee-screening software that links to HR databases should make qualifying for EZ wage credits even easier in the future. In addition, firms like Walton Management Services, Inc. of Ocean, N.J. (www.waltonmanagement.com) help manufacturers identify and claim hundreds of thousands of dollars in Empowerment Zone employment credits.

Walton Management Services works with firms like Delphi Corp. and PepsiAmericas in obtaining tax benefits those companies have earned.

Crate maker not boxed in

Tax-exempt facility bonds help Empowerment Zone businesses like AAA Packing & Shipping in Los Angeles to get low-cost loans to finance property, buy equipment, or develop business sites within the EZ. A $3 million, 25-year Empowerment Zone bond awarded to AAA in 2000 enabled AAA to create 60 new jobs.

"With our new facility, which was built with the aid of the bonds, we've been able to expand our business tremendously," said Julius Giannini, president of AAA, which manufactures wooden crates and pallets.

A whole host of other benefits await new EZ businesses. Consider the Los Angeles Empowerment Zone, which cover 19 square miles.

"Los Angeles provides a 35% electric rate reduction from our Department of Water & Power, and for a manufacturer that uses a lot of electricity, that's obviously a huge benefit to the bottom line," said Cliff Weiss, deputy director of the Industrial & Commercial Development Division for the city of Los Angeles. "We also have a reduction in our city business tax for businesses that are moving into the Empowerment Zone or expanding into the zone. New businesses that move into the zone pay just $25 a year for five years, as opposed to a much larger fee for businesses outside the EZ."

So, what if highly skilled or specially trained workers are needed by a business setting up shop in an Empowerment Zone? That's a challenge that can be solved, says James DeRosa, acting director of the Cleveland, Ohio, Empowerment Zone.

"Not only do we have programs already in place to train residents in high-growth, high-paying jobs, but we also will tailor a program to a firm if they have special needs," said DeRosa.

The Cleveland EZ works with the EZ-funded Center for Employment Training, the Advanced Manufacturing Center, and other skills-development organizations.

Critical empowerment zone factors

As executives consider locations to expand, they should check out the road networks in and around Empowerment Zones, advises Randy Roth, CEO of the Endeavour Co. of Milwaukee, Wis., a firm that has spearheaded new development in the Columbus, Ohio, Empowerment Zone.

"There's a real challenge that the infrastructure of these communities may be dated; you are talking about streets that may no longer have the necessary width to support truck capacity. Just the basic issue of how do I get my truck off of the Interstate, onto a central city street that might be too narrow for me to have sufficient turning radiuses at key intersections to get to the plant. Those are significant though mundane details, but are ones that impact manufacturers."

Roth notes that Empowerment Zones throughout the U.S. often share locational pluses for businesses, such as close access to major Interstates and freeway systems, and the fact that acreage is often near the downtown central business district. This makes it ideal for businesses that want to have a near-downtown office presence without paying downtown office prices.

What firms are likely to look closely at potential EZ benefits, and take the plunge? Companies that are already established within a region may look within that region to establish a presence in an Empowerment Zone, says Gene DePrez, national director, business location strategies, at PricewaterhouseCoopers in Florham Park, N.J.

This category of firms, says DePrez, would especially include companies looking for facility options in the region that could lead to lower costs.

As he starts the New Year, Peter Z. Garver hopes to build on his successes in 2002. Garver, who is director of development for Himmelrich Associates, Inc., landed a new tenant for Montgomery Park Business Center, which is part of the Baltimore Empowerment Zone. The new tenant, NCO Group, is setting up a 100,0000 square foot call center at Montgomery Park. Garver says there is still plenty of space available in the park, which covers about 2 million square feet in the 1925-vintage Montgomery Ward Catalog Building.

Cliff Weiss, deputy director of the Industrial & Commercial Development Division in the Los Angeles city government, also has some big plans.

"For 2003, we are going to be doing some major outreach efforts to market our Empowerment Zone bond products," said Weiss. "We are having a seminar this month just to market these bonds. We have seven years to spend $230 million in Empowerment Zone bonds, and it's money we want to get out on the street."