What is an enterprise zone, and why should it matter to you? If you are an executive at a company that is considering an expansion or relocation, you should be looking for answers to these questions.
Simply stated, an enterprise zone is a designated district, often in an economically depressed area, that has been targeted for revitalization by local and state governments. Thirty-nine states have one or more enterprise zone programs in place, according to KPMG LLP, the accounting and tax firm.
United Welding Services (UWS) in Perry, Fla., has seen its work force grow from 125 to 170 since it started taking advantage of incentives available in the Taylor County enterprise zone, one of 53 in the Sunshine State. Among all businesses in the Taylor County enterprise zone, UWS has been the largest user of the job tax credit taken against the Florida corporate tax.
“At least part of the growth in our work force is attributable to the enterprise zone help we’ve received,” said Shelton Davis, chief financial officer for UWS.
| “At least part of the growth in our work force is attributable to the enterprise zone help we’ve received.” — Shelton Davis, chief financial officer, UWS |
UWS, which has been in business since 1987, produces aluminum grill guards, truck boxes and other truck aftermarket products. The company has plants in Georgia and Texas, as well as North Florida.
Besides wage tax credits, UWS has received refunds of sales taxes from the state of Florida for equipment purchases and building additions under the enterprise zone program.
Davis said that before they begin their expansion, companies should talk with the enterprise zone coordinator in their community, and make sure that they adhere to all of the program’s requirements.
“Here in Florida, businesses are expected to follow the letter of the law in reporting promptly and keeping track of all of the requirements in order to be eligible for enterprise zone credits,” he pointed out.
Enterprise Zone Helps Bausch & Lomb
Similar to enterprise zones, New York state’s 72 Empire Zones are designated areas that offer special incentives to encourage economic and community development, business investment, and job creation. Certified businesses located within an Empire Zone are eligible to receive significant tax credits and benefits.
Bausch & Lomb, the eye health giant, is doubling the size of its main R&D center in Rochester N.Y. About 22 acres of the proposed Optics Center campus sit in the city of Rochester’s Empire Zone, which will allow Bausch & Lomb to apply for several tax incentives through the Empire Zone program. The company will also be eligible to receive a capital grant from Empire State Development.
The $35 million project includes $25 million for new construction and $10 million for renovations, equipment and machinery. The new two-story, 75,000 square foot glass-and-brick wing will house laboratories and offices, and allow room for a future 25,000 square foot expansion.
The R&D center expansion project is scheduled for completion in early 2007. In all, Bausch & Lomb will add as many as 200 research jobs during the next two years.
Having a savvy economic development team in place was crucial to Bausch & Lomb’s expansion in the Rochester Empire Zone.
“As Bausch & Lomb began to plan the expansion of our research and development capabilities, we considered locations around the world where we already have an R&D presence,” said Daniel E. DiLoreto, director of real estate for Bausch & Lomb. “Greater Rochester Enterprise (GRE) worked with the various municipal and governmental organizations, including state, county and city departments, and with Rochester Gas and Electric, to put together a package of economic incentives that made it possible for Bausch & Lomb to expand in Rochester.”
In Spokane, Wash., meanwhile, the state and city governments offer a variety of incentives for businesses through their Community Empowerment Zone (CEZ) program. Qualified Spokane County manufacturing, research and development, and software businesses can earn special tax incentives for expanding and/or renovating their facilities in the CEZ.
Hollister-Stier Laboratories, which produces allergy products and other pharmaceuticals, is one of seven local businesses that collectively won more than $1 million in sales tax deferrals and exemptions through the city of Spokane’s CEZ program.
The company, which also does contract filling and finishing, employs 375 workers.
“Hollister-Stier is in a prime position to participate in the program because of the location of the facility, which borders the CEZ,” said Dick Freeman, chief financial officer or Hollister-Stier. “We have met our 2005 commitment to hire three employees from the CEZ and project a savings around $174,000 on our $2 million warehouse expansion project.
Executives on the prowl for a new site shouldn’t underestimate the importance of expanding in an enterprise zone, said Steve Morgan, a government affairs consultant at GSP Consulting in Philadelphia.
“It may not be enough of an incentive to be a make or break on a location decision, but you should keep enterprise zones in mind when you are working with your broker,” he said.
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