Enterprise zone program in jeopardy at state Legislature

Posted on March 21, 2006 | Type: In the News | Author: Mike Sunnucks
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A state economic program that attracts jobs and business investment to rural and urban areas with high unemployment and poverty rates is facing extinction because of some strong opposition in the state Legislature.

Some conservative Republicans and Democrats in the state Senate oppose extending the state's enterprise zone program because it offers special incentives and tax breaks to specific businesses.

 That opposition has stalled enterprise zone continuation legislation in the Senate Finance Committee despite support from the business lobby, local governments and economic developers. That legislation needs to be approved by the state assembly in order to extend the zone program and tax breaks beyond July of this year. It was approved by the Arizona House of Representatives in February but faces a tougher go in the Senate.

The state offers income and property tax breaks to companies that create higher-wage jobs and invest in economically under-served and struggling areas of the state.

The enterprise zone program was created in 1989 and is administered by the Arizona Department of Commerce. There are 26 enterprise zones in the state, including ones in older sections of the East Valley, Phoenix and parts of the West Valley, as well huge swaths of Arizona's rural areas where job growth is scarce.

Critics, including conservative Republicans and state Sen. Ken Cheuvront, D-Phoenix, do not like the enterprise zones or other incentives that offer specialized tax breaks. Cheuvront also has been a leading opponent of Valley cities that give tax subsidies and rebates to national retail chains and shopping mall developers.

The Arizona Tax Research Association also opposes the zone continuation, contending that the state needs low overall property tax rates, not special benefits for specific locations. The association instead wants to see a more level playing field on taxes. ATRA is an advocate of comprehensive property tax cuts.

Business and economic development groups are pushing hard in favor of the continuation, arguing the zones help attract jobs to communities that are older, more rural and less affluent.

"The enterprise zone is virtually the only economic development tool available to many communities in rural Arizona, and loss of the program would, for some of these communities, result in the loss of jobs to states that are able to provide at least limited attraction incentives," said John Bowers, director of the Arizona Association for Economic Development. "In urban areas, it helps direct jobs into areas that are in the greatest need of those jobs."

The Arizona Chamber of Commerce & Industry, East Valley Chambers of Commerce Alliance and Western Maricopa Coalition (Westmarc) are among the business backers of continuing enterprise zones, arguing they help attract jobs and investment to rural regions and parts of the Phoenix metro area in need of revitalization.

The Arizona Commerce Department also backs the EZ program, saying it has helped attract 55,000 new jobs to the state over the past decade, according to spokesman David Drennon.

The economically conservative Goldwater Institute think tank’"which usually takes a dim view on incentives and specialized tax breaks’"does not want to see the enterprise zone program go away.

Goldwater President and Chief Executive Darcy Olsen said eliminating the zone program would amount to a major tax increase on businesses within those areas.

Instead, Olsen said income and property tax breaks available in the EZ areas should be extended to the rest of the state contending that lowering the tax burden is key to economic growth.

"Lets expand this to all of Arizona," Olsen said.

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