Economic Development Zones Under Fire?

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A recent state audit reported that eight business zones in New York state aimed at helping economically distressed areas weren't creating as many jobs as expected. Staff writer James Bernstein of Newsday goes on to say that the report, which took sharp aim at New York's Empire Zone economic development program, cites inadequate records, poor administration and a lack of holding firms who receive tax breaks accountable for producing jobs as reasons for the poor performance. Business receiving tax breaks were expected to produce 521 jobs in their respective zones, yet only produced 319.

Seems more and more state governments are paying closer attention to tax breaks given to businesses in economic development zones lately. Just recently, Governor Carcieri of RI proposed axing many tax breaks for businesses in economic development zones because they weren't producing any significant returns for the state.

Why all the scrutiny? The economy of the last few years hasn't been especially business friendly. A slow-to-recover economy has produced more layoffs than sales in many businesses, not just those in the "zones." Perhaps state governments should look at the bigger picture of what has resulted because businesses have moved into these areas.

Neil Pierce of the National Academy of Public Administration outlined some of the hopes of inner cities -- where many ecnomic development zones are established -- in a 2001 column. While job growth from 1995 to 2001 was just 1% in inner cities compared to 2% nationally, Pierce suggests that the positive aspects of revitalizing the areas provides broader benefits, including those noted by famed Harvard urbanologist William Julius Wilson.

The higher the ratio of inner city income to suburban incomes, he noted, the stronger the economy of the entire metro region. "In the global economy, firms choose regions. The health of the inner city is a key factor in their decisions."

Perhaps states should look beyond performance ratings and consider the overall economic and societal implications of targeting economic development zones.