Great Ideas for your Small Business: Know about Economic Development Incentives and Agencies
If you are thinking of relocating or expanding your business, be sure to investigate the wide variety of economic incentives and tax breaks.
Hundreds of local, state, federal, and private agencies offer scores of programs designed to entice business owners to move into economically disadvantaged areas.
As a way to revitalize the economy, former President Bill Clinton began an initiative that designates distressed com- munities across the country as Empowerment Zones and Enterprise Communities (EZs and ECs). In 2001 he moved his office into one of the first EZs, Harlem, which had been selected for $1.2 million to stimulate tourism by developing a tour package and gift shop for the Apollo Theater. The initiative seeks to use public and private partnerships to attract the investment necessary for economic and community development. In the first two rounds of funding (the third round closed in December 2001) about $4 billion in grants and tax incentives had been awarded to eighty-seven EZs and thirty- eight ECs (the Empowerment Zone’s rural counterpart).
The EZ/EC initiative, which is administered through the Department of Housing and Urban Development, rewards hiring by giving an employer as much as $3,000 in tax credit for every new job created. Every year, business owners in an EZ can also deduct $37,000 worth of business equipment and supplies, about $20,000 more than otherwise allowed.
Tax-exempt bonds are also available for capital improvements such as factories and offices. Some cities with federal EZs are Miami; Boston; Columbus, Ohio; Knoxville, Tennessee; El Paso, Texas; and Santa Ana, California.
In Richmond, Virginia, where government programs alone failed to bring in new business, a public/private development group was formed in 1994. By 2000, the Greater Richmond Partnership Inc. had brought in about 25,100 new jobs, half of its five-year goal; total investment in buildings and equipment was $1.9 billion, or 99 percent of the goal. A business owner looking at the Richmond area sees a growing population and good basic infrastructure: an air- port, two expressways, and a university. Then the partner- ship steps up with tax breaks, fast-track development permits, and even state help in training new employees.
Case in point: Barber & Ross Millwork, maker of exterior windows and doors, opened a $4 million plant in Richmond in 1998, taking advantage of low taxes in a state “enterprise zone.” Now the company has expanded again—this time to Orange County, California, where it will refurbish a vacant plant and take advantage of the county’s offer to pay $50,000 for the extension of a sewer line. The company’s strategy is to be a regional source for homebuilders, hence to locate in hot real estate markets. Project manager Bruce Weber said the company’s next move may be to Charlotte, North Carolina, where, again, there is a private-public partnership group to encourage new business.
New or expanding companies can qualify for programs where the state helps pay part of the cost of training workers. There is also a variety of tax credits and incentives available for employers. To contact the Greater Richmond Partnership. To find out more about EZ/EC initiatives in your area, go to the Department of Housing and Urban Development website at www.hud.gov, or contact your local SBA chapter for information on other programs in your area.