ENTERPRISE ZONES COME UNDER FIRE

CAPE GIRARDEAU - State Rep. Larry Thomason, D-Kennett, is sponsoring legislation to tighten use of the state's enterprise-zone law.

Thomason said he is sponsoring the measure because of his concern that continued use of the law for purposes other than what it was originally intended could lead to its demise as an economic development tool.

Thomason, director of the Kennett Chamber of Commerce before his election to the House in 1988, said the intent of the law was to induce industry to build in economically depressed areas.

But over the years the number of zones have been expanded, and just about any business building in an enterprise zone can qualify for tax breaks. This has troubled many taxing entities, particularly school districts, which are almost totally reliant on property tax revenue that is partially abated in the zones.

Businesses expanding or building in an enterprise zone can receive a minimum property tax credit of 50 percent for 10 years and can qualify for state income-tax credits.

"There has been a growing crescendo of anti-enterprise-zone rhetoric stemming from the fact that in some places taxing entities like school districts are being affected negatively by this," said Thomason. "I'm afraid if we don't make changes in the law, then we will eventually have to do away with the enterprise-zone law altogether, and I don't want that. It's too good of a law to lose."

Thomason's legislation, which will be given a hearing before the Commerce Committee of the House Wednesday night, makes two basic changes.

The initial legislation limited the number of enterprise zones to 25, but each year legislation is passed changing the statute to include new areas.

"The reality right now is that all you need to get an enterprise zone is a senator or representative with enough clout to get up on the floor and make a big deal about how you need one," said Thomason.

Under his bill, decisions on zones would be taken away from the General Assembly and would be made by the Department of Economic Development. The criteria for getting a designation will remain the same, said Thomason, except that hopefully they will be awarded on the basis of need rather than political clout.

The second change is that cities or counties that give final approval to enterprise-zone areas may limit tax credits to industries if they desire. By doing that, retail businesses, restaurants and other types of businesses that build in that area would not receive the credits.

"If this program is not an inducement to a business locating in the zone, they should not get the tax incentive," said Thomason.

His bill also requires that businesses getting the credits employ at least 15 full-time people; the current law requires at least two.

Another part of the legislation requires the business to apply for tax credits prior to starting business, not later, as an afterthought, when an accountant discovers they can qualify for a tax incentive.

A representative of the Department of Economic Development will testify in support of Thomason's bill.

Cape Girardeau Chamber of Commerce President Bob Hendrix said he has not read the bill but supports the concept of restricting enterprise zones to benefit industry.

"I think it is very true that we could be in danger of losing enterprise zones altogether if there are not some kind of controls put on them," said Hendrix. "I don't have any problem doing it for manufacturing firms only, because that is what they were put in for originally."

Hendrix pointed out that industrial revenue bonds, which were originally created to stimulate manufacturing jobs, were expanded to all types of businesses. As a result, the federal government stopped the program last year.

Enterprise zones have been used in Cape Girardeau and expanded several times to include the Southeast Missouri Regional Port Authority area. Many businesses taking advantage of the tax credits are retail and service-type businesses rather than manufacturing.

However, Hendrix said the requirement of at least 15 employees to qualify is to many employees because many small manufacturing firms may have fewer than that many employees initially.

Hendrix said he favors taking approval of zones out of the political process and letting the Department of Economic Development make those decisions. He said he also favors attempts to give cities and counties more say in who should qualify for tax incentives.

Rep. Mary Kasten, R-Cape Girardeau, said Thomason's bill "sounds like a really good direction. I certainly will study it."

She said she agrees with Hendrix and Thomason that sentiment could shift away from enterprise zones unless something is done to curb their use. Kasten, a member of the Commerce Committee, said she has heard some criticism that the current enterprise-zone law amounts to the state helping businesses compete against other businesses that are not in the zones and have to get started without the benefit of tax breaks.

"I think just allowing manufacturers to benefit is an excellent idea," said Kasten.

Putting the Department of Economic Development in charge of decisions on future enterprise-zone designations won't take politics completely out of the process, "but if there is a good device for evaluation, that would be a good direction," said Kasten.

Rep. Joe Driskill, D-Doniphan, chairman of the Commerce Committee, said he is not aware of any opposition to the bill planned this week. He said he supports the concept.

In fact, much of what Thomason's bill calls for is included in a large bill sponsored by Driskill that will also be heard Wednesday. Driskill's bill relates to the new and expanding business tax-credit program that deals mainly with technical details, but also includes a section on enterprise zones.

"I have signed on to this concept and certainly think it is very credible," said Driskill. "But there is a current running counter to this argument because several bills are in the House and Senate this year to create a number of additional enterprise zones.

Driskill said he anticipates the Commerce Committee may vote the measure out of committee next week, but when it might get to the floor of the House will depend on how many bills he is allowed to report out from the committee later this month.

Thomason stressed he does not blame non-manufacturing businesses from taking advantage of enterprise-zone tax incentives.

"You can't blame anybody for taking advantage of all the tax credits available to them," said Thomason, "but their taking advantage of the program will eventually kill the program.

"It is such a good tool we can't allow that to happen."