The ABCs on EEZs

Acronyms

EZ

Enterprise Zone – tax benefit program for new or existing businesses in an enterprise zone. The program is being phased out of existence in favor of Enhanced Enterprise Zone (EEZ). Only facilities opened before Dec. 31, 2004 are eligible for state incentives.

Provides abatement based on number of jobs created, number of enterprise residents employed, number of “difficulty to employ” people employed and trained or amount of new investment.

EZ eligibility: to receive credits a company must add two new jobs and make $100,000 in investments.

Fund limits: companies can receive up to a 50 percent state income tax exemption, $400 credit for each new job, $400 credit for enterprise residents, a credit of $5,500 for the first $100,000 of new capital and 2 percent of investments greater than $100,000 and 50 percent local property tax abatement.

EEZ

Enhanced Economic Zone – Similar to EZ, but gambling establishments, retail trade, educational services, religious organizations, public administrators and food and drinking places are not eligible. In order to be eligible companies must provide health insurance at all times and employers must pay at least 50 percent. Tax credits are limited to $24 million annually. Unlike EZ credits EEZ credits can be sold.

TIF

Tax Increment Funding, administered locally, permits the use of a proportion of local property and sales taxes to assist funding the redevelopment of blighted, conservation or economic development areas. TIFS can be used for professional services, land acquisition/demolition, building new infrastructure and relocation of resident and business occupants located in the project area.

Blight

Defined by Missouri as “an area which, by reason of the predominance of defective or inadequate street layout, insanitary or unsafe conditions, deterioration of site improvements, improper subdivision or obsolete platting, or the existence of conditions which endanger life or property by fire and other causes, or any combination of such factors, retards the provision of housing accommodations or constitutes an economic or social liability or a menace to the public health, safety, morals, or welfare in its present condition and use;”

According to a graph created by the Show Me Institute one-third of Missouri is currently blighted.

The Players

Mike Brooks

President of REDI and Columbia’s first economic development director in July 2009, Brooks and REDI Vice President Bernie Andrews started the EEZ process in May 2011. Brooks first became aware of EZs in Indiana. He says EEZS can help REDI close economic development deals. “Multiple communities meet the (business’s) basic analysis,” he said. “Opportunity comes with incentives.

Bernie Andrews

Vice President of REDI. Andrews has been working with Mike Brooks to create EEZs in Columbia. He works closely with the EEZ advisory board. With the board’s help he works on establishing zone boundaries, determining eligible businesses and setting tax rates.

REDI

Regional Economic Development Inc., a private economic development firm in Columbia led by Mike Brooks.

Keep Columbia Free

A libertarian citizen’s group opposed to EEZs. The group calls EEZS “corporate handouts”. Mark Flakne is the group’s president.

Greg LeRoy

Photo courtesy of Columbia Missourian

Author of the Great American Jobs Scam, worked as a consultant on industrial job retention where he exploited tax breaks, Leroy now runs a non-profit company, Good Jobs First, in Washington D.C., which challenges the efficiency of tax incentives. He recently led a discussion on economic development in Columbia. Keep Columbia Free has handed out his books before advisory board meetings. He compared using tax incentives to grow business to using a chainsaw to cut butter.

EEZ Advisory Board

Members of the board interprets public comments to make decisions on EEZ eligible companies and zone boundaries. Eventually the EEZ board will file annual reports. Members of the board said they would like to mitigate the amount of residential zones within EEZs. They also expressed a desire to maintain environmental standards.

First Ward Councilman Fred Schmidt

Photo courtesy of the Columbia Missourian

Runs his own accounting firm, Accounting Cycle, treasurer for the Missouri Bicycle and Pedestrian Federation. Schmidt got his bachelor’s in economics from Vassar and his master’s from the University of California Berkeley. He has worked for the Federal Reserve as a statistician and on Wall Street as a bond analyst. When elected Schmidt said he wanted to focus on high unemployment in his district. Recently voted in favor of reestablishing an Enhanced Enterprise Zone Board. Because of his EEZ support Schmidt faces a recall by Keep Columbia Free President, Mark Flakne and Keep Columbia Free Treasurer Mitch Richards. Richards ran against Schmidt in 2010, but said he would not take Schmidt’s seat if he is deposed.

Mark Flakne

President of Keep Columbia Free.

Mitch Richards

Treasurer of Keep Columbia Free and 2010 election opponent of Fred Schmidt. Richards is leading a recall petition against Schmidt, but Richards has said he would not run for the First Ward if Schmidt is deposed because it would be a “conflict of interest”

David Stokes

Staff member of the St. Louis Show-Me Institute, a free market advocacy group, Stokes recently wrote an op-ed piece against EEZs calling EEZs corporate welfare. Stokes says EEZs have directly led to an economic downturn in St. Louis.

Stokes said tax incentives like EEZ result in poor allocation of resources by businesses and do not create jobs. Instead because tax incentives became a natural course of business and intra-regional competition forces the tax incentive to become larger and larger their negatives outweigh their benefits.

“The panoply of subsidies that come into play when a large area is declared blighted have a number of adverse side effects. They shrink the local tax base, encourage more government planning of the economy, and increase the chances of eminent domain abuse.”

CiViC

Multi-partisan group opposed to EEZs

Dave Griggs

REDI Chairman and owner of Flooring America. His company was included in the blighted area in previous zoning maps.


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