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They go by many names.  In Pennsylvania they’re Keystone Opportunity Zones.  In Michigan they’re Renaissance Zones and in New York, Empire Zones.  The names may change, but the concept behind them is the same; attract and facilitate new business in impoverished rural and urban communities by offering a slew of tax and job creation incentives to grow quick profits.

Seems like a good place for corporations, but everyone knows the business of site selection has come a long way since the first enterprise zone cropped up in Florida over 20 years ago.  Long gone are the days of choosing property based on one or two factors.  To make real estate decisions, today’s competitive business climate demands that companies employ real estate experts armed with complicated spreadsheet matrices that cross-measure and quantify dozens of factors. 

While no one is going to start off a site search hunting for an enterprise zone, there is no need to throw the baby out with the bathwater either.  Usually enterprise zones are comprised of a combination of statewide tax incentive packages and local enticements, all of which reward relocating and expanding companies.  And, just as the site selection process has stepped up in sophistication, so too have many enterprise zones. 

In the strongest, thriving zones, inherent incentives are being coupled with further assistance, including support from non-profit organizations and low-cost loans from local lenders.  This new generation of enterprise zones attempts not only to add jobs, but to also foster R&D investment and diversity the industrial base.  New Jersey, for example, is parlaying its enterprise zones, buoyed by other regional draws such as access to a large highly-skilled labor pool and multi-modal transportation, into the incubation of a significant biomedical industry cluster.

Despite their evolution, enterprise zones are not without drawbacks, and determining whether your project is a fit can be cumbersome.  Often financial support and tax incentives are tied to wage levels and job creation within a questionable labor pool.  The best tool at a company’s disposal to evaluate and secure the true potential of an enterprise zone is a real estate broker intimately familiar with the state zone characteristics, the economic development agencies and the local government.  The profits realized through enterprise zone incentives could give rise to the optimal site.

For more information or to discuss the issues surrounding enterprise zones, contact Andrew Harris at aharris@binswanger.com .