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Governance Policy Issues and Implementation: Economic Development

Sarah F. Liebschutz
Distinguished Service Professor Emeritus
State University of New York at Brockport
Adjunct Professor of Political Science
University of Rochester
Paper developed under the auspices of the
National Academy of Public Administration
Standing Panel on the Federal System

Prepared for the International Conference on
"The Challenge to New Governance in the 21st Century:
Achieving Effective Central-Local Relations"
Tokyo, Japan
July 27-29, 1998

"Governance Policy Issues and Implementation:
Economic Development"

Sarah F. Liebschutz

The United States economy is fundamentally unplanned. Both capital and labor are mobile. Local governments, in contrast, are fixed in specific locations. As product cycles recede and advance, population and industries migrate, local governments face two choices. They can either adapt to change or yield to the natural forces of the marketplace.

Not all local governments in the United States have the same level and intensity of preference for economic activity; most, however, prefer more rather than less. This is especially true for America's largest cities, particularly those historically reliant on now-eroded manufacturing bases. Many of their local officials aggressively promote economic development strategies to retain, expand, and/or attract business. The strategies include financing and tax incentives directed to the private sector and direct investments by governments in the local infrastructure.

Local governments do not pursue these strategies alone. The national government has long been involved in efforts to revitalize America's distressed inner cities. States-the intermediate level of government in the American federal system-also have an important stake in the health of local communities within their borders. They, too, especially since the 1970s, have become increasingly active in economic development

Do national-local and state-local programs make a difference in economic development in the United States? Do different policy interventions, e.g., financing and/or tax incentives, public infrastructure improvements, have different effects? What intergovernmental strategies work best to promote sustainable local economic development? This paper is organized to consider those questions as follows:

  • First, the general context for economic development in the United States is presented
  • Next, generic approaches of government used to influence private sector decisions are described and illustrated;
  • Then, research issues and findings about the effectiveness of the public sector in stimulating local economic development are discussed;
  • Finally, the current major national government initiative, the 1993 national Empowerment Zones/Enterprise Communities Program, which targets public incentives on distressed cities, is analyzed. Original field research by the author on state and local economic development initiatives in seven large United States cities is presented.

These are the paper's main points:

  • Job creation in the United States rests fundamentally in the private sector.
  • Decisions to induce private investment are local, but incentives involve local, state, and national governments.
  • Subsidies targeted directly to private firms include tax expenditures and public infrastructure and service improvements.
  • Subsidies to local governments take the form of national and state grants-in-aid.
  • State and/or local business incentives seem to have the greatest effects on location of investment
  • Economic gains, in general, appear to be "zero-sum."
  • Political rather than economic logic explains the embrace of economic development by local officials.
  • Economic and job development activities dominate urban empowerment zone strategies
  • Reuse of environmentally contaminated urban industrial sites, "brownfields," is supported by local, state, and national levels.
  • Governance difficulties evident early in the urban EZ program-between citizens and city hall, and between local and state governments-seem to be abating.

Economic Development in the United States:
The Context

From the beginning of the American federal system to the present, economic development has been dominated by the private sector. At the same time, governments at all three levels have played important roles. As Theodore Lowi and Benjamin Ginsberg (1990), authors of a widely used textbook on American government, write: "Most of the [public] policies in the history of the United States have been distinctly capitalistic; that is, they have aimed at promoting investment and ownership by individuals and corporations in the private sector" (p.680) Such public policies, in the broadest sense, are intended to "protect public order and private property; control or influence markets; and defend or enhance the vitality of our capitalistic economy " (p. 759). At a more localized and focused level, they are intended to influence individual firms to locate (or expand or remain) in a specific geographic location to perform a specific type of activity. Both broad-gauged and targeted policies rest on a single assumption: job formation is a decentralized, private sector function, but government incentives can influence business decisions.

Public and Private Sectors in Perspective.

Public sector employment represents a small, and decreasing, share of the total United States workforce. In 1970, for example, 16 million government workers accounted for 19 percent of the total work force of 82.7 million persons. In 1980, the public sector work force numbered 18.3 million, or slightly more than 17 percent of the total workforce of 106.9. In 1990, the total workforce grew to nearly 126 million persons; public sector employment increased to 20.4 million. The public sector share decreased to 16 percent, where it remained as of 1994 (ACIR and RIG, 1998). Job creation in the United States, thus, is largely a private sector function.

Government spending, in contrast, has increased relative to the United States economy. In the first quarter of the 20th century, government spending was small. In 1927, for example, expenditures by all governments (national, state, and local) represented only 13 percent of personal income. Personal income is used here as an indicator for the economy. While gross domestic product may be a preferable indicator, it is not available on a timely basis for state or local economies. See American Council on Intergovernmental Relations and Rockefeller Institute of Government, 1998, p. 8, footnote 4. During World War II, they grew rapidly as the national government responded to national defense needs, rising to nearly 45 percent of personal income by 1946. National government spending represented 80 percent of that proportion. During the next three decades, total government spending as a percentage of personal income decreased. Starting in the mid-1970s, as defense and public welfare expenditures grew, it returned to its earlier level. "Spending relative to the size of the economy was generally highest during and shortly after the recessions of 1975-76, 1980-82, and 1990-91 as countercyclical spending, such as unemployment insurance and welfare, rose"(ACIR and RIG, 1998, p. 9) In 1994 total government spending represented 46 percent of personal income, with the national government share half of that total.

Although the federal government spends more than state and local governments, its share of the public sector workforce is the smallest. Local governments have the largest number of employees, nearly 12 million in 1994, or 61 percent of the total, with state governments (4.7 million) at 24 percent, and the national government (4.6 million, including 1.6 military employees) at 15 percent.

Why the discrepancy between public spending and public employment? The explanation is straightforward:

  1. The national government's responsibilities include defense and foreign affairs, Social Security and Medicare, interest on the public debt, and payments to state governments for public welfare programs. "By comparison, state and local governments do not pay for the national defense. . . Social Security or Medicare. Furthermore, because. . . they cannot by law run budget deficits. . . their interest expenses for general debt are relatively small"(ACIR and RIG, 1998, p. 10).
  2. Local governments in the United States bear the greatest responsibility for delivering services. The largest function of local government is education (elementary and secondary), which accounts for more than half of all local government employees. It is in this area that the major distinction between service delivery and service financing occurs; "most states finance a large share of these costs via aid to local school districts, but the districts actually deliver the service. In fact, aid to local school districts is the largest component of total state government spending, exceeding both Medicaid and higher education" (ACIR and RIG, 1998, p. 10) Local governments are also primarily responsible for police and fire services. State and local governments share the financing and service delivery in highways, health, hospitals, and a variety of other services, including the environment, parks and recreation.

Private Investment Trends

A clear, but complex, trend has characterized private investment in the United States since the end of World War II. In general, older central cities in the northeast and midwest regions of the country have lost economic activity, while less built-up areas-suburbs, rural areas, growing cities in the south and west-have gained. "The process is not simply the movement of existing enterprises; it also involves a bias in the choice of location of new activities"( Nathan and Webman, 1980, p. 93).

The shift of private investment away from older cities "began with manufacturing firms but [then] extended to business services and retail and personal services as well. As manufacturing . . . declined, many older large cities. . . lost population, jobs, and large parts of their tax base" (Nathan and Webman, 1980, p. 93). The explanation for this trend? The "transportation, infrastructure, density, and other advantages of the older cities no longer outweigh the advantages of other more dispersed places-the suburbs, rural areas, and newer cities in the South and West" (Nathan and Webman, 1980, p. 93).

One particular aspect of private sector disinvestment involves "industrial and commercial sites that are abandoned or underused because of real of perceived contamination" (ICMA, 1997, p.1). The redevelopment of these "brownfields" is often thwarted by the high and uncertain costs of remediation associated with cleanup of contaminated areas and liability for past and future environmental consequences. (ICMA, 1997).

The consequences of private sector disinvestment are distressed people and distressed places. "Individuals or groups with special needs-the poor, unemployed, homeless, handicapped, educationally disadvantaged, elderly, or those living in crowded or substandard housing-illustrate the people dimension. Communities with structural, organizational, and fiscal limitations-high proportions of substandard housing units, declining property tax bases, limits on taxing and/or annexation powers, or comprehensive functional responsibilities-illustrate the place dimension" (Liebschutz, 1989, p.3)

Despite losses of jobs, population, and tax bases, large, older cities still have one important comparative economic advantage-" the convenience of center-city locations that facilitate 'face-to-face' contacts" (Nathan and Webman, 1980, p. 93) This convenience makes them natural locations for such service activities as law, finance, advertising, publishing, information services, government and medical specialties.

Private sector disinvestment linked to industrial decentralization has resulted in what Michael Pagano and Ann Bowman (1995) term a "polycentric urban field." They write, "Just as the industrial revolution established a new hierarchy [among American cities], the decentralization of industry is generating still another. The changing economy has contributed to the alteration of urban space, [with] the metropolis. . . becoming a polycentric urban field rather than one dominated by a primate city" (p.31)

Within the polycentric urban field, politics matters. The aspirations of local officials for their communities make a difference in whether "cities. . . adapt to their changing environments or succumb to the invisible hand of the marketplace" (Pagano and Bowman, 1995, pp. 2, 34). Leadership vision and city image explain why even fiscally healthy cities pursue economic development activities.

Local public officials, thus, have choices. They can yield to the natural forces of the marketplace, or they can consciously adapt to change. Not all local governments, as we stated at the outset of this paper, have the same level and intensity of preference for economic activity. The political leaders in most of America's largest, distressed cities, however, prefer more rather than less. Their challenge is to choose the most effective economic development strategy to counter market failure and to achieve redistributional aims.

Generic Concepts and Approaches
The term economic development incorporates the concept of comparative advantage and the perspective of the long term. Comparative advantage pertains to the special attraction for a particular economic activity that a locality possesses so that it becomes the center for the production of goods or services that are sold to people from other areas. The exchange of the good and/or service produced in the local area for income from outside customers is the "export" product; it is the foundation for the economic growth of the local area. Economic development, embodying the long term view refers to the "transition-sometimes orderly, sometimes chaotic-of the local economic from one export base to another as the area matures in what it can do as rising per capita income and technological progress change what the national [or global] economy wants done" (Thompson, 1965, p. 3).

When markets fail and/or redistribution of resources is desired, government intervention is generally justified. When markets fail, the purpose of intervention is to enhance efficiency of production, and the competitive posture of firms and the local area. When redistribution is the goal, the purpose of intervention is "to ensure the commonly recognized needs for dignified survival" for the least advantaged members of the local community (Weimer and Vining, 1989, p. 91).

In distressed cities-those marked by private sector disinvestment and labor surpluses-"one way to increase the supply of goods is to give direct subsidies to the [actual or potential] suppliers of the goods. The subsidies may be directed at either private firms or lower levels of government"( Weimer and Vining, 1989, p. 138).

Subsidies targeted directly at private firms involve:

  • Financing incentives, designed to reduce the costs of capital for new construction or plant modernization; and
  • Tax incentives, designed to reduce the costs of ongoing operations; and
  • Government spending on local infrastructure or technical assistance or job training or public services, designed to improve investment potential.

Subsidies directed at lower levels of government, known as inter-governmental grants-in-aid, are intended to reduce the costs of local public sector intervention. With or without matching requirements, the intergovernmental grant stimulates local government spending that would otherwise not occur at the level resulting from the grant, or at all. These grants-in-aid facilitate the infrastructure investments and job training programs by local governments that make localities more attractive to private businesses. Both kinds of subsidies-those directly targeted at private firms and those made available by national and state governments-are currently in widespread use by city governments.

Public Spending for Economic Development

Local Governments

Economic prosperity is necessary to protect the fiscal base of local government and to enable elected officials to deliver a reasonable quality of public services at reasonable tax levels. Economic development activities are politically popular. And "most local officials have a sense of community responsibility and want to do what is good for the community." (Wolman, 1996, p. 117). Thus activities to enhance local economic development are generally viewed as appropriate.

The pace of local economic development activity has increased greatly since the mid-1960s. Wolman (1996) suggests four complementary explanations:

  1. Capital has increased substantially in mobility of capital and is now international in scope; this leads to increased competition among cities to maintain their economic and fiscal bases;
  2. Slow national growth has resulted in similarly slow growth or even decline in many urban economies; officials are under pressure to take action to provide jobs for residents and fiscal resources for local governments;
  3. International economic restructuring has resulted in particularly hard economic times for cities dependent on traditional manufacturing employment;
  4. Cutbacks in aid from the national government have thrown local governments back on their own resources if they are to undertake economic development activity.

Two broad options are available for local governments to induce private investment. The first involves use of own-source revenues and inter-governmental grants for (a) public infrastructure improvements (roads, sewers, schools etc.), (b) job training subsidies, (c) improved services, e.g., public safety or street cleaning; and (d) other assistance to the private sector, such as reduced red-tape. The second category involves foregone local revenues, or tax expenditures, to subsidize operating and capital expenses associated with private sector location or expansion.

Data for spending by local governments on economic development activities-direct and/or tax expenditures-are very hard to obtain. The U. S. Department of Commerce, Bureau of the Census, does not collect annual data that conform to the categories listed above. The most pertinent category used by the Bureau of the Census is "Housing and Community Development." By itself, however, it is an incomplete indicator of the wide range of direct local spending for economic development. The problem is further compounded by aggregation of local and state expenditures. The Bureau of the Census reports that state and local expenditures for housing and community development have grown on a per capita basis in 30 years by nearly 1200 percent, from $6 per 1965 to $76 in 1994 (ACIR and RIG, 1998). This rate of increase outpaced the growth of 974 percent in total general expenditures by state and local governments, from $284 per capita in 1965 to $4,125 in 1994 (ACIR and RIG, 1998).

Paul Peterson (1995) divides governmental expenditures into developmental and redistributional categories. "Developmental programs provide the physical and social infrastructure necessary to facilitate a country's economic growth. Redistribution programs re-allocate societal resources form the 'haves' to the 'have-nots'" (p. 17). Peterson ( 1995) includes the following as developmental programs: physical infrastructure-roads, mass transit systems, sanitation systems, public parks and other basic utilities-and social infrastructure-public safety, public health, and educational institutions. Redistributive programs "transfer economic resources from those who have gained the most from economic development to those who have gained the least: the elderly, the disabled, the unemployed" etc. (p.17). Peterson's developmental programs include public infrastructure and job training activities listed above, but not enhanced services. His data for developmental state and local spending show an increase of nearly 200 percent from 1962 to 1990, lower than the increase in redistributional spending for the same period.

Thus, both the Bureau of the Census and Peterson show trends over the past 30 years of accelerated spending for economic development. This finding, however, comes with two caveats: (1) the data incompletely reflect economic development spending; and (2) they do not reflect local spending alone.

State Governments

The American states have long been involved in the economies of local communities. Although specific objectives for such involvement have varied over time, the overriding goal has been to enhance the economic competitiveness of the state. From colonial times to the present, state governments have adopted policies to protect, retain and/or attract businesses to localities within their borders.

Since the 1970s, state governments have become increasingly active in economic development. They have responded to the challenges of technological change and of competition from abroad. They have developed training and education programs, financed university research, created financial incentives for foreign investors and for high-technology business, and provided export assistance. Like the national government, the governments of the American states provide loans and grants to local governments (e.g., for training and education programs). States, in addition, offer a wide array of financing and tax incentives that offer relief to firms from state-imposed taxes.

Such state economic activism has occurred in the context of federal retrenchment in domestic policy, decentralization of responsibilities to the states, and concern with the condition of urban centers. During the 1980s, tired of waiting for Washington to act to reverse abandoned urban industrial areas and create jobs for the unemployed, 37 states and the District of Columbia enacted their own enterprise-zone statutes. By the time that the federal Empowerment Zones and Enterprise Communities law (elaborated later) was adopted, there were more than 2,000 enterprise zones in 41 states. Most states use criteria of economic distress, of people and/or of places, to designate state zones. Most provide some form of tax incentive to private businesses-to hire disadvantaged persons living in the zone and/or to encourage capital investment there-regulatory relief, and direct state loans (Liebschutz, 1995).

The more energetic exercise of state economic powers does not necessarily imply an eclipse of federal influence in the national economy. The magnitude of the federal government's spending as well as its central role in negotiating terms of international trade assure that it will continue to have a major effect on state and local economic development. Nonetheless, the role of the states as important actors in stimulating local economic development deserves attention.

National Government

National government grants to state and/or local governments represented 13 percent of federal government spending in 1994. More than half went for public welfare. The remaining intergovernmental grants, $103 billion in 1994, were for purposes ranging from construction of water and sewer systems, resurfacing of roads, mass transit improvements, employment and training services, to loans and grants to private businesses. Table 1 summarizes eight major federal intergovernmental grant-in-aid programs involved in economic development.

The national government also provides "a large number of tax preferences for various kinds of economic development activities" (National Academy, 1996, p. 12). Such tax preferences represent foregone tax revenues from tax subsidies and loan guarantees to private firms, and are termed tax expenditures. The National Academy of Public Administration (1996) estimates that federal government spending for economic development in 1995 totaled $27.9 billion for direct expenditures [such as discussed in the previous paragraph], $2.2 billion "in estimated costs for federal loans and loan guarantees," and about $60 billion in tax expenditures measured in terms of lost federal revenues" (p. 13). In other words, tax expenditures were more than three times intergovernmental grants. The Academy estimated "about 60 percent of [tax expenditures] involve[d] various subsidies for research and technology investments by firms, and another 22 percent subsidize[d] the issuance of industrial development bonds by state and local governments. The remaining 18 percent include[d] various subsidies for agricultural and shipping firms, incentives for housing rehabilitation, and targeted jobs tax credits" (p. 12).

Economic Development in the United States:
Research Issues and Findings

What difference do public sector programs make for economic development decisions by the private sector? Do different policy interventions have different effects? What strategies work best to promote sustainable local economic development? What is the net value of public sector programs?
Finally, are public sector investments in pursuit of economic development rational?

The first three questions focus on the influence of public sector incentives on private (for-profit) actors and firms; the fourth, on the larger context-the local region, or the state or the nation. The last question focuses on local political actors.

The "But For" Question

"Would a specific firm locate (or expand or remain) in a specific geographic location to do a specific type of activity without the assistance of a specific public sector incentive?" This "but for" question asks: "But for the subsidy would the economic activity occur?" While the "but for" question may seem straightforward, in fact, it is not, for it embodies within it the complexities of substitution effects.

Substitution of public incentives for private investment is, in part, a timing issue. Would the benefits of the investment stimulated by the incentive have resulted without it? Did the incentive accelerate the timing of an investment that would have occurred later anyway?

The Public Works and Development Facilities Program, a national government program, "provides distressed communities with grants to help attract new industry, encourage business expansion, and generate long-term, private-sector jobs"(GAO, 1997, p. 26). It is plausible that a certain activity would be worthwhile, for example, if it were located in the South Bronx [an economically distressed area within New York City] and would be undertaken even without a Public Works and Development Facilities grant. The question is whether it is undertaken now or later. If the grant makes the whole development package come together and happen in six months rather than in five years, it has facilitated a natural economic decision process. Accelerated timing of a private investment that would have occurred anyway means the grant's effects are substitutional.

Substitution is, in part, a redistribution issue, involving both the nature and location of private investment. Does the incentive support a pattern of investment that is different from current trends? Does the incentive alter, however marginally, current locational trends? Using the example in the prior paragraph, does the hypothetical Public Works grant in the South Bronx, for a project, otherwise located in the suburbs, reverse the polycentric pattern of service jobs in the central city and manufacturing jobs in the suburbs discussed above? If so, its effects are redistributional. However, if the business, lured by incentives to locate within the South Bronx, later moves out, the redistributional effects were temporary.

Redistributional effects are clearly intended by public sector incentives that involve the reuse of brownfields sites. Such reuse has potential benefits for cities (removal of blight, creation of jobs and generation of income, and local government revenues) and for regions (diversion of growth away from farmland and open space). However, "the costs of remediation have made otherwise attractive development projects economically infeasible. Uncertainty about the presence of contamination at many sites has meant that suspicion of contamination can, by itself, obstruct development" (ICMA, 1997, p.1-2) If public sector financial assistance to reduce the lender's risk and reduce the borrower's cost of financing, and nonfinancial assistance, such as loan packaging, results in diverting private investment from suburban or rural "greenfields" to urban brownfields, the effect would appear to be substitutional. Even that conclusion, however, must be tempered. For, at the same time that governments at all levels have taken action to promote redevelopment of brownfields, other trends have also been at work.

Developers, lenders, insurers, and other private sector parties
were gaining experience with the cleanup and development of
contaminated sites and were becoming more confident that
brownfields projects could generate profits without requiring
excessive risk. Rapid advancements in assessment and remediation
technology were making cleanup less costly, more predictable, and
protective of public health. A strong economy and a tightening
market for industrial land made development of sites that had
previously been considered marginal more attractive (ICMA, 1997,
pp. 1-2).

Thus, public sector incentives to promote brownfields development, may not as easily meet the "but for" test as presumed.

The challenge for governance at all levels is to refine the "but for" question so as to better determine and implement local development strategies. This is easier said than done. The "but for" question presumes that gains that occur--in jobs created, in zone residents employed, in capital investment generated, in sales, in quality of life for zone residents and for city and rural residents generally--can be sorted out from what would have happened anyway. Evaluators of intergovernmental grants-in-aid have long struggled with this vexing challenge.

The Value-Added Question

Local governments cannot control what businesses, lured by incentives, relocate from one area to another. Nor can states act like nations. "They cannot control who lives within their boundaries nor who leaves. If a firm moves outside the state, the state cannot retaliate by imposing tariffs that protect forms making the same products within the state. This openness makes states [and local governments] very sensitive to forces outside their control. [Their] efforts thus take place in a volatile environment"(Brace, 1994, p. 120). The value-added question, thus, is: Do incentives for private sector investment yield a zero-sum game that, in the aggregate, creates little, if any, economic benefit?

Research Findings

Many policy analysts have explored the relationship between state and/or local business incentives and changes in economic activity. The findings are not consistent.

Research conducted in the late 1970s and early 1980s found that incentives had little or no effect on an area's economic development. Two studies found that state business incentives had little influence on the stimulation of new business, measured either by the number of firms or by the firm's size. Wage rates, energy costs, and the availability of skilled labor were all found to be more important influences on the creation and expansion of business firms (GAO, 1997). These findings were confirmed in the 1982 Fortune Market Research Survey of businesses: "relocation incentives are not the most important factors in plant location decisions. The Survey rank[ed] financing inducements 15th in importance, far behind such factors as work productivity, efficient transportation, and the state or local government's attitude toward businesses" (GAO, 1997, p. 19).

Several more recent studies have found nuanced effects. For example, tax considerations have greater effects on manufacturing and capital-intensive industries than on other businesses (GAO, 1997). Additionally, state and local policies may influence where firms locate within a region. While selection of a region for an investment may be driven by economic criteria, such as the availability of labor and transportation and proximity to markets, selection of a particular site within a region may be influenced by the availability of incentives (Bartik, 1991).

Finally, incentives for private sector investment may produce a "zero-sum gain," where "the value of one state's incentives is offset by the incentives offered by competing states" (GAO, 1997, p. 19). The result, when "incentives offered to new businesses to locate in an area may give them a competitive edge over existing businesses, [is] a shift in economic activity from established firms to new firms [but] little change in a region's overall economic activity" (GAO, 1997, p. 19).

The drawback common to these studies is that they are "economic analyses, whereas the practice of state and local economic development often follows a political logic"(Accordino, 1994, p. 218). As John Accordino (1994) states: "The developers and businesses most likely to benefit from particular programs or projects generally wield considerable political clout. Moreover, practitioners and the decision makers to whom they report are driven by the electorate's demand for easily visible results to 'shoot anything that flies and claim anything that falls.' For these reasons, states and localities may pursue programs or projects that bring no net results to the community" (p. 218).

Pagano and Bowman (1995), who analyzed the effects of public subsidies and investments on economic development projects in eight American cities, take cognizance of "political logic." They advise local officials to heed two factors, in particular, in their economic development decisions-the state of the local economy and public support.
    The more healthy the city's economy, the more likely a profit will be realized from the city's investment. Officials in economically distressed cities would be ill advised to invest in projects for the purpose of generating a profit. Further, although innovative finance seems to enjoy great popularity among city development finance experts, the results from these projects suggest that the less complicated and the more routine or standard the incentives offered (especially by economically healthy cities), the greater the probability of revenue-generating success-although the significant level of .115 certainly tempers this inference.. . . Although the data indicate that city governments support both low-risk and high-risk projects, city officials should mobilize public capital only for projects that enjoy wide local support. City leaders should gauge public apprehension about development projects and postpone or halt funding for projects that generate political conflict and controversy (p. 104).

The Political Rationale

Economic development activities are generally viewed as appropriate undertakings for local governments. Yet the research just cited strongly suggests negative, or at best, neutral results from public investments. Symbolism, however, may be more important than tangible success. As Elkin (1987) states, " One of the easiest ways for public officials to gain the necessary reputation for innovation and to achieve visibility is by association with major land-use projects. . . A major downtown mall or convention center can be advertised as taking the city into the new metropolitan age. Such projects are also visible in a way that few other things that happen in cities are, and such building is taken as a sign that much else of note is going on in the city-even if it is not" (p. 37).

Wolkoff (1991) suggests other reasons for politicians to embrace economic development:

The political time horizon of elected officials will typically be
shorter than the time period over which project costs and
benefits flow. . .The costs of many direct subsidies are
distributed over time and across many taxpayers. To the
taxpayer, these costs take the form of lower services or
somewhat higher taxes. In either case, these costs will be
somewhat invisible (p. 517).

Using a game theory approach, Wolkoff (1991) argues that fiscal incentives might be rational under certain circumstances. But even if they are offered under inappropriate circumstances, they can be justified as rational in light of the myriad political and economic costs and benefits local officials face within a context of information uncertainty and asymmetry.

Most of the aforementioned research focuses on specific incentives and/or specific projects. The national Empowerment Zones/ Enterprise Communities (EZ/EC) program, targeted at both urban and rural distressed communities and embodying a wide range of intergovernmental incentives, offers a broader perspective on the public-private sector relationship.

The Empowerment Zones/Enterprise Communities Program
The Empowerment Zones/Enterprise Communities Program was enacted into law by the United States Congress in 1993. The successor to federal (national) programs enacted in the 1950s, 1960s, and 1970s, it has been characterized as "the most significant effort launched by the Federal Government in decades on behalf of the Nation's distressed inner cities"(Price, Waterhouse, 1997, p.1) Unlike prior federal programs, which focused separately on urban infrastructure renewal or social programs, the EZ/EC program is holistic. Its subsidies to local governments and its incentives to private business enable a comprehensive approach to physical, economic, and social revitalization. For background on prior federal programs for distressed areas, see Liebschutz, 1995; and Rubin (1994). The EZ/EC program is further differentiated by an intergovernmental approach to economic development that combines federal mandates for inclusive and comprehensive planning with decentralized interpretation and implementation.

Two tiers of beneficiaries-nine empowerment zones (six urban, three rural) and 95 enterprise communities (65 urban, 30 rural)-were authorized in the EZ/EC program. Urban zones are larger in population; rural zones are larger in area. Urban zones can contain from 10 percent of the city's population or 50,000, to a maximum of 200,000 people; rural zones can extend up to 1,000 square miles.. Poverty, unemployment, and general distress threshold criteria are identical for urban and rural zones. Each nominated area must have a poverty rate at or above 20 percent for each census tract, or 25 percent in at least 90 percent of the census tracts, or 35 percent in at least 50 percent of the census tracts.

Federal (national government) benefits to both empowerment zones and enterprise communities include subsidies to local governments, through grants-in-aid and waivers from federal regulations, and tax expenditures directed to the private sector. Each urban EZ grantee receives a large grant, $100 million, of social services block grant (SSBG) funds, each rural EZ, $40 million. Each enterprise community, in contrast, receives only $3 million of SSBG funds. The SSBG grants can be used for job training, education, housing, and/or social services for disadvantaged persons. The EZ or EC designation is in effect for ten years, but the SSBG funds must be spent within two years of receipt.

Tax expenditures take several forms. Federal financing incentives for the private sector stem from the ability of the EZ and EC designees to issue up to $3 million in federal tax-exempt bonds for new construction or expansion in the zone. Qualified EZ businesses also can claim enhanced deductions (in lieu of depreciations) for certain property investments. Federal tax incentives are available for businesses located in empowerment zones; they can claim a federal wage tax credit of 20 percent on the first $15,000 in wages on each employee who lives and conducts a substantial portion of business in the zone.

The EZ/EC program is fully intergovernmental, involving not only federal, but also state and local governments. States have an explicit role in the EZ/EC program. State governments must nominate local communities for EZ/EC designation. They must also certify that each applicant community satisfies poverty, unemployment, general distress, and other criteria; and agree to appropriately distribute EZ/EC social services block grant funds to designated communities. Beyond these stipulations, they are given wide latitude in their relationship with the local community. The legislation states that their assistance can entail "providing support to implement the strategic plan, including . . . 'reinventing' their [own] roles and coordinating programs" (Federal Register, 1994, p. 2708).

Local Empowerment

The term "empowerment" is key to the depth of latitude allowed local governments in the planning process and plan design. "Your application," applicants were informed by the departments of Housing and Urban Development and Agriculture (1993), "will be judged both by the substance of the strategic plan and the extent to which [it] reflects the participation of community residents, citizen groups, the private and nonprofit sectors, and your local governmental entities" (p. 6).

Federal grant applications frequently contain detailed guidance regarding process and content. Instructions to local governments seeking EZ/EC designations, in contrast, were relatively general and non-directive. Population, area, and poverty criteria (noted above) constituted the threshold for eligibility. Applicants were instructed to focus comprehensively and strategically on economic, physical, and social dimensions of urban or rural development and to demonstrate participation and commitment by community groups to the strategic plan. They were given general guidance regarding logical steps to arrive at a "common vision" of the future, and suggestive "vision concepts." They were asked to stipulate how federal resources (SSBG funds, tax incentives, etc.) would be utilized, what performance benchmarks would be applied, and what implementation structure or process would be created. But beyond these directives, and consistent with a bottom-up, empowering approach, the local strategic plan was intended to reflect community choices. That plan, in effect, was the application.

In December 1994, President Clinton announced the designation of 104 empowerment zones and enterprise communities out of 520 applications for EZ/EC status. The successful urban EZ applicants were:

  • Atlanta, Georgia
  • Baltimore, Maryland
  • Chicago, Illinois
  • Detroit, Michigan
  • New York, New York
  • Philadelphia, Pennsylvania /Camden, New Jersey.

The successful rural EZ applicants were in Kentucky, Mississippi, and Texas. For an analysis of the key factors in the legislative background, details of the program, and selection of EZ/EC designees, see Liebschutz, 1995. In addition, two cities (Los Angeles, California, and Cleveland, Ohio) were designated "Supplemental Empowerment Zones;" the remainder, in forty-two states, were designated enterprise communities.

Local public officials, as we have written above, have choices. They can yield to the natural forces of the marketplace, or they can consciously adapt to change. If they select to adapt to change, their choices further expand. They can target narrowly to sub-city areas to encourage investment by specific firms; they can be selective in their use of available revenues for infrastructure improvements or financing or taxing incentives. Or they can choose to focus more broadly on the entire city, and be less selective about investment incentives and business targets. State governments, as well, have choices; they can use state resources for direct spending, including technical assistance, and for financing and tax expenditures. The EZ/EC program, which encourages local determination of development strategies, offers local and state officials many choices.

The Six Urban Empowerment Zones
Atlanta, Baltimore, Chicago, Detroit, New York City, and Philadelphia/ Camden (a single, bi-state zone), the six urban empowerment zones designated in 1994, constitute the sample for reference in this paper. All six EZs meet the economic and social distress criteria specified in the legislation. However, the seven cities in which the zones are located also exemplify the wide variation across the American states in what state and local governments do. Their political and institutional structures contrast, as do their relationships with their state governments. Thus, these seven urban empowerment zone cities facilitate investigation of the economic, social, and intergovernmental dimensions of local development.

Data Collection

Both primary and secondary documents were used in the study of the urban empowerment zone cities. Primary documents include data from interviews conducted by the author between January 1997 and April 1998 with local and state government officials in the seven cities and their state capitals, as well as government documents (laws, regulations, internal memoranda) obtained during site visits. Secondary documents include descriptions and analyses published in government reports, journals and newspapers.

Sample characteristics.

These seven distressed cities present variations among themselves in size, density, poverty, education, and employment. They range in size from New York, the nation's largest city, with more than 7 million population in 1990; to Camden, New Jersey, with a 1990 population of less than 90,000. They vary also in population density, with New York the most densely populated, and Atlanta, the least. Nearly 70 percent of Atlanta residents have at least a high school education; fewer than half of Camden residents do. Nearly two-fifths of the population of Camden was below the poverty level in 1990, and over one-third of its households were headed by single mothers; New York's shares of both characteristics were the lowest among the seven cities. Finally, the cities' unemployment rates (proportions of persons 16 years of age and over who were not working, looking for and available to accept a job) varied from Atlanta's 6.5 percent to Camden's 15 percent. Tables 2 through 8 contain information on all of these characteristics for the seven cities, seven states, and six empowerment zones.

These variations among the seven cities are much less dramatic than their contrasts along the same dimensions with their states. In every case, the cities are more densely populated and their populations are poorer, less well educated, and less able to own housing. They contain much higher proportions of female-headed households than the states as a whole, and their residents are much more likely to be unemployed. In fact, these contrasts are understated since the state data are inclusive of those for the city. (See Tables 2-8)

Finally, the six empowerment zones contrast substantially with both their cities and their states. Their residents are poorer, less well educated, and less likely to be employed. The EZs are more likely to contain higher proportions of female-headed households with children. For example, in the Philadelphia part of the Philadelphia/Camden EZ, and

in the Atlanta EZ, persons in poverty were two or two and one-half times the proportions in those cities as a whole, and nearly five and four times the proportions in the states of Pennsylvania and Georgia. One-third fewer residents of the Atlanta, Chicago, Detroit, and New York EZs completed high school than in the cities. Both the Chicago and New York EZs had much higher proportions of female-headed households than their cities or states. A final indicator of the deep distress of the empowerment zones is the unemployment rate; for the six EZs, the average of 21 percent was twice the rate for the seven cities and three times that for the states.

Local Development Strategies

Each of the urban empowerment zones crafted a development strategy with associated activities that takes local needs as well as assets into consideration. Although local plans vary in details from zone to zone, they share common approaches to local development. The Rockefeller Institute (1997), in a report on the first 18 months of the program for the U.S. Department of Housing and Urban Development, found that two strategies dominated the intended spending of the $100 million grants. Economic and job development was the primary thrust of the strategic plans, followed by infrastructure and community development. As might be expected, since these were social services block funds, most activities in the first category pertain to employment (training or placement or support services). The following box illustrates these activities.

Economic and Job Development

  • Small Business Development and Growth, facilitated by "an entity-along the lines of a community development bank-to provide financial and technical assistance to entrepreneurs and businesses in the zone"
  • Job Training, through training targeted at groups (female heads of households, young adults with disabilities, persons returning from prison) and at industries (construction, telecommunications, health care).
  • Job Placement, through internships, on-the-job training, school-to-work programs, with matching funds from businesses.
  • Human Services, such as child care, transportation, health care.
  • Public Safety, through community policing, drug abuse treatment and prevention.

Source: Rockefeller Institute, 1997.

The second category consists mainly of investments in public infrastructure.

Infrastructure and Community Development

  • Housing, both new construction and rehabilitation, and encouraging home ownership through "an increased funding pool dedicated to mortgage loans and/or closing fees"
  • Transportation, through more accessible public transportation routes, and upgraded subway stations and bus shelters.
  • Cultural/Recreational Initiatives, including cultural displays to promote tourism.
  • Additional Community Development, such as development of parks and playgrounds, educational, and family-based services.
  • Infrastructure Improvements, including "improving the landscape, public spaces, as well as removing toxic materials from the environment"

Source: Rockefeller Institute, 1997.

Leveraging Private Capital

Many activities, such as community development banks and home mortgage lending pools, are specifically intended to leverage private or other public sector capital. The "one-stop capital shop," a centrally located technical and financial assistance organization, is also designed for that purpose. The "one stop capital shop" informs local businesses and helps them apply for pertinent taxing and financing incentives offered by national, state, and local governments.

The New York City Empowerment Zone for example, works closely with the Department of Business Services of the New York City government, to offer a wide variety of services to industrial and commercial businesses. The Department of Business Services, in effect, is New York's "One-Stop Capital Shop." It offers information to businesses contemplating locating, or expanding within the City. Such information ranges across local, state, and national grants and loans, sales tax credits on building costs, property tax relief, low-cost tax exempt bonds, reduced utility costs, and wage credits. In addition, the Department of Business Services helps new or existing businesses within the Empowerment Zone to prepare applications for these various benefits.

Local Governance Arrangements

Local governments, as we have written above, are "empowered" in the EZ/EC legislation to plan, design, and administer their revitalization programs. It is not surprising that the governing structures in the urban empowerment zones-reflecting, as they do, unique political institutions and citizen-government dynamics-also contrast widely. The Rockefeller Institute (1997) has classified these structures and their degree of integration with city government as follows:

      Atlanta: Zone-wide; moderate-low integration with city government.
      Baltimore: Zone-wide and individual zones; low integration.
      Chicago: Zone-wide; high integration.
      Detroit: Zone-wide; moderate integration.
      New York: Zone-wide and individual zones: high to moderate integration.
      Philadelphia-Camden: Zone-wide and individual zones: low integration.

In both Atlanta and Baltimore, the EZ program is governed by quasi-public nonprofit corporations; the Empower Baltimore Management Corporation is more independent of the city government than is the case in Atlanta. Detroit's EZ program is also governed by a separate corporation, but "the city council, through its power to approve all contracts with implementing agencies, is the key EZ governing entity" (Rockefeller Institute, 1997, p. 53). New York City's empowerment zone corporation requires unanimity in decisions from its board, which includes the mayor of New York City. Chicago's EZ council proposes projects, but the City Council and mayor have final approval authority. The Philadelphia/Camden empowerment zone has a Bi-State Governing Board with broad responsibilities. The reality is that Philadelphia's EZ program is governed by local boards, whose chairs are appointed by the mayor of Philadelphia. Camden's governance was in disarray for nearly eighteen months after designation, when the city, state, and federal governments created a nonprofit entity, the Camden EZ corporation-with city, state, citizen, and employer representation.

Despite these variations in governing structures and their relationships with the city government, ultimately, its is the local political officials who bear responsibility and will take credit or blame for the success or failure of the local empowerment zone program.

The Role of State Governments

The EZ/EC program, as already noted, allows much discretion to the states. Such latitude contributes in important ways to variations in involvement among the seven states whose cities have urban empowerment zone status. State political cultures, economic development priorities, and past state-city relationships also contribute. The resulting variations range across funds and programs.

The federal legislation does not stipulate that the EZ funds be matched by state or local governments. Yet New York and Illinois have committed their own funds to match, in whole or in part, the federal dollars. New York 's situation is especially notable, for the state and New York City governments each fully match the federal SSBD grant of $100 million. The result is $300 million of public sector direct commitments for the New York City EZ. Illinois has committed $50 million over ten years to Chicago, two federally designated enterprise communities, and 19 unsuccessful applicants for the designation. The Chicago EZ receives nearly two/thirds of the total, or $31.8 million.

The financial contributions of all states take the form of administrative costs expended for required oversight of the federal spending. These contributions are not small; for example, the Georgia Department of Community Affairs estimates that it expends nearly $200 thousand annually of its own revenues for this purpose.

Four of the seven state agencies that administer EZ/EC funds have broad responsibilities for state public welfare and social services programs (Illinois, Maryland, Michigan, and New Jersey). The federal social services block grant program, of which the EZ/EC funds are a small part, is managed by these state agencies. Thus, their designation to administer the EZ funds. In Georgia, New York, and Pennsylvania, EZ administration is lodged with the state economic development agencies. In all of the states, however, state EZ program involvement extends beyond the designated state administrative agency.

State Program Resources

State programs available to the empowerment zones encompass taxing and financing incentives to supplement federal and local incentives, and state spending from own-source-revenues for programs that extend or complement the SSBB funds. Table 9 lists these state programs under two categories-those specifically coordinated with state enterprise zones and other resources and programs, some generally available throughout the state to qualified communities and/or investors. All seven states allocate resources, through direct spending and tax expenditures, to the empowerment zones. Except if the state law mandates that local tax incentives be offered in a state enterprise zone, these allocations represent direct or indirect commitment of state resources.

New Jersey is unique among the seven states to directly target state assistance to the Camden EZ. The New Jersey Urban Coordinating Council coordinates funding across a variety of state agencies to stimulate home ownership, neighborhood revitalization, and industrial investment; provide job training, and to enhance public health and public safety in the Camden EZ.

The commitment of state government assistance for development of "brownfields" needs separate comment. All six empowerment zones contain brownfields, whose redevelopment is a high priority. All seven states offer incentives for private sector investment. Liability assurance is the most common approach. For example, Atlanta's goal is to inventory brownfields within its EZ, and encourage industry involvement in reuse. A prospective purchaser of a redevelopment site, whose cleanup plan receives approval from the Environmental Protection Division of the Georgia Department of Natural Resources, can be authorized limitation of further liability under state law. In some states, liability assurance is coupled with financial assistance. For example, Maryland offers grants and loans to private investors in the Baltimore EZ as well as free site assessments. Michigan also extends financial incentives, and has, in addition, "replaced its previous framework of cleanup standards with use-based criteria." (ICMA, 1997, p. A-37).

The Urban Empowerment Zones Program: A Preliminary Assessment

Assessments of the EZ/EC program have been mixed. Communities that received designation status exuded early optimism that their community-based strategic plans would generate private sector investment with positive spillover effects for residents and local governments. For some communities, even the prospect of the designation had salutary effects-of loan commitments by banks in distressed neighborhoods, of resident involvement in community-wide planning (Liebschutz, 1995). Some scholars and journalists found the program "impressive" in light of prior federal programs (Rubin, 1994); others discerned faults (Lehmann, 1994). And others were skeptical about equity in the selection process (Boyle, 1995; Liebschutz, 1995; Thomas, 1995).

Three and one-half years after designation of the urban empowerment zones, implementation progress is best characterized as uneven. The United States Department of Housing and Urban Development (HUD), in a performance report for 1995-1996 (the first 24 months), found that;

  • the six urban EZs had obligated (approved and committed) 44
    percent of the $600 million SSBG funds;
  • over $2 billion of new private sector investment had been
    made or committed;
  • the focus of the new investment was economic opportunity: job
    creation, investment pools for capital access and innovative
    financing strategies, job and occupation skills-training, and
    entrepreneurial and business support and assistance (HUD,
    1997a, p.2).

However, HUD also noted that most of the urban EZs had start-up problems. They ranged from organizational and power-sharing difficulties between city governments and neighborhood groups, to conflicts between city and state governments over spending priorities, financial reporting, and monitoring mechanisms.

Implementation successes varied among the six urban EZs: Baltimore and Detroit were praised by HUD for significant overall progress in leveraging private investment. The Chicago city government was commended for its commitment to the development of industrial corridors and brownfields in the EZ. HUD noted Atlanta's conflict with the state of Georgia over release of funds, but expressed optimism about commercial revitalization activities in the EZ. HUD observed that the EZ program was "apparently on track" in the New York EZ, but expressed concern about the uncertain status of New York State and City matching funds. The Philadelphia part of the bi-state EZ was commended for progress towards each of its strategic goals. But the Camden part was named "among the lowest performers in the program," having made "no progress in implementing its strategic plan objectives" (HUD, 1997b, p. 2).

Some early difficulties in city-state relations were overcome by the third year of the program. Pennsylvania and New York state agencies developed smoother funds draw-down processes, thus diminishing conflicts with the Philadelphia and New York empowerment zones. However, Atlanta's contentious relationship with the Georgia State Government continued; the Georgia Department of Community Affairs issued a detailed report in November 1997 highly critical of the financial practices and excessive use of administrative funds by the Atlanta Empowerment Zone Corporation.

Summary and Conclusions
What is the appropriate role of national and subnational governments in achieving a balance between economic development and environmental policies? I have reconsidered and refined this question in several ways in this paper. I have focused on local development in the United States. While I have not neglected environmental policies, I have considered them narrowly, as they pertain to the redevelopment of contaminated sites. My examination of the issues has been empirical and positive rather than normative; I have emphasized the "what is" rather than the "what should be."

These, in summary, are the paper's main points:

  • Local economic development in the United States occurs within two controlling contexts: an unplanned economy, and a federal system. Job creation rests fundamentally in the private sector. Decisions to induce private investment are local, but incentives involve local, state, and national governments. Subsidies targeted directly to private firms include tax expenditures and public infrastructure and service improvements. Subsidies to local governments take the form of national and state grants-in-aid.
  • The effects of public incentives on private investment are frequently neutral. Incentives to business most affect location of investment. These effects are largely timing and redistribution. Economic gains, in general, appear to be "zero-sum."
  • Economic development incentives are widely embraced by local, state, and national public officials. At the local level, symbolic and redistribution benefits, with largely invisible cost to taxpayers, constitute the political rationale. State officials, in light of urban blight and national government decentralization, view economic development activities as proper. And national-level politicians, as well, agree on the appropriateness of actions to stimulate private sector investment.
  • The Empowerment Zone and Enterprise Community Program, the latest variant on a national urban policy, seems to hold out promise for distressed urban areas. A holistic, intergovernmental initiative, that involves all three levels of government, it combines incentives for capital investment by the private sector with relevant social investment by the public sector. In the urban empowerment zones, these incentives extend to reuse of "brownfields." Governance difficulties-between citizens and city hall, between local and state governments-evident early in the urban EZ program, seem to be abating.

What conclusions can we draw about public sector governance and economic development in the United States? Weimer and Vining (1989) analogize that policy adoption and implementation are like courtship and marriage. Once the policy has been adopted (and the courtship ends), and implementation begins (as does the marriage) "Unless the couple admit failure and divorce, implementation goes on and on" (p. 305). If the logic of the policy (the underlying theory) is reasonable; if the assembly of essential elements from those who control them is well anticipated; if the facilitators and fixers of the implementation process are creative and competent, the prospects for success are enhanced. These elements have obvious relevance for the implementation of public policies intended to attract private investment, create jobs, create sustained local comparative advantage, and enhance the tax base and quality of life for America's currently distressed cities. Not only does the theory not predict perfectly where, when, and whether private investors will respond to public incentives, the public and private sector interests and actors make the assembly process particularly challenging. The stakes, however, are sufficiently high that public officials at local, state, and national levels are likely to continue trying-if not to implement current policies, then to enact new ones.

Table 1. A Summary of Major Federal Intergovernmental Grants-in-Aid Programs for Economic Development

Clean Water State Revolving Fund Program:

Administering Agency: Economic Development Administration

Activities funded: Loans for wastewater treatment faculties

Fiscal commitment: $1.7 billion, FFY 1996

Community Development Block Grant Program:

Administering Agency: Department of Housing and Urban Development

Activities funded: Housing rehabilitation, neighborhood revitalization;

water and sewer systems

Fiscal commitment: $4.6 billion for Entitlement Communities

(cities > 50,000) and Small Cities, FFY 1996

Community Services Block Grant Program:

Administering Agency: Department of Health and Human Services

Activities funded: Shelter and food emergency services, nutrition

programs, education and employment activities.

Fiscal commitment: $357.4 million, FFY 1994

Employment and Training Assistance for Dislocated Workers:

Administering Agency: Department of Labor

Activities funded: Basic readjustment assistance, occupational

training, supportive services

Fiscal commitment: $1.09 billion, FFY 1996

Table 1. Continued

Empowerment Zone and Enterprise Community Program:

Administering Agency: Department of Housing and Urban Development

Department of Agriculture

Activities Funded: Job training, business and tax incentives, economic

and social development activities

Fiscal Commitment: $1 billion to 6 urban and 3 rural empowerment

95 urban and rural enterprise communities (total for

10 years, 1994-2004)

Public Works & Development Facilities Program:

Administering Agency: Economic Development Administration

Activities funded: Water and sewer systems, access roads, industrial

parks infrastructure improvements; tourism facilities

Fiscal commitment: $164.9 million (158 grants), federal fiscal 1996

Surface Transportation Program:

Administering Agency: Department of Transportation

Activities funded: Highway, mass transit, pedestrian, bikeway


Fiscal commitment: $3.4 billion to states, FFY 1996

Water and Waste Disposal Program:

Administering Agency: Department of Agriculture

Activities funded: Rural water and sewer systems

Fiscal commitment: $963 million (loans and grants), FFY 1996

Source: U.S. General Accounting Office, Economic Development Activities: Overview of Eight Federal Programs, Washington, DC: GAO, 1997.

Table 2. Atlanta, Georgia, 1990

Georgia Atlanta Atlanta
City EZ

Population 7,353,225 394,017 49,998

Population Density* 111.8 3,003

% Unemployed 5.0 6.5 17.9
% Below Poverty Level 14.7 27.3 54.7

% Owner-Occupied Housing 64.3 43.1

% High School Degree or more 70.9 69.9 43.1

% Female Headed Households
with Children 10.9 24.6 24.6
* Per square mile

Data Sources:
Nelson A. Rockefeller Institute of Government, Urban Study Group,
Analysis of 1990 Census.
U.S. Department of Commerce, Bureau of the Census, County and City Data
Book, 1994.
U.S. Department of Commerce, Bureau of the Census, Statistical Abstract of
the United States, 1997.
U.S. General Accounting Office, Community Development: Status of Urban Empowerment Zones, 1996.

Table 3. Baltimore, Maryland, 1990

Maryland Baltimore Baltimore
City EZ

Population 5,071,604 736,014 73,362

Population Density* 489.2 9,166

% Unemployed 5.9 9.4 17.3

% Below Poverty Level 8.3 21.9 41.8

% Owner-Occupied Housing 64.9 48.6

% HS Degree or more 78.4 60.7 45.7

% Female Headed Households
with Children
9.5 21.0 22.5

* Per square mile

Data Sources:
See Table 1

Table 4. Camden, New Jersey, 1990

New Jersey Camden Phila/Camden
City EZ

Population 7,987,933 87,492 49,645

Population Density** 1,041.9 9,878

% Unemployed 6.6 15.4 18.0

% Below Poverty Level 7.6 38.6 46***

% Owner-Occupied Housing 65.0 48.4

% HS Degree or more 76.7 49.7 42.8

% Female Headed Households
with Children
7.5 34.5 22.7

** Per square mile
*** Camden part of the Philadelphia/Camden EZ

Data Sources:
See Table 1

Table 5. Chicago, Illinois, 1990

Illinois Chicago Chicago
City EZ

Population 11,846,544 2,783,726 199,938

Population Density* 205.6 12,204

% Unemployed 7.1 8.4 25.0

% Below Poverty Level 11.9 21.6 49.9

% Owner-Occupied Housing 63.0 41.5

% with HS Degree or more 76.2 66.0 44.0

% Female Headed Households
with Children
9.4 17.1 25.6

* Per square mile

Data Sources:
See Table 1

Table 6. Detroit, Michigan, 1990

Michigan Detroit Detroit
City EZ

Population 9,295,297 1,027,974 101,279

Population Density* 163.6 7,581

% Unemployed 9.2 13.1 29.0

% Below Poverty Level 13.1 29.0 47.9

% Owner-Occupied Housing 72.3 52.9

% HS Degree or more 76.8 62.1 49.0

% Female Headed Households
with Children
11.0 29.0 17.9

* Per square mile

Data Sources:
See Table 1

Table 7. New York, New York, 1990

New York New York New York
State City EZ

Population 18,184,774 7,332,564 199,375

Population Density* 381.9 24,287

% Unemployed 7.2 8.6 18.0
% Below Poverty Level 13.0 19.3 42.4

% Owner-Occupied Housing 53.3 28.6

% HS Degree or more 74.8 68.3 47.6

% Female Headed Households
with Children
10.4 15.0 20.4

* Per square mile

Data Sources:
See Table 1

Table 8. Philadelphia, Pennsylvania, 1990

Pennsylvania Philadelphia Phila/Camden
City EZ

Population 12,056,112 1,585,577 49,645

Population Density** 265.1 11,659

% Below Poverty Level 11.1 20.3 50.1***

% Unemployed 6.9 8.0 24.0***
% Owner-Occupied Housing 70.6 61.9

% HS Degree or more 74.7 64.3 42.8

% Female Headed Households
with Children
7.3 15.6 22.7

** Per square mile
*** Philadelphia part of the Philadelphia/Camden EZ

Data Sources:
See Table 1

Table 9. State Program Commitments

State Enterprise Zone Other State Resources and
State Coordinated Benefits Programs (illustrative)

Georgia Mandatory local gov't Wage, investment,
property tax abatement retraining, child care,
tax credits; sales tax
exemptions; Brownfields aid

Illinois Wage credits; sales, utility tax $31.8 million matching funds;
exemptions Brownfields incentives;
infrastructure imprvts.

Maryland Local property tax credits; state Subsidized loans;
employment tax credits for zone loan guarantees
    employers and for hiring economically for working capital;
    disadvantaged employees daycare facilities:
    Brownfields aid
Michigan Waiver of state business, personal Job training;
income, education taxes; local housing purchase
property, income, and utility taxes and rehabilitation
loans; subsidies for
homeless shelters;
Brownfields aid

New Jersey Wage, business tax credits Customized job
training; sales
tax exemptions; housing loans,
grants; other development
loans, grants;
Brownfields aid

New York Investment, wage, capital and $100 million matching funds;
    sales tax credits; utility rate priority re employment and
    reduction; property tax training funds, business
    permits; Brownfields aid

Pennsylvania Low-interest loans; tax credits; Investment, wage
local property tax abatements tax credits; utility
discounts; Brownfields aid

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Washington, DC: ACIR.

Bartik, Timothy J. (1991) Who Benefits From State and Local Economic Development
Policies? Kalamazoo, MI: W. E. Upjohn Institute for Employment Research.

Boyle, Robin (1995). Empowerment Zones: Picking the Winners. Economic
Development Quarterly , 9: 207-211.

Brace, Paul (1993). State Government and Economic Performance. Baltimore, MD:
Johns Hopkins.

Elkin, Stephen E. (1987). City and Regime in the American Republic. Chicago: University of Chicago Press.

Federal Register (1994, 18 January), p. 2708.

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International City/County Management Association (1997). Brownfields Redevelopment: A Guidebook for Local Governments and Communities. Washington, DC: ICMA.

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U.S. Departments of Housing and Urban Development and Agriculture (1993). Application Guide. Washington, DC: HUD and Agriculture.

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