Wall Street West: Enterprise Zones and the “New” Jersey City

Middle States Geographer, 2000, 33: 10-19 WALL STREET WEST: ENTERPRISE ZONES AND THE "NEW" JERSEY CITY Grant Saff Department of Economics and Geography Hofstra University Hempstead, NY 11549 ABSTRACT: 1n 1983 the NJ Urban Enterprise Act was enacted with the aim of providing a wide range of incentives to facilitate business relocation into depressed New Jersey cities. Jersey City, an early beneficiary ofthis legislation, has been touted as the most successful urban enterprise zone (UEZj in the State. Since the mid-1980s, Jersey City has staged a remarkable comeback, with the bulk of all NJ's 1990s employment gains occurring there. Most ofthis boom has been due to corporations relocating back-office facilities from New York. There has also been noticeable gentrification of the downtown area. Nevertheless, this boom has been very unevenly shared, with incomes for most ofthe city's residents remaining well below the mean for the State. My paper critically reviews the role that the UEZ has played in promoting the redevelopment ofJersey City, and also the costs and benefits ofusing UEZs as a redevelopment tool. INTRODUCTION abatements that the city has been offering. This has meant that despite the city's gleaming patina, the recent 2000 budget had a $20 million budget gap. It Jersey City is a very good case study of an old was only after a long battle with the State over industrial city that went through major economic securing additional aid to the city and the use of a decline during the 1960s and 1970s and then slowly number of one-time fiscal dodges, such as collecting clawed its way back as part of the new service some of the city's future tax abatement revenue as economy - in this case mainly financial services. In upfront prepayments, that the budget was passed (see the process the city, particularly the downtown area, Miller, 2000). has undergone a major renaissance as new office One of the biggest incentive programs in the buildings and apartments have been erected, city is the enterprise zone program. This program is abandoned old factory space has been converted to often touted as being the most successful in the State condos and lofts, a major mall and marina have been and one of the most successful in the nation. This constructed and new upwardly mobile professionals paper, which is the beginning of a larger research have moved into the area. In the local press it is not project on economic restructuring in Jersey City, unusual to read of Jersey City referred to as provides an overview of the urban enterprise zone "America's Golden Door", "Wall Street West", "the program in both New Jersey and Jersey City and then comeback city", "Silicon Valley East", or as the title attempts to review what role it has played in the city's of a new book "The Left Bank" (Lovero, 1999). change in economic fortunes. Unfortunately this comeback has been unevenly shared as poor, mainly Latino and African American residents, are displaced from downtown ENTERPRISE ZONES and many of the poorer sections of the city remain neglected, with high crime rates and very poor social indicators. In addition to the uneven benefits of this The genesis of enterprise zones can be traced economic comeback, much of the city's to the British urban scholar, Peter Hall, who based his attractiveness to corporations has been due to the idea for urban revitalization on what he had observed very generous fmancial incentives and tax during a 1977 trip to Hong Kong and Singapore. He 10 Wall Street West: Enterprise Zones And The "New" Jersey City argued the need for British "freeports" in selected URBAN ENTERPRISE ZONES IN NEW inner-city areas. These would be areas that had JERSEY minimal state control and encouraged various types of business initiatives (see Wolf, 1990: 125). The core of this concept, renamed "enterprise zones," was In August 1983 the New Jersey Legislature adopted by the then Conservative party government, enacted the New Jersey Urban Enterprise Act and was enacted into law in 1980. US scholars and (NJUEA) as part of a way to revitalize the state's policy-makers, particularly those associated with failing cities. Distressed communities were described conservative think tanks, later brought this concept to in the NJUEA as areas "of economic distress the US. In 1980, Jack Kemp (a Republican characterized by high unemployment, low investment congressman from Buffalo) and Robert Garcia (a of new capital, blighted conditions, obsolete or South Bronx Democrat) introduced a federal proposal abandoned industrial and commercial structures, and based on this idea - tax breaks, fmancing assistance deteriorating tax bases (New Jersey Statutes, 1998). and regulatory relief for businesses that located in The legislation further stated that "it is the targeted areas (Wolf, 1990: 127). At a federal level, responsibility of government to provide a framework the Enterprise Zone legislation failed to pass within which encouragement be given to private Congressional muster during the Reagan capital investment in these areas, disincentives to administrations and the legislation that contained the investment be removed or abated, and mechanisms program within it fell victim to a presidential veto be provided for the coordination and cooperation of during the Bush administration. It was not until 1993, private and public agencies in restoring the economic during the first Clinton administration, that the viability and prosperity of these areas (see Response federal government adopted such a program, when Analysis Corporation, 1998: i)." the Federal Empowerment Zone and Enterprise The program became operational in 1984 and Community Program was signed into law (see each zone was designated for a twenty-year period. Cullingworth, 1997: 198). From 1984 through 1986, UEZs were designated in While the UEZ (urban enterprise zone) ten municipalities. The first two UEZs designated concept stalled at a federal level, it was readily under the 1983 UEZ Act were in Camden and embraced at a state level where by the end of the Newark. Later after two competitive rounds that 1980s more than 30 states had active UEZ programs. considered levels of distress and economic According to Wilder and Rubin (1996: 473) by 1995, development potential of the areas proposed as zones, 34 states had enterprise zone programs and with the the following eight other municipalities were Federal Empowerment Zone and Enterprise selected: Bridgeton, Elizabeth, Jersey City, Kearny, Community Program, the UEZ concept was extended MillvilleNineland (two-municipality joint zone), to 106 additional communities. According to Wolf Orange, Plainfield, and Trenton (Response Analysis (1990: 130) while initially the main aim of the UEZ Corporation, 1998). In 1993, an amendment to the program was to foster neighborhood revitalizati?n, 1983 Act authorized the designation of ten additional this goal quickly became secondary to promotmg UEZs. Of these ten, six were designated in the economic development within the zones. In general legislation and four were selected through a the core goals of most state UEZ programs are to: competitive process. The ten new UEZs are: Asbury leverage new investment to depressed areas through ParkILong Branch, Carteret, Lakewood, Mount the use of incentives (particularly tax incentives such Holly, Paterson, Passaic, Perth Amboy, Phillipsburg, as: sales tax concessions, investment tax credits, and Pleasantville, and Union City. The 1983 legislation employer credits for hiring new workers), increase was amended again in 1996 to add seven zones: East employment within the targeted zones, and to Orange, Guttenberg, Hillside, Irvington, North promote a more friendly business climate within the Bergen, Pemberton, and West New York. Today zones (by eliminating red tape, increased marketing there are a total of 27 UEZs in NJ and all of the and so forth). State's major cities are part of the program. To be designated as a UEZ an area should: be within the qualifying municipality defined by a 11 Middle States Geographer, 2000, 33.· /0-/9 continuous border; by local ordinance the area should Assessments of the New Jersey UEZ Program have been designated as "in need of rehabilitation;" and it should meet the criteria established by the UEZ authority (see U.S. Department of Housing and In 1989 Rubin and Arnstrong conducted an Urban Development, 1995). The NJ UEZs assessment of the New Jersey Enterprise Zone provide a wide variety of incentives and benefits to Program (cited in Wilder and Rubin, 1996: 477-78). businesses that locate within the zones. These They surveyed 976 firms in the state's (then) ten incentives include: qualified retailers charging 50 % enterprise zones. The major conclusions were that the of New Jersey sales tax on "in person" purchases (3% UEZ program had created an additional 9,193 jobs which is half of the NJ sales tax rate of 6%); sales tax between 1985-88 and $803 million in new private exemptions for materials and for tangible personal investment was reported in 1987. They argued that property; a one-time corporation tax credit of $1,500 32% of the surveyed firms cited zone incentives as for the full-time hiring of residents of a city where a the primary reason for location or expansion Zone is located who have been unemployed or decisions, 38% saw these incentives as a secondary dependent upon public assistance for at least 90 days; factor, and 30% said that they were not influenced by a Corporation tax credit of $500 for hiring a resident the incentives. The study also found that larger firms within the zone, within another zone or within a (with over 50 employees) were more likely to be qualifying municipality; subsidized unemployment influenced by the incentives than smaller firms. The insurance costs, for new employees whose gross study also estimated that between 1987-88 the state monthly income is not more than $1,500 (this tax had spent approximately $51.6 million through tax break ranges from 50% to 10% depending on length incentives and direct program expenditures.

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