Louisiana economic development head criticizes enterprise zone program

Louisiana Department of Economic Development Secretary Stephen Moret criticized the state's Enterprise Zone Program Monday, saying it no longer fulfilled its purpose of encouraging businesses to create jobs in disadvantaged areas. The program, instituted in 1981, was designed to give tax credits, sales/use tax rebates and investment tax credits to businesses which created jobs in designated disadvantaged areas, called enterprise...

Louisiana Department of Economic Development Secretary Stephen Moret criticized the state's Enterprise Zone Program Monday, saying it no longer fulfilled its purpose of encouraging businesses to create jobs in disadvantaged areas.

The program, instituted in 1981, was designed to give tax credits, sales/use tax rebates and investment tax credits to businesses which created jobs in designated disadvantaged areas, called enterprise zones (EZs).

However, a 1999 act amending the law eliminated the requirement that the businesses be located inside an EZ to qualify. This led to major retailers claiming tax credits and rebates under the program without fulfilling the law's original intent to stimulate growth in disadvantaged areas.

"There is no question this program has, over the years, shifted well beyond what it was intended to do," Moret said Monday morning at a meeting of the Revenue Study Commission.

"If you ask me the question, 'do I think this program helps encourage investment in low income disadvantaged areas?' I think it's certainly not effective at doing that. And I think you could make the argument that it's actually encouraging investment outside those areas."

Moret added state officials are now looking to change the program to realign it with its original intent of creating jobs for EZ residents, those on public assistance, those lacking basic skills and those unemployable by traditional standards.

"We're looking at a number of options for potential tweaks to the program in the context of an overall tax reform effort," he said.

Moret's comments are in line with an April report by the Louisiana Legislative Auditor which found a majority of the jobs created and capital investment made under the program were located outside of the designated enterprise zones.

Specifically, the report found 75 percent of jobs, 68 percent of new businesses and 60 percent of capital investment were made outside of EZs.

Unlike similar laws in Alabama, Arkansas, Mississippi and Texas, the Louisiana program includes the retail industry, where jobs easily transfer from one business to another. This has allowed big box retailers and restaurants to enter markets that may then oust local business from the area.

Moret said his department is concerned about "the impact the program has on small businesses in Louisiana when you incentivize larger companies to come in."

Moret said of the program's $91 million value in fiscal year 2011, 30-40 percent went to incentives for big box retailers such as Walgreen's, Raising Cane's and Walmart.

Moret said he completely shared the concern of legislators such as Senator Sharon Weston Broome, D-Baton Rouge, who said she was concerned about a shift of the program away from benefiting poorer areas.

"Most of the projects are larger companies investing in relatively affluent areas in Louisiana today," Moret said, noting the companies are doing so legally. This reaffirms the importance of making changes to the program itself, he said.