Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, November 26, 1995 TAG: 9511250009
SECTION: BUSINESS PAGE: G-1 EDITION: METRO
SOURCE: JEFF STURGEON STAFF WRITER
DATELINE: LENGTH: Long
Unfortunately, this parcel in Northeast Roanoke is hilly and its soil covers rock. The cost to blast out and grade the site and building an access road are costly barriers to development.
This could change. On Wednesday, Virginia Gov. George Allen could declare the tract part of a new enterprise zone, a designation that comes with a package of financial incentives that may drum up interest of developers.
An enterprise zone is defined by law as a depressed area in which companies get tax breaks or other incentives in return for establishing or expanding businesses and employing people with low to moderate incomes.
Roanoke believes the designation could cut the cost to private industry of developing vacant land in the city-owned industrial park. Roanoke Centre for Industry and Technology is where 1,800 to 2,000 people work now, depending on the season, but where industry hunters believe hundreds more jobs could be created.
The enterprise zone program also could defray the cost of improving buildings at Statesman Industrial Park, another center of employment in the northeast part of the city, with 80 businesses. Officials said it is dotted with vacant and obsolete buildings, unsightly fenced storage lots and patches of overgrown weeds. Roads lack complete gutters and curbing to manage storm runoff.
The incentives would include a first for the city - a reduction in its tax on business machinery and tools, which, when applied to new and near-new equipment, is the second highest in the Roanoke Valley, after Salem.
While Roanoke hasn't made a practice like some other localities of trading free land for jobs and lavishing often controversial incentives on industry, "we don't mind investing in human capital and buildings and equipment that we will get a return on," said Doug Chittum, a city economic development specialist.
Forty other Virginia communities will be competing for enterprise zone designations. Although officials claim the program ultimately pays for itself, the number of zones operating is limited to control the upfront costs to taxpayers. This week, 14 zones will be approved, bringing the state's total to 45. The General Assembly has authorized five more zones for the governor to use in economic development deal-making.
In Roanoke, areas roughly north of Orange Avenue and east of the railroad tracks that parallel Hollins Road would fall within the new zone. The designation would take effect after Allen's announcement, expected at a community development conference in Hampton, and continue for 20 years.
Roanoke's proposal is a 1,020-acre area - 3.7 percent of the city - and would complement an 1,800-acre zone that encircled most of downtown Roanoke 11 years ago.
The lower cost of doing business in an enterprise zone would come at taxpayer expense, but Roanoke City Manager Bob Herbert has said the program would most likely bring in more money from taxes on the industries than it would cost the city.
Chittum said Roanoke's proposal is strong because it would assist companies and residents living near the industrial areas, while sharing costs with the state.
Those residents make below-average incomes by citywide standards and rank lower on other demographic measures, such as education. Four percent of homes use wood or coal for heat.
Under its application for enterprise zone designation, the city pledges to invest $450,000 or more over five years to improve their living conditions.
"We want the people to be happy here as well as businesses," said city economic development specialist Linda Bass.
|n n| But the city had another reason for addressing neighborhood issues: The state required Roanoke to draw the zone boundary to include low-income areas.
If the zone is designated, businesses could collect four types of incentives from the state and about a half-dozen from the city. The incentives include:
A 60 percent to 80 percent break on corporate income tax for 10 years.
First, a new business would need to show that 40 percent of its employees live in the enterprise zone or had annual income of no more than $22,300 before being hired. Existing businesses would need to first boost employment by 10 percent and ensure 40 percent of new hires were zone residents or met the income guideline.
A 50 percent break on the city's business machinery and tools for three years. A business would first have to install at least $1 million worth of equipment to collect the savings, which would amount to at least $25,000.
City officials would need to make sure the constitution would allow the rebate, and will ask for an opinion from the attorney general if the zone wins approval.
One-time cash award of $1,000 for each resident of the zone hired for a full-time permanent job, as long as the company creates at least 10 jobs and invests $250,000 to expand or move to the zone. The award is $500 if the new employee lives outside the zone.
A five-year freeze on the real-estate property tax for anyone spending at least $50,000 to repair or replace a building at least 15 years old. Normally, the tax goes up on improved buildings to reflect its higher value.
Some owners of older buildings have been hesitant to make improvements, and asked city officials, "Why should I fix it up? You'll just come out and tax me," Chittum said.
To John Frye, the proposals "sound real good." He is president of Tread Corp., an equipment maker, and leader of a business association at Statesman Industrial Park.
Bill Johnson, manager of the Vitramon Inc. electronics plant at the Roanoke Centre for Industry and Technology, cautioned against thinking of the enterprise zone as simply a giveaway program that requires little of businesses. Businesses must spend significant amounts of money on hiring or construction to qualify, he said.
Despite the program having supporters, some in Statesman Industrial Park don't necessary agree with the city that Statesman's businesses should move to improve property values and the park's image by cleaning up its look.
Bill Inge makes no apoligies for the large number of signs he stores behind a vegetation-entwined fence outside his sign company, Stanford & Inge Inc., which opened soon after Statesman Industrial Park did in 1967.
If the city wants to build him a storage shed for the signs, he said, fine. If not, "they can go fly a kite," Inge said. "I just thought this was an industrial park."
Businesses were supportive when Roanoke created its existing enterprise zone to try to revitalize the downtown in 1984, shortly after the state enterprise zone program began. As of last summer, 59 businesses had qualified for benefits from the state, which shouldered virtually the entire cost of all incentives available through the first zone designation.
Neither local nor state officials can say how much money the 59 businesses have invested or how many employees they've hired. Officials said they will better monitor the proposed enterprise zone to determine if taxpayers receive their money's worth.
Other new safeguards have closed what many considered unintended legal loopholes, to spread benefits more evenly among qualifying businesses, and put an adjustable cap on the state's costs. The state has paid $7.8 million and one estimate said the number could double within a year or so, but the program has so far "probably paid for itself" through the generation of new taxes, Dan Girourd, state enterprise zone administrator, said in a recent interview.
Although the taxpayer protections will apply to all enterprise zones, old and new, Roanoke will subsidize just those companies in the proposed zone.
Brian Wishneff, the city's former chief of economic development, said the earlier program's most visible developments include the renovation of a former bus station on Rutherford Avenue by Avis Construction Co. and Adams Construction Co., the sprawling plant of Coca-Cola Bottling Co. of Roanoke and the facilities of J.M. Turner & Co. at 130 Church Ave., Newcomb Electric Co. at 2708 Shenandoah Ave., and Branch Highways Inc. at 442 Rutherford Ave.
This week, local officials hope Allen will lower barriers to the same sort of building blitz at the industrial parks on the northeast side.
Under their vision of progress, the white-tailed deer that graze at the city meadow will someday amuse a chief executive looking out from a corner office.
by CNB