August 07, 2012
Earlier today, Illinois Governor Pat Quinn signed legislation intended to add transparency, accountability and competition to the State’s Enterprise Zone Act. The Civic Federation’s issue brief on Illinois enterprise zones, previewed in a blog post last month, is now available on our website. The purpose of this issue brief is to describe:
· How enterprise zones currently operate in Illinois and recent efforts to reform their administration and implementation;
· The types of tax incentives offered;
· The number and county location of Illinois enterprise zones;
· Enterprise zone fiscal and economic performance;
· A short review of the policy literature on enterprise zones; and
· An overview of enterprise zone operations in five selected states: California, Connecticut, Florida, Indiana and Texas.
Enterprise zones are geographic areas designated by state and/or local governments to stimulate economic growth and create or retain jobs in economically depressed areas. Businesses are provided certain state and local tax exemptions, credits and related benefits to relocate to enterprise zones or to continue operating in them. The concept underlying enterprise zones is that reducing government regulation and taxation in economically depressed areas will stimulate local business enterprise and investment that would otherwise not occur. Currently 43 states have created enterprise zone programs and there are well over 3,000 enterprise zones in the U.S.
Here are some of the key findings of the issue brief.
Number of Enterprise Zones in Illinois: In FY2011 there were a total of 96 enterprise zones operating in Illinois. Of these, 16 enterprise zones were located in Cook County, four in the Collar Counties and 76 in the downstate counties. There are a total of six enterprise zones within the City of Chicago. With the passage of Public Act 097-0905, the total number of enterprise zones in Illinois increases to 102.
Value of Enterprise Zone Tax Expenditures: According to the most recent tax expenditure report from the Illinois Comptroller’s Office, the dollar value of the various state enterprise zone tax expenditures was $104.2 million in FY2010, the last year for which data are available. This was a $33.1 million or 45.0% increase from five years before. Of that amount, approximately 66.3% of the $104.2 million in tax expenditures were for utility tax exemptions, 24.5% for sales tax exemptions, 8.3% for corporate income tax credits and deductions and just 1.9% for individual income tax credits.
Value of Enterprise Zone Investments: The Department of Commerce and Economic Opportunity’s FY2011 annual enterprise zone report stated that the total dollar amount of Illinois enterprise zone investments was nearly $2.5 billion in FY2011. It fell from $4.6 billion in FY2008.
Jobs Retained or Created in Illinois Enterprise Zones: The FY2011 DCEO annual enterprise zone report also provided information on jobs retained or created in each zone. Multiple investments by a firm occurring throughout a fiscal year may retain the same jobs. The total number of jobs created and retained in Illinois enterprise zones fell by 54.2% between FY2006 and FY2010. This was a drop from 50,417 to 23,099. The number of jobs created fell from 21,332 to 8,980; this is a decrease of 57.9%. Jobs retained decreased by 51.5% or from 29,085 to 14,119.
