Two years after adopting an orphaned federal program designed to revive economically depressed urban areas, Virginia has reported measured success in attracting new businesses to several cities, according to state and local officials.
The program, initiated in anticipation of similar Reagan administration legislation that never passed Congress, provides economic incentives on two levels to businesses that relocate or expand in state-designated Urban Enterprise Zones. Although in Virginia the zones may be either urban or rural, they tend to be older downtown urban and industrial areas that, for the most part, have been deserted by business.
At the state level, Virginia offers five-year state tax credits to businesses that locate in the designated areas. In addition, businesses are offered a range of economic incentives by local governments -- including infrastructure improvements, low-interest loan pools and marketing services -- that are designed to address problems affecting their area. To qualify, businesses also have to hire a certain percentage of their work force from among the areas' low-income population.
Virginia had anticipated federal funding that would have added a third level to the program, but when the legislation was killed in Congress, the state "decided to go ahead with the program and let it stand on its own," said John Marlles of the state's Department of Housing and Community Development. Currently, 26 states have Urban Enterprise Zone programs, he added.
So far, only five businesses statewide have qualified for state tax incentives, Marlles said: two in Roanoke, one in Danville, one in Norfolk and one in Newport News. Still, he argues, the 20-year program is in its infancy and already has begun to show signs of success.
Of five communities that were among the first to receive state designation as Urban Enterprise Zones, all have reported active business participation in the program, and some claim it has directly affected the decisions by firms to locate there, Virginia development authorities said.
Portsmouth reported the greatest increase in new businesses. According to Muriel Zober, senior development official for Portsmouth, 24 firms relocated to the city's 480-acre zone in 1984, and one existing company expanded. Construction permits valued at $7.2 million have been issued for the zone, compared with $1 million in new construction in the last five years, she added.
Twenty-five firms have moved into Roanoke's Urban Enterprise Zone, which is nearly four times the size of Portsmouth's, and 141 businesses have expanded, said city official Phil Sparks.
The program has helped create 1,633 new jobs for Roanoke's central business district and areas east of the city, he added. Nine businesses have relocated to or expanded in Newport News with $8 million in new investment during the life of the program, said Thomas E. Ward, director of development.
In other areas: Lynchburg has made loans to 17 businesses to build in the city's 1,236-acre zone. And Danville invested $860,000 in its zone in 1984 and anticipates a further revival of its downtown area with the scheduled arrival next year of a new outlet mall.
Six more Virginia communities were added to the enterprise-zones program a year ago: Hampton, South Hill, Petersburg, Hopewell, Chesapeake and Carroll County-Wythe County.
To what extent the state's programs can be credited with the increased development in these areas is uncertain, according to Marlles. He said it is a problem determining whether these programs "tipped the scale" for businesses that decided to move to the zones.
"Based on my conversations with local businessmen and area development officials, zones are not effective in attracting businesses from outside of the state. But if a firm already has selected the area, it could make a difference over whether a company locates on one side of the line or the other," said Marlles.
But, he cautions, the returns on this program have just begun to come in: "In Virginia, this is a 20-year program. We don't anticipate immediate results. You're talking about really distressed inner-city areas where there is no environment for investment. It will take a while before this impression changes."