Enterprise Zones:

Lessons From the Maryland Experience

PEMD-89-2: Published: Dec 15, 1988. Publicly Released: Dec 15, 1988.

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Pursuant to a congressional request, GAO studied the enterprise zone program in Maryland to identify issues for the possible development of a federal program, focusing on: (1) program cost offsets; (2) employment growth; (3) program effects on workers; (4) reductions in welfare dependence; and (5) the effectiveness of tax incentives and other local development strategies.

GAO found that: (1) both Maryland and proposed federal legislation sought to establish zones to promote private investment in economically distressed areas; (2) program-related increases in employment could lead to net increases in economic activity and program cost offsets; (3) the Department of the Treasury estimated that a federal program could cost $4.75 billion over the first 6 years of operation and assumed that the program would redistribute, but not increase, economic activity; (4) the employment growth experienced in the three Maryland zones investigated was not attributable to the program, making cost offsets or reductions in welfare dependence unlikely; (5) participating employers were more likely to consider market access and site characteristics than such program benefits as relaxed regulatory practices, financial inducements, and government assistance; and (6) participating employers were more likely to be influenced by financial incentives in making hiring and investment decisions.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: The new administration is proposing enterprise zone legislation with major differences from the bill GAO examined.

    Matter: The GAO assessment of the Maryland experience does not show that enterprise zones are effective. If Congress decides to introduce a federal program along those lines, the program should be a modest demonstration rather than the large effort proposed in several bills.

 

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