Enterprise Zone growing slowly in tough economy

Business owners look for ways to cut costs, hire employees, increase production

By Vanessa Van Voorhis

The Estacada News, Mar 25, 2009, Updated Oct 30, 2009

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For Eric Sale, owner of Northwest Technologies, EZ program tax abatements were instrumental in the decision to invest $350,000 in new machinery, for which he agreed to hire at least five new employees.

“One of the benefits that we have out here is Randy Ealy has partnered with the county to help us, so the city has been real proactive,” Sale said. “Initially, we agreed to increase 10 percent of the total staff maybe in a year. That was the intent when we started.” As the year progressed and the economy worsened, he realized hiring plans would have wait.

Both Becktel and Sale say Mengelberg told them the county would be flexible with the hiring requirement and would take the economy into consideration. After applying for the program, the company owners say they learned they were misinformed.

“We were told there was a hiring requirement, and we were told if we couldn’t meet that requirement right now, that would be taken into consideration,” Sale said. “The way it was originally pitched to us is the county would take into account things like the economy in order to delay the hiring requirement. They reneged on that.”

Mengelberg said she was “hoping there might be some flexibility and there wasn’t, because there is a state statute of law” that regulates the program’s hiring requirements. She added that the misunderstanding was due in part to the ever-increasing complexity of the program’s rules.

A recent study published by the National Bureau of Economic Research states, “Small businesses find it less worthwhile than larger businesses to claim enterprise zone benefits because of the administrative burden.”

The study examined 33 California enterprise zones dating back to 1984 and found that the program didn’t create new jobs and may have even reduced the number of businesses within the EZ boundary.

Ealy said he “respectfully disagrees” with the studies findings. “We already have two businesses taking advantage of the enterprise zone program, so it’s working quite well in Estacada…We’re becoming quite attractive for great quality of life and well paying jobs.”

Mengelberg agrees with Ealy. “In Estacada, there has been growth in the industrial park. Two businesses in the same year is pretty amazing. It’s been very successful,” she said.

The NBER recommends that the program’s continuation be reevaluated because it’s fairly expensive, and it’s failing to meet its key objective of creating new jobs.

Oregon State Legislature ordered a report evaluating the EZ program by February 1, 2009. Art Fish, business incentive coordinator for the Oregon Economic and Community Development Department, said the Legislative Review Office didn’t provide any funding for it.

He expressed some concern that the state’s current economic situation will create “noise” in the data. Sale said the problem with program is that the “enterprise zone assumes the market will always improve.

“We’re really focused on trying to get things to work,” Sale said. “The city was very helpful and tried to make things easy for us. We’re trying to get involved in the community. We’re not just here to take things; we want to provide things, too, like jobs... We have big hopes for 2010.”

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