You asked for a comparison of sSB 154's proposed Bradley Airport Development Zone (BADZ) with the existing enterprise zones.

SUMMARY

sSB 154, which died on the House Calendar, and the enterprise zone statutes provide tax incentives to stimulate mostly business development in designated areas. sSB 154 designates contiguous sections of East Granby, Suffield, Windsor, and Windsor Locks as the Bradley Airport Development Zone (BADZ).

The legislature did not designate the state's 17 enterprise zones but established a statutory process through which municipalities propose zones to the Department of Economic and Community Development for approval. In doing so, it authorized up to 15 zones and later provided separate criteria for designating additional zones. All 15 authorized zones have been approved, as have two additional zones under the separate criteria.

The bill does not specify BADZ's purpose, but it appears to be to reinforce the airport's ability to attract and retain businesses. It fulfills that purpose by providing tax incentives to businesses that develop facilities, create jobs, and repair equipment in the zone. The enterprise zones were also designated to attract businesses, but under a different circumstances. Unlike the BADZ, these zones are small urban pockets where blight, poverty, high taxes, and other factors drive up costs and consequently discourage businesses from operating there. Arguably, their incentives aim to offset these negative effects.

sSB 154 authorizes largely the same types of tax incentives as the enterprise zone statutes. It includes a property tax exemption, but, unlike the enterprise zone statutes, allows the municipalities to decide whether to grant it. If they do, the state must reimburse them for the revenue loss, and the business qualifies for the bill's corporate business tax credits. The state also reimburses enterprise zone municipalities for zones' property tax exemption and businesses that receiving the exemption also qualify for the zones' corporate business tax credits.

DESIGNATION

BADZ

The method for designating the proposed BADZ is different from the one for designating enterprise zones. In sSB 154, the legislature designated an area around the airport as the BADZ by specifying the census tract blocks comprising the zone. Although the bill designates the zone without requiring the affected towns' approval, the zone takes effect only if a town chooses to grant the bill's property tax exemption.

Enterprise Zones

On the other hand, municipalities choose whether to have an enterprise zone. Those that do must comply with the statutes, which specify criteria for designating zones and require the economic and community development commissioner to approve them (CGS § 32-70).

The statutes allow only one zone per municipality and cap the total number of zones statewide. They currently authorize 15 zones and allow additional zones under very strict criteria. The legislature initially authorized six zones when it launched the enterprise zone program in 1981, four additional zones in 1986, and five more in 1993. It also changed the criteria for designating zones each time it authorized additional zones. Attachment 1 summarizes this information.

TAX INCENTIVES

Like the enterprise zone statutes, sSB 154 provides tax incentives for businesses investing in the BADZ. Tax incentives are tools states and municipalities often use to induce businesses to expand or relocate in an area. They vary depending on the tax, the incentive amount, and their duration. They also vary depending on the types of business that qualify for an incentive and the things a business must do to access it (e.g., build a new facility).

sSB 154 and the enterprise zone statutes authorize the same sales tax exemption but different property tax exemptions and corporate business tax credits. The enterprise zone statutes also authorize a real estate conveyance tax exemption. Attachment 2 compares sSB 154's incentives with those under the enterprise zone program.

The property tax exemption appears to be the major incentive under the bill and the enterprise zone statutes. As Attachment 2 shows, BADZ's property tax exemption is different from the enterprise zone exemption. It is available to a wider range of businesses and bases the exemption amount and term on the dollars invested. It is identical to an existing, optional exemption the statutes authorize (CGS § 12-65b). The enterprise zone exemption is a flat, five-year 80% exemption that is available only to manufacturers and specified financial service and retail firms.

The BADZ is optional, meaning that a municipality does not have to grant the exemption even if a business meets the bill's eligibility criteria. The enterprise zone exemption, on the other hand is mandatory, meaning the municipality must grant it if the business qualifies for it. But the state must reimburse municipalities for a portion of the revenue loss under the bill and the enterprise statutes. Arguably, this feature would encourage the BADZ municipalities to grant the exemption.

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