DECD: Enterprise Zone Guide

Connecticut's Enterprise Zone Program Guide
 

Connecticut was the first state in the country to establish Enterprise Zones. In 1982 zones were designated in 6 communities; there are currently 17 Enterprise Zones in Connecticut.

Below you will find information on the Connecticut Enterprise Zone program 2010-2012.

 
ZONE DESIGNATION

Connecticut General Statutes 32-70 designates the establishment of the state's Enterprise Zones. A zone consists of a primary or secondary census tract or several contiguous tracts within a community.  In order for a community to be eligible to establish a traditional Enterprise Zone it must meet certain criteria related to social and economic conditions.

Primary census tracts must meet at least one of the following:

  • a poverty rate of at least 25%
  • an unemployment rate of two times the state average
  • at least 25% of the tract's population receives public assistance 

Secondary census tracts must meet lower thresholds:

  • a poverty rate of 15%
  • an unemployment rate of at least 1/5 times the state average
  • at least 15% of the tract's population receiving public assistance 

NOTE: East Hartford, Groton and Southington were designated Enterprise Zone municipalities by way of special legislation due to the impact of severe defense industry cutbacks, each representing a minimum of 2,000 lost positions. The above poverty criteria did not apply.

A municipality with a designated Enterprise Zone, as described above, is defined in CGS 32-222(u) as a Targeted Investment Community. By statute, a municipality may have only one Enterprise Zone. However, a Targeted Investment Community may, if certain conditions are met, designate other areas within the municipality as having the equivalent of Enterprise Zone-level benefits. Such designations include:

  • Entertainment District (Sec 32-76 CGS) - A Targeted Investment Community may, with the approval of the Commissioner, designate an area within the municipality as an Entertainment District. Once an Entertainment District is designated, projects eligible for Enterprise Zone-level benefits would include, but are not limited to, facilities producing live or recorded multimedia products, and any such support business necessary to sustain such operations. An eligible entertainment-related project taking place anywhere within a municipality, with an approved Entertainment District, is eligible for Enterprise Zone-level benefits. In the event that an eligible entertainment-related project takes place within the boundaries of the designated Entertainment District, the municipality has the option of providing a 100% property tax abatement for the eligible project for up to seven years, rather than the standard tax abatement of 80% for five years. Entertainment related to gambling or gaming facilities, or facilities whose primary source of revenue is the sale of alcoholic beverages are specifically excluded per statute. Also, such operations as video arcades and theme parks do not fall within the range of definitions provided in statute. However, within the designated district, the municipality may provide a 100%, seven year property tax abatement for any real property improvement (Sec. 32-76a CGS). Currently Entertainment Districts have been designated in Bridgeport, New Britain, Stamford, and Windham. A list of eligible entertainment businesses, by NAICS number, is located in Addendum B.

  • Qualified Manufacturing Plant (Sec 32-75c CGS) - Any Targeted Investment Community with a manufacturing plant having an area of at least 500,000 square feet, which is located outside of the Enterprise Zone may, with the approval of the commissioner, designate such a facility a Qualified Manufacturing Plant. Any eligible company completing an approved project in such a facility is eligible for the same benefits, and subject to the same conditions, as those who qualify for benefits in an Enterprise Zone. Bristol and New Britain are the only Targeted Investment Communities that have received such a designation for specific facilities.

  • Railroad Depot Zone (Sec 32-75a CGS) - Any Targeted Investment Community with an abandoned or underutilized railroad depot area, which is located outside of the existing Enterprise Zone may, with the approval of the commissioner, designate this area, and a reasonable amount of adjacent area, as a Railroad Depot Zone. For the purpose of this designation a railroad depot is defined as an area that abuts an active or inactive rail line and contains vacant or underutilized manufacturing or warehousing facilities that were originally dependent on railroad access to operate. An eligible project taking place in such a designated area is eligible for the same benefits, and subject to the same conditions, as those who qualify for benefits in an Enterprise Zone. To date, the towns of East Hartford and Hamden, and the city of Norwich, have received such a designation.

Urban Jobs Program - The Urban Jobs Program provides benefits to eligible companies located in a Targeted Investment Community, but outside of the Enterprise Zone, and which are not impacted by any of the Enterprise Zone-level benefit areas described above. Urban Jobs benefits are lesser benefits than Enterprise Zone-level benefits but the same qualifying criteria generally apply, as a requirement an inducement letter must accompany each application.

In order to apply for one of these designations, a municipality must meet certain specific qualifying criteria as described below. These designations are:

  1. Contiguous Municipality Zone - Any municipality that is contiguous to an Enterprise Zone located in another municipality may, with the approval of the commissioner and the legislative body of the municipality containing the Enterprise Zone, designate one or more census tracts, or portions of such census tracts, as eligible for provision of Enterprise Zone-level benefits. These designated census tracts must be immediately adjacent to an existing Enterprise Zone in the neighboring municipality. An eligible project taking place in such a designated area is eligible for the same benefits, and subject to the same conditions, as those qualifying for benefits in an Enterprise Zone in a Targeted Investment Community. Per statute, any municipality that designates such a zone under these conditions is not considered a Targeted Investment Community, and no other incentive programs or benefits available within a Targeted Investment Community apply. The town of Plainville has received such a designation. 
  2. Defense Plant Zone - Any municipality with a former defense manufacturing plant that was vacant on July 1, 1998 may apply to the commissioner to provide Enterprise Zone-level benefits to eligible business facilities locating in that building. Approval of the zone designation is subject to the commissioner determining that the economy of the municipality was severely impacted by a prime defense contract cutback. Such a determination is made after a public hearing where information is presented supporting such findings. Such a determination would be effective for two years, and may be renewed for another two years subject to another public hearing taking place. Any eligible project taking place in such a designated facility will be eligible for the same benefits, and subject to the same conditions, as those qualifying for benefits in an Enterprise Zone in a Targeted Investment Community. Any municipality that designates a Defense Plant Zone will not be considered a Targeted Investment Community, and no other incentive programs or benefits available within a Targeted Investment Community apply.  The towns of Stratford and Cheshire have received such a designation. 
  3. Manufacturing Plant Zone - Any municipality with a population less than 20,000 that is contiguous to a Targeted Investment Community may request the commissioner approve the designation as manufacturing plants those properties located in a census tract or contiguous to such census tract provided that the census tract (1) is contiguous to a census tract in a Targeted Investment Community and has a low or moderate income housing project, (2) contains a facility of at least 180,000 square feet formerly used for printing or allied industries, (3) includes at least 100 acres of land that is vacant and zoned industrial or commercial, and (4) has a boundary that consists of a portion of a railroad track and a stream. Any eligible project taking place in a designated Manufacturing Plant Zone shall be eligible for the same benefits, and subject to the same conditions, as those qualifying for benefits in an Enterprise Zone in a Targeted Investment Community. Any municipality that designates a Manufacturing Plant Zone will not be considered a Targeted Investment Community, and no other incentives programs or benefits available in a Targeted Investment Community apply. The town of Bloomfield has received such a designation.
  4. Bradley Airport Development Zone - This zone establishes tax incentives for manufacturers and certain related businesses that build or substantially renovate facilities in the area and create new jobs. Enterprise Zone-level benefits will be available to businesses that manufacture, process or assemble raw materials or parts; perform manufacturing-related research and development; or significantly service, overhaul or rebuild industrial machinery and equipment. Warehousing and motor freight businesses can qualify for tax incentives if they can demonstrate their business is dependent on goods shipped by air, while service companies including information technology companies can also qualify for credits if they can demonstrate their business is related to the airport. The zone, located around Bradley International Airport, will include specified census blocks within the towns of East Granby, Suffield, Windsor and Windsor Locks.
  5. Bioscience Enterprise Corridor Zone This zone is for eligible businesses that do not have more than three hundred employees at any time during the preceding twelve months and is engaged in bioscience, biotechnology, pharmaceutical or photonics research, development or production in the state. The definition of bioscience has been included for businesses engaged in the study of genes, cells, tissues, and chemical and physical structures of living organisms. Enterprise Zone-level benefits will include certain businesses and commercial properties in certain census blocks, groups and tracts in Farmington, Hartford, Bristol, New Britain and Plainville. 
ENTERPRISE CORRIDOR ZONES

Enterprise Corridor Zones are located along Route 8 South and Route 8 North in the state's Naugatuck Valley and Interstate 395 in the eastern region of the state.

Benefits for eligible projects in an Enterprise Corridor Zone are identical to those in an Enterprise Zone, and subject to similar qualifying terms and conditions. For the purpose of obtaining the enhanced 50% level of corporate credits, the hiring level for new full-time positions remains at 30% of those positions being filled by residents of the community in which the project takes place, who are Workforce Investment Act (WIA) eligible.

The communities located in the corridor zones are: Ansonia, Beacon Falls, Derby, Griswold, Killingly, Lisbon, Naugatuck, Plainfield, Putnam, Seymour, Sprague, Sterling, Thompson, Torrington and Winchester. Municipalities in the Enterprise Corridor Zones are not classified as Targeted Investment Communities, and are therefore not eligible to extend Urban Jobs Program benefits.

ELIGIBLE APPLICANTS

Eligible businesses are defined by their North American Industry Classification System (NAICS).

  • For Urban Jobs Program benefits, in a Targeted Investment Community but outside of an Enterprise Zone, ONLY manufacturers, research associated with manufacturing, and distribution warehousing (new construction/expansion only) may qualify under the standard threshold guidelines. Certain service sector companies, as defined by NAICS code (see Addendum A), may be eligible for benefits based on a graduated scale subject to meeting certain thresholds of capital investment and job creation. An eligible applicant must occupy a facility that meets the criteria as defined below under ELIGIBLE PROJECTS.

  • In an Enterprise Zone, in addition to manufacturers and distribution warehousing (new construction/expansion only), certain service sector firms (also defined by NAICS code), may also qualify. The NAICS codes for the service sectors that may be eligible for Enterprise Zone benefits are listed in Addendum A.

APPLICANT CONDITIONS

If the business occupant leases the qualifying facility (as defined below) the lease term must satisfy certain minimum requirements.

  • In a Targeted Investment Community (Urban Jobs Program) the lease must be for an initial minimum term of five years with the option to renew, at the request of the lessee, for an aggregate term of not less than ten years, or the option to purchase the facility after the first five years.

  • In an Enterprise Zone the term of the lease for a business occupant is generally the same as for a facility located in a Targeted Investment Community (Urban Jobs Program). However, for those with an average of ten or fewer employees, the lease may be for an initial minimum term of three years with an option to renew, at the request of the lessee, for an aggregate term of not less than six years, or the option to purchase the facility after the first three years.

ELIGIBLE PROJECTS

The project eligibility for both Targeted Investment Communities (Urban Jobs Program) and Enterprise Zones is defined in CGS 32-9p. Benefits accrue to projects whose central activity revolves around capital improvements to land and/or building. A real estate transaction has to take place in order to qualify the facility that will be occupied by the eligible business. The transaction must meet one of the following criteria:

  • Substantial renovation of an existing facility involving capital expenditures of at least 50% of the assessed value of the facility prior to its renovation. All renovation activities must be permitted by the town in order for their value to be recognized. The only costs that matter in meeting the 50% test are those costs that were incurred for work that required the use of a building permit.

  • Construction of a new facility. The expanded portion of an existing facility is considered new construction.

  • Acquisition of a facility by new owners after having been idle for at least one year prior to acquisition. Within an enterprise zone, the idleness requirement does not apply to companies with an average of five or fewer employees in the six months preceding acquisition of the facility, and is at least six months for businesses that have an average of between six and nineteen employees in the preceding six months. A one year idleness is required if there are more than nineteen employees involved.

Idleness is determined if the facility was unused, unoccupied or substantially under utilized for the appropriate period of time prior to being acquired for productive use. A community may request that the commissioner waive the idleness requirement for a facility for a specific client.  An idleness waiver must be signed by the Enterprise Zone Coordinator.

BENEFITS - ENTERPRISE ZONE

There are basically two business incentives associated with an Enterprise Zone location:

  • A five-year, 80% abatement of local property taxes on qualifying real and personal property, subject to the property being new to the grand list of the municipality as a direct result of a business expansion or renovation project, or in the case of an existing building, having met the vacancy requirement. The property tax abatement is for a full five-year period and takes effect with the start of the first full assessment year following the issuance of a "Certificate of Eligibility." Statutory reference to these benefits can be found in CGS 32-9p, 32-9r, 32-9s, 12-81(59) and 12-81(60).

  • A ten-year, 25% credit on that portion of the state's corporation business tax that is directly attributable to a business expansion or renovation project as determined by the Connecticut Department of Revenue Services. The corporation tax credit is available for a full ten-year period and takes effect with the start of the business' first full fiscal year following the issuance of a "Certificate of Eligibility." The corporate tax credit increases to 50% if a minimum of 30% of the new full-time positions are filled by either zone residents or are residents of the municipality and are WIA eligible. The statutory reference for this benefit is CGS 12-217(e).

Newly formed corporations located in a zone qualify for a 100% corporate tax credit for their first three taxable years and a 50% tax credit for the next seven taxable years. The corporation must have: (1) at least 375 employees - at least 40% of which are either zone residents or are residents of the municipality and who qualify for the Workforce Investment Act, or (2) has less than 375 employees - at least 150 of which are zone residents or are residents of the municipality and who qualify for the Workforce Investment Act.

Any businesses engaged in biotechnology, pharmaceutical, or photonics research, development or production, with not more than three hundred employees, are eligible for Enterprise Zone benefits if they are located anywhere in a municipality with (1) a major research university with programs in biotechnology, pharmaceuticals or photonics and (2) an Enterprise Zone. Benefits are subject to the same conditions as those for businesses located in an Enterprise Zone.

BENEFITS - URBAN JOBS PROGRAM

The benefits associated with the Urban Jobs Program in a Targeted Investment Community, but outside of the Enterprise Zone, are provided at the discretion of the commissioner of the Department of Economic and Community Development, and are as follows:

  • A five-year, 80% property tax abatement.

  • A ten-year, 25% corporation business tax credit to qualified manufacturing businesses.

  • Property tax benefits for real estate and/or equipment are provided for qualifying service facilities, located outside of an Enterprise Zone in a Targeted Investment Community, on a sliding scale basis. The minimum investment is $20 million to qualify for a five-year, forty percent tax abatement. This benefit increases to an eighty percent, five-year tax abatement for projects with an investment greater than $90 million. The equipment qualifies only if it is installed in a facility which has been newly constructed, substantially renovated or expanded.

  • Corporate business tax credits are provided for qualifying service facilities, located outside of an Enterprise Zone in a Targeted Investment Community, on a sliding scale basis based on new full-time jobs created. The minimum tax credit of 15% is allowed for service companies creating 300 or more but less than 599 new jobs. The benefit increases to 50% for such companies creating 2,000 or more new jobs at the eligible facility. The eligibility period for this tax credit is ten years.

A business may not initiate a project that could qualify for incentives without first requesting and obtaining the approval of the commissioner of the Department of Economic and Community Development. The preferred method is in the form of a letter, from the municipality to the commissioner, requesting approval of benefits on behalf of the company for a specific project.

Approval is dependent upon the business' ability to demonstrate: (1) that the incentives are an inducement, and (2) that they have an economic need that the incentives will alleviate or that the project will represent a net economic benefit to the state and/or municipality. (CGS 32-9r)

APPLICATION AND CERTIFICATION PROCESS

An Enterprise Zone business applicant must complete a preliminary application to determine if all eligibility criteria will be met. Enterprise Corridor Zone applicants are processed identically to those in Enterprise Zones.

A Targeted Investment Community (Urban Jobs) business applicant must submit a formal request (preferably through the local economic development official of the town) for the urban jobs program incentive before initiating an otherwise eligible project. The request must demonstrate (1) inducement and (2) need or economic benefit as described above.

Neither the preliminary questionnaire nor the letter of request constitutes a formal application. If the Enterprise Zone applicant demonstrates that all of the requirements will be met, a formal application is provided. A Targeted Investment Community (Urban Jobs) applicant is sent a formal application after his request has been approved by the commissioner of the Department of Economic and Community Development.

All applicants must submit a completed application to the Department of Economic and Community Development prior to October 1 of the assessment year in which the project is completed. In addition to the completion of the formal application a business applicant must provide the following in order to be certified:

  1. a copy of the lease, if the facility is being leased.
  2. a copy of the deed to the property if it is acquired by purchase.
  3. a notarized letter from a municipal official testifying to the idleness condition if that criterion is being used to qualify a facility.
  4. a copy of the company's Certificate of Good Standing from the Secretary of State.

Completed applications are reviewed and Certificates of Eligibility are issued within 2-3 weeks after receipt. The department does not impose any charges or fees for the application and certification process. Monitoring consists of inspections of certified facilities and businesses by department officials as well as local and municipal program administrators. These inspections may be announced or unannounced and may include the municipal assessor.

ZONE EXPANSION

Municipalities, with the approval of the DECD commissioner may expand Enterprise Zones outside of the primary tract if the census tract boundary line is along a railroad right-of-way, railroad property or natural stream of water. Additional contiguous tracts, as well as portions of contiguous tracts, may also be added to the zone if these tracts are determined to meet primary or secondary tract threshold requirements.

The commissioner may also include in the area designated as an Enterprise Zone:

  • certain facilities which are located outside of, but contiguous to, a zone census tract.

  • any private properties which are located outside of a census tract included in the zone, and located between the zone and a railroad right-of-way which is the boundary of the zone.

  • any property located within 150 feet of a stream, the center line of which is the boundary of a census tract included in the zone and which property contains an existing building or facility 100,000 square feet or larger, that is or was used for manufacturing purposes but is under-utilized or vacant.