By Cindy Schroeder
The Cincinnati Enquirer

COVINGTON - Government and business leaders here say they will continue the fight next year to extend an economic development tax-break program that's been used by more than 260 Covington businesses.

Covington's enterprise zone is one of two in Northern Kentucky and 10 in the state with staggered expiration dates. It's scheduled to end Dec. 31, 2004, unless the General Assembly passes legislation to prolong it. Campbell County also has an enterprise zone that's scheduled to expire in 2007.

ENTERPRISE ZONES

• When they started   The Kentucky legislature created enterprise zones in the early 1980s to encourage businesses to locate in economically depressed areas. • What they are   The zones, which are required to have an unemployment rate 11/2 times the national average, were set to last up to 20 years. Building materials are exempt from the state sales tax. Other tax breaks are available for the purchase of machinery, equipment or motor vehicles. • Where they are   Northern Kentucky has two enterprise zones. Covington's starts downtown and runs through the southern end of the city. Campbell County's covers 12 square miles and includes parts of Newport, Bellevue, Dayton, Silver Grove, Wilder, Southgate and Highland Heights.

Despite widespread support during the legislative session just ended, the effort to extend Kentucky's enterprise zones lacked the support of House and Senate leadership and the governor, Northern Kentucky officials said. Local officials plan to renew their lobbying efforts during the 2004 legislative session.

In Covington, businesses that build or expand in the enterprise zone can qualify for a number of incentives, including a lifetime exemption on Kentucky sales tax on equipment and machinery, a three-year abatement of the Covington business license fee and a 40 percent rebate of new payroll taxes collected by the city for up to five years.

"The enterprise zone is critical because we've identified several potential projects for the next two years that would be negatively impacted if those incentives are lost," said Covington Economic Development Director Ella Frye. She added the 6 percent exemption in sales tax is especially attractive to developers investing in new construction or major rehabilitation.

"For some of these deals, it's a make or break proposition in terms of that incentive," Frye said.

Enterprise zones were created in the 1980s to entice businesses and create local jobs. Major employers who have located in Covington's enterprise zone include Fidelity Investments Co., Marriott at Rivercenter, Packaging Unlimited, and a host of businesses along the Madison Avenue corridor.

Frye said Covington's enterprise zone, which encompasses two-thirds of the city, is crucial to the development of the proposed $200 million Riverfront West project. City officials would like to see a mixed use project on the 15-acre site that would include condominiums, high-rise luxury apartments, a 2000-car garage and commercial development.

The city recently advertised nationally for developers and has heard from prospective developers in Indianapolis, Columbus, and Chicago, as well as other parts of Ohio, Indiana and Kentucky, Frye said. Developers are to submit their qualifications by April 25.

"All of them wanted to know what kind of incentives are going to be available," Frye said.

The future of Kentucky's enterprise zones came into question early last year when the state budget director's office reported that enterprise zones had cost the state $284 million in tax revenues over the years.

Supporters have said they don't think those figures are accurate. They acknowledge they need to do a better job of supplying state officials with information on the capital investment made and jobs created and retained because of enterprise zones.

"What it came down to was (state officials) looking at the taxes that are forgone because of the enterprise zone, primarily sales use taxes," said Steve Stevens, vice president of public affairs for the Northern Kentucky Chamber of Commerce. "We are trying to prove to them that what is brought in terms of jobs and economic growth more than offsets any sales tax that the state gives up."

As it did during the current legislative session, the Northern Kentucky Chamber of Commerce will again join the coalition of local governments fighting to keep enterprise zones from expiring.

"We think that the enterprise zone program is one of the best business retention tools that the state is using today," Stevens said. "It's particularly effective in the metropolitan areas and in areas that are depressed."

Government leaders say enterprise zones also help level the playing field for cities that border other states offering enterprise zones and other incentives.

"It's a bigger situation for cities that lie on the border, such as Louisville, Covington and Newport," said Kristi Nader, executive director of the Covington Business Council, which represents about 200 businesses.

"If you look at our enterprise zone, the businesses that have moved there have all cited the benefits to be gained from an enterprise zone as one of the leading factors for making the move," said Campbell County Judge-executive Steve Pendery.

Campbell County's enterprise zone, scheduled to expire Dec. 31, 2007, includes the northernmost parts of Newport, Dayton and Bellevue, as well as Silver Grove's Ohio Riverfront. It also includes parts of Wilder and Highland Heights, including Northern Kentucky University, as well as part of Southgate, including the vacant hilltop site of the Beverly Hills Supper Club.

"Our enterprise zone includes the area around NKU," Pendery said. "That's important to us because of the technology triangle."

Pendery said the university already has plans for a hotel, a conference center and an office building within the enterprise zone. The Northern Kentucky Tri-Ed also has developed a brochure to market sites near NKU.

"(Northern Kentucky University) is producing more (information technology) students than any university in the state," Pendery said.

From February 1984 through September 2002, Covington officials estimated that that city's enterprise zone was responsible for $305 million of capital investment and 6,431 new jobs.

During the past two fiscal years alone, Campbell County had $114 million worth of capital investment, when Newport on the Levee was developed.

E-mail cschroeder@enquirer.com