Enterprise Zones for Former Military Bases: Some Empirical Evidence from California's LAMBRA Program

Article excerpt

ABSTRACT

LAMBRA is an enterprise zone program created by the state of California to encourage commercial reuse of deactivated military bases. This paper reports results of an exploratory study of LAMBRA's influence on business decisions to locate or expand at former installations . The study first interviewed local program managers in site visits, who reported that they had perceived limited economic impact of the LAMBRA program. Businesses at the LAMBRA locations then were surveyed. Statistical analysis of the surveys showed that few businesses at the sites had taken advantage of LAMBRA. The study presents recommendations for policy and future research.

Introduction

Beginning in the early 1980s, state governments throughout the United States established enterprise zones (EZs) offering business tax incentives to stimulate growth in distressed areas (Hirasuna and Michael, 2005). California inaugurated its EZ program in 1984, and by 2007 had authorized 42 enterprise zones in urban and rural areas around the state.

Within a few years of creating its enterprise zone program, California experienced a wave of military base closures stemming from post-Cold War defense cutbacks. By 1995, 29 installations had been deactivated or had pared operations, at a cost that state sources totaled at $9.6 billion in revenues and 130,000 military and civilian jobs (California Trade and Commerce Agency, 1998). In response to this erosion of a pillar of the state economy, the legislature in 1993 enacted a new, targeted enterprise zone program to facilitate commercial reuse of former base p roperties. Unique among the states (although some ex-bases outside California have been designated enterprise zones), the program is called "Local Agency Military Base Recovery Area" or "LAMBRA." It offers most of the California EZ program incentives, with some salient differences. By 2001, eight LAMBRA designations had been authorized encompassing nine former installations. These included air force bases, naval and Marine Corps air stations, a naval training center, and a shipyard. Five of the sites are in northern, four in southern California.

To date the LAMBRA program has not been a subject of academic study. This paper presents results of a n examination of LAMBRA's economic impacts. Findings are reported from two research phases. First are results of in-person interviews with local program managers at the LAMBRA sites. Local economic development officials who oversee the program were asked about their perceptions of its impacts and management challenges. The second, more important set of results comes from a survey of businesses at LAMBRA sites. The questionnaire, which was developed from the literature review and site visit findings, was sent to all known businesses located at the seven LAMBRA sites with significant commercialization. Businesses were asked about industry and ownership characteristics, place of origin or from where they had relocated, staff levels and wage and hiring rates, and familiarity with LAMBRA and use of incentives. Survey data were analyzed using cross tabulations with Chi-square tests.

The paper begins with a survey of the academic research on enterprise zones. A tentative conclusion about LAMBRA is drawn from the review. Next, basic information is presented about LAMBRA incentives, the process for designating sites, and state tax evidence on utilization. This is followed by a description and summary of results of the site interviews. Next is described the questionnaire sent to businesses at the LAMBRA locations, followed by presentation of the findings of statistical analysis. Following a discussion of results, the paper concludes with implications for policy and research.

Enterprise Zone Literature

Since they were established in the early 1980s, enterprise zones have stimulated a growing body of research. The sophistication of studies has improved as initial case, survey, or shift-share methods have given way to multiple regression analyses, but findings about the economic impacts of enterprise zones remain inconclusive. …