[Congressional Record Volume 143, Number 1 (Tuesday, January 7, 1997)]
[Extensions of Remarks]
[Page E57]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                    INTRODUCTION OF FIRE LEGISLATION

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                        HON. BARBARA B. KENNELLY

                             of connecticut

                    in the house of representatives

                        Tuesday, January 7, 1997

  Mrs. KENNELLY. Mr. Speaker, I rise today to introduce legislation 
that would create three additional enterprise zones targeted toward the 
financial institution, banking, and real estate or FIRE industries. I 
have consistently supported enterprise zones and think the intense 
competition for both the zone and community designation provides ample 
evidence of the broad support for these efforts.
  My city of Hartford, CT applied for designation as an enterprise 
community but was denied. But when I started looking at the details, it 
was clear to me that while empowerment zones/enterprise communities are 
excellent economic development tools, they just don't quite fit all 
areas.
  The tax incentives in empowerment zones include a wage credit, 
expensing of up to $75,000 and a loosening of restrictions on tax-
exempt bonds--all incentives seemingly geared to manufacturing. 
Hartford and a number of other cities around the Nation, however, are 
different--our base is services and we would frankly benefit from a 
different mixture of tax incentives.
  Let me talk about Hartford for a moment. Hartford has long been known 
as the insurance capital of the world. We have also traditionally been 
a center for financial services. However, any reader of the Wall Street 
Journal knows of the consolidation in the banking industry and that 
real estate in many parts of New England is still in a severe slump. On 
top of this, we are in the midst of unprecedented change in the 
insurance industry. In the past 3 years every major insurer in Hartford 
has either been a merger participant and/or acquired or jettisoned a 
major line of business.
  But because this proposal isn't just about Hartford. In the past 
decade, we have seen unprecedented change in our financial services 
industries. We have had banking and S&L problems, face increasing 
competition in the global marketplace, and again this year will debate 
allowing banking, and other service industries including securities and 
insurance to affiliate. In addition, we have seen Bermuda attract over 
$4 billion in insurance capital in the past few years. It is certainly 
a beautiful place, but most important, it's also a tax haven.

  And while change can be good, it does create a tremendous amount of 
uncertainty. With each and every merger or spinoff, every mayor and 
every city council, not to mention the thousands of affected employees 
who ask the same two questions: What does this mean for jobs; and what 
impact does this have on the property tax base and real estate values?
  This legislation would create three additional zones with tax 
incentives targeted to services. Specifically, these FIRE zones would 
be patterned after existing enterprise zones, but could encompass an 
entire city or municipality, and more important, could include central 
business districts. Eligibility would be the same as for existing 
enterprise zones, with an additional requirement that an eligible city 
would have to have experienced the loss of at least 12 percent of FIRE 
industry employment, or alternatively, 5,000 jobs.
  In lieu of traditional enterprise zone tax incentives, new or 
existing businesses in FIRE zones would receive a range of tax 
incentives.
  First, to deal with jobs, there would be a wage credit for the 
creation of new jobs within the zone. This would encourage businesses 
to hire displaced and underemployed insurance, real estate, and banking 
workers as well as to create entry level jobs for clerks and janitors.
  Second, to deal with the high commercial vacancy rate problem that 
plagues many cities, there would be unlimited expensing on FIRE 
buildouts and computer equipment. The proposal would also remove the 
passive loss restrictions on historic rehabilitation.
  Next, to provide an incentive for investors, the proposal would 
provide for a reduction in the individual capital gains rate for zone 
property held for 5 years to 10 percent. In addition, capital gains on 
zone property would not be considered a preference item for individual 
alternative minimum tax purposes. The corporate capital gains tax rate 
would also be reduced, to 17 percent.
  Finally, many big cities aren't always as safe as we would like. 
Therefore, the proposal would provide for a double deduction for 
security expense within the zone. This should give employers an added 
stake in the safety of our cities.
  I would urge my colleagues to support this legislation.

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