L.A.’s Zone Program Is Unproven : Development: Business owners say inducements were not a key element in deciding where to locate, even though city claims them as success stories.

After five years, the value of Los Angeles’ enterprise zone program--in which firms get state tax breaks and other lures to move to or stay in tough communities such as Watts and Pacoima--is unproven.

To be sure, there is evidence of new industrial vitality in Pacoima. But is it because of the area’s enterprise zone tax benefits? That is unlikely, said Alex Nuno, the program’s coordinator.

And signs of renewal are hard to find along Van Nuys Boulevard, Pacoima’s retail core.

In Watts, an enterprise zone has done little to staunch the hemorrhaging of its fragile industrial base. “If it’s working so well, why is business moving out of here?” asked Dennis Brown, who owns a high-tech recycling company in Watts.

Enterprise zones also exist on the Eastside, in Wilmington-San Pedro and in the Central City area, south of the downtown core.

But not one executive interviewed at a dozen small- and medium-sized businesses in the Los Angeles enterprise zones said the tax benefits were a key element in their decisions to move into an area or remain there.

A few businesses have taken limited advantage of the tax benefits, while some executives were unaware that they are in an enterprise zone.

Even so, most businesses contacted were cited in city reports as enterprise zone success stories.

One city report--which must be filed yearly with the state Department of Commerce, the agency that oversees the program--held up the Kluger Co. as an example of success. In fact, the apparel firm’s relations with the city’s enterprise zone program have soured.

Official job creation statistics also appear to tell a lackluster story.

City officials have claimed credit for creating 159 jobs in the Watts enterprise zone, 212 in Pacoima, 220 in the Central City zone, 157 on the Eastside, and 89 in the Wilmington-San Pedro zone. The figures cover 1987 to 1990.

State officials and other champions of the zones, including state Assemblyman Pat Nolan, (R-Glendale), author of California’s enterprise zone legislation, defend the program and say the concept should not be judged by results in Los Angeles.

“I’ve been frustrated with the way the program’s been handled in Los Angeles myself,” Nolan said.

Los Angeles bureaucrats have failed to aggressively market the zones’ advantages to the business community, said Wilson Administration officials, who added that programs in other cities provide better examples of what enterprise zones can achieve.

An audit to be released soon will also criticize the city Community Development Department, the agency that runs Los Angeles’ enterprise zone program, for not making better use of low-interest loans to help businesses, officials say.

Others, such as Reynold Blight, overall chief of the city’s enterprise zone programs, said the state program’s tax incentives are not juicy enough. What is really needed are supplementary federal enterprise zones, they say.

But for now there is only the state program--and little outward sign in Los Angeles that it is playing a vital business development role.

Pacoima’s fresh sprouts of industrial development appear to have been nurtured more by a cheap labor pool, inexpensive land and proximity to freeways than the enterprise zone status.

Costume jewelry manufacturer Leonard Shriver recently moved his firm--which employs 400--from Alhambra to Pacoima. The enterprise zone “was not a deciding factor in our decision . . . but it had some weight,” Shriver said.

Harvey Greenberg moved his company, Pens Plus, to Pacoima in 1988 but only learned recently from enterprise zone officials what tax breaks are available. Greenberg is reluctant to get entangled in the government red tape he believes would be involved to qualify for tax credits. “We small entrepreneurs don’t want to report to anybody,” he said.

“All things being equal, we’d rather be in an enterprise zone,” said John Ondrasik, an executive at Precision Wire Products, a family-owned firm with 160 employees that makes shopping carts and has been in Watts since the mid-1950s.

“But it’s only a small incentive for us to stay here,” said Ondrasik, whose firm has taken limited advantage of the zone’s tax breaks for hiring and equipment purchases.