HUB Zone
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HUBZone is a reference to a US Small Business Administration (SBA) program for small companies that operate and employ people in Historically Underutilized Business Zones (HUB Zones). The HUB Zone program was created in response to the HUB Zone Empowerment Act created by the US Congress in 1998 [1]. Based on the Act, small businesses will be designated as HUB Zone certified if they have the following criteria:
- The business must be a small business based on the North American Industry Classification System (NAICS)[2] for size standards.
- The business must be entirely owned by citizens of the United States.
- The primary facility for the corporation, which is defined as the location with the most employees excluding customer sites, must be in a HUB Zone.
- 35% of a company's staff including consultants (e.g. 1099) must reside in a HUB Zone.
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[edit] What is a HUB Zone?
A HUB Zone is any census tract in the United States or territories where the average income of the persons living in that census tract is less than 80% of the state or territory's average wage, or the personnel in that census tract have an average unemployment rate of 140% or greater than the unemployment rate of the state or territory. To determine if a location (residence or business) is in a HUB Zone, the SBA web site has a feature the make this determination found at [3]
The primary goal of the program is to create incentives for the US federal government to do contracting with businesses that operate and create jobs in communities with statistically proven economic needs.
These are also called Enterprise Zones
Enterprise zones are designated geographic areas suitable to receive financial and non-financial incentives that will attract private investment. Enterprise Zones are generally high-poverty areas that have suffered from years of disinvestment. The incentives available through zone programs vary significantly, but most offer various forms of tax relief or refunds, certain regulatory relief to new or expanding zone businesses, infrastructure improvements in the zone and increased or improved city services to the zone.
While there are hundreds of Enterprise Zones that exist, controversy remains among those studying their efficacy specifically outcomes regarding supermarket investments and its effect on the public health of the community in which it invested. The variety of tax incentives offered in state EZs are generally viewed to be a cost-effective means of spurring business investment activity and for retaining or creating jobs.[Alan H. Peters and Peter S. Fisher, State Enterprise Zone Programs Have They Worked?, University of Iowa] There have been several attempts to evaluate the effectiveness of these geographically targeted incentive programs.
[edit] Government Contracting requirements
The agencies of the US federal government are required by the HUB Zone Empowerment Act to contract with HUB Zone certified small businesses for more than 3% of their budget in the form of prime contracts to HUB Zone firms. The government has made some progress towards these goals but by and large remains below them.
[edit] HUB Zone Creators
Numerous legislators created and continue to support the HUB Zone program. However, it is widely held that US Senator Kit Bond (R-MO) was the true creator of the program and continues to be the champion. His motivation came from numerous meetings with business owners at events that discussed training. In those events, the feedback was grateful for the training for businesses in lower economic areas, but the training was slated as inadequate unless work was also going to allocated to those communities. Based on the need of jobs, Senator Bond began the concept of HUB Zones.
[edit] Notable Firsts
The first business to receive a contract under the HUB Zone program's simplified acquisition program was Garrett Container based in Accident, Maryland.
