How Kentucky created urban 'enterprise zones'

State Rep. Edward L. Holloway boasts that his home state, Kentucky, recently adopted an ''ideal'' enterprise zone law.

Mr. Holloway, who co-sponsored an enterprise bill that passed the legislature March 16, says the measure encourages ''private sector investment rather than government subsidy to improve the quality of life'' in depressed communities.

His view is supported by Edgar Vash of the American Legislative Exchange Council (ALEC), who has worked with 16 states on enterprise zone legislation. State statutes and local cooperation are essential to the succec mOeation of enterprise zones, he says.

Kentucky, the 7th state to enact such a law, has ''one of the best passed or in process,'' says Mr. Vash. ''It may not be a panacea, but it is a model other states could follow.'' He praises these elements:

* A neighborhood enterprise corporation with charters and bylaws drafted by residents. Stock will be offered to them to establish businesses such as garbage collection and security patrols in the zone.

* Leasing of publicly owned land and property to a community-run management agency at $1 a year for 99 years. Operated tax free for the life of the zone, this firm would lease properties to entrepreneurs who would set up businesses in the zone.

* A zone regulatory authority with power to streamline procedures that could delay the establishment of businesses.

The bill also permits ''joint venture'' zones, says Mr. Holloway. ''And we can function with or without federal legislation,'' he adds.