Gov Pitches Increase for Economic Development Incentives

December 12, 2012

Hickenlooper wants more funding for economic development initiatives

DENVER– Colorado Governor John Hickenlooper requested $207 million to fund the Office of Governor in FY 2013-14, a budget increase of $7.2 million. The governor wants to add $6 million to the Office of Economic Development and International Trade (OEDIT) for job creation incentives and marketing.

Incentives to retain, expand and attract businesses are listed in OEDIT’s Colorado Blueprint Annual Report – but not all are success stories.

While the governor’s budget was being reviewed Monday by the Joint Budget Committee, employees for Vestas Wind Systems learned that their work week was being cut from 40 to 32 hours.

OEDIT approved $1 million incentives for Vestas to create 1,750 jobs, but the wind power company has laid off 800 employees over the past four months at its plants in Pueblo, Louisville, Windsor and Brighton.

Vestas was one of four renewable energy companies that received more than $2.4 million of incentives in 2011. SMA Solar agreed to create 500 jobs for the $1 million incentive, but this week announced impending layoffs – unknown is how many, if any, will be in Colorado.

PrimeStar Solar, a subsidiary of General Electric, was awarded a $168,000 incentive to create a minimum of 84 jobs. In July, the company announced it would eliminate 70 jobs in Arvadaand suspend plans to develop a $300 million solar energy plant in Aurora- and more than 350 potential jobs vanished.

The wind energy industry has blamed cutbacks on a downturn in the turbine market because it’s unknown whether Congress will reauthorize a federal subsidy for wind power. Some consumers may be hesitant to invest in a product if the manufacturer can’t survive without the subsidy.

OEDIT’s successes include The Coleman Company that received a $370,000 incentive package to create 74 jobs in Golden, $109,266 to Entegris to create at 63 jobs in Colorado Springs, and $937,500 for the Sisters of Charity of Leavenworth Health System, Inc. to move its corporate headquarters to Denver and add 750 jobs in the near future.

The incentives can include a combination of relocation assistance, grants and tax rebates from OEDIT and local governments. Most incentives are awarded after a specified number of jobs are sustained.

The JBC members may or may not keep a scorecard of the outcome of OEDIT’s past incentives, but they will likely weigh the requests for general funds against other departments’ dire projects.

“Colorado is not known as a state with deep pocket incentives,” said JBC Budget Analyst Kevin Neimond. “Other states around us are deep pocketed in this respect.”

Colorado has to compete for new business, but Neimond said the state has never come close to matching incentives offered by Texas or Arizona.

Requests for General Fund increases for OEDIT include:

$2.98 million from the General Fund; OEDIT is also slated to receive an estimated $17.3 million from the Limited Gaming Fund for FY 2013-14. The actual amount of the gaming tax revenue will be determined in June 2013, the end of the current fiscal year.

$4.05 million for FY 2013-14, a request based on 80 percent of a one-time $5 million appropriation from the General Fund granted for job creation in the current fiscal year.

$1.3 million to promote tourism through TV and web-based advertising; travel and tourism promotion will also receive $23.5 million from gaming revenues.

$200,000 to identify new international markets to invest in tourism promotion.

$500,000 to launch a brand platform for the state to promote tourism.

$603,232 for branding and marketing initiatives to retain and grow businesses, including $300,000 for 3.6 full employees.

$1 million for performance-based incentives for production companies that hire Colorado employees and spend money in the state while producing feature films, television commercials and digital games.

$129,332 to cover increased leasing cost of OEDIT’s 14,337 square-foot office at 1625 Broadway. The budget request stated the square-foot cost will climb from $18.60 to $25.17, adding $94,194 to the current $266,668 rental cost when the 8-year lease is renewed June 30, 2013.

Rep. Cheri Gerou (R-Evergreen) objected to the JBC approving an estimated rent figure prior to the lease expiration and renegotiation.

“Is there any way we can get around this?” asked Gerou. “I’m not saying I want to take advantage of the situation, but I’d sure hate it they took advantage of the situation.”

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