Zeroing out incentives would be short-sighted

The Long Bill, the state budget bill currently making its way through the state Legislature, has a critical flaw. The version that passed the House last week and was introduced in the Senate this week includes no money for the state Office of Economic Development and International Trade’s Strategic Fund.

Economic development groups from around the state have been scrambling to try to get money for the Strategic Fund re-authorized in the Long Bill. And with good reason.

“The Strategic Fund is the single most important component of the state’s ability to compete for new jobs with other states and countries,” said Tom Clark, CEO of the Metro Denver Economic Development Corp., in a letter to other economic development groups in the state.

The Strategic Fund pays cash incentives to companies that “expand or move to Colorado and (which) pay wages above the average wage in counties where they locate,” Clark’s letter explained.

Although there are other state incentives to attract companies, such as tax credits, they’re not as useful now, Clark said. “As companies are coming out of the Great Recession, many have significant financial losses,” he wrote. “A tax credit is meaningless to those companies.”

The concern isn’t limited to Denver. If losing the Strategic Fund money “makes it difficult for Denver to compete, it makes it very difficult for Grand Junction to compete,” said Kelly Flenniken, executive director of the Grand Junction Economic Partnership.

It’s not as if Colorado is seeking a lavish fund for such incentives. The state currently has only $462,000 in unobligated money in the Strategic Fund, and it is expected to be gone this year. The Office of Economic Development, with Gov. John Hickenlooper’s support, has asked for $5.75 million in next year’s budget.

Contrast that with Texas, Colorado’s major competitor in the economic development marketplace. The Lone Star State has a cash fund of more than $200 million to use for new business incentives.

Furthermore, it’s not as if this money is simply poured down a rat hole and lost to taxpayers. It’s estimated that the state recovers its investment for each job created — through taxes on wages paid to employees of these companies — in a little more than a year.

And, since the incentive money isn’t paid up front, but only after jobs have been created and audited by the Office of Economic Development, there is no risk the money will go to fly-by-night businesses that fail to produce jobs.

Zeroing out the Strategic Fund would be a short-sighted mistake that will cost the state money in the long run. Here’s hoping the state Senate adopts an amendment to restore Strategic Fund money in the Long Bill this week.


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