Posted by Tom Clark January 24, 2012
Gov. John Hickenlooper is about to start a statewide listening tour on the public's vision of the state we want to live in. It's JIT—"just in time." With his TBD ("to be determined") initiative, the Governor intends to spend a good amount of time both laying out the state's financial condition and listening for new ideas. He'll also be paying extra attention to those comments on what aspects of our lives we prize most in Colorado. Will it be our open spaces, our schools, our low taxes, our roads, or all of the above?
These conversations have been going on for more than five years-from Rutt Bridges' Bighorn Center to the Metro Denver EDC's Toward a More Competitive Colorado (first published in 2005). In recent years the University of Denver with its Colorado Futures program and former Club 20 CEO Reeves Brown's "grass tops" initiative have all taken steps to inform a broad spectrum of leaders around the state.
What has not been done is a much deeper dive into the psyche of all Coloradoans. It is a risky undertaking. The Governor's "bottom-up" economic development planning process brought in a mixture of the citizenry and community and political leaders. It worked fairly well, despite outcries from various quarters that they should have been invited to the conversation. We hope that TBD can accomplish the same positive outcome.
The TBD conversations should be very lively. There's lots of solid data that lays out our competitive position as compared to other states. We are very competitive in many ways, and not in some others. The cost of a college education for the average family's budget has increased 50 percent since 2000. More than 50 percent of our roads are in poor condition; some are still in use, but unsafe. We have the third-lowest residential property tax burden, the lowest state sales tax (in states that have a sales tax). Ditto for our state income tax. But we have the 10th-highest local government tax burden. See Toward a More Competitive Colorado at www.metrodenver.org.
With the recent Lobato decision, wherein the judge called our funding of K-12 "unconscionable," we run the risk that the courts will begin deciding our tax rates. Our funding of K-12 may be "unconscionable" in the eyes of the judge, but we would argue it's not "unconstitutional." We vote to fund education at the levels we choose. With the potential for a constitutional confrontation in the wings and a structural deficit in our budget, the Governor's tour couldn't come at a better time. Stay tuned.
Tags: Gov. Hickenlooper, Legislation
Posted by Tom Clark January 17, 2012
Both of Colorado's political parties are championing the reinstatement of the Senior Homestead Exemption, a program than can potentially cost the state's General Fund up to $100 million. While such rhetoric makes for great election-year chatter, it ignores some basic facts.
Seniors, and the rest of us homeowners, have received a total of $17 billion in property tax breaks on our homes since 1987. Annually, the amount totals to about $71 million. That $17 billion in tax breaks has been passed on to the state's General Fund and commercial property owners, courtesy of the well-intentioned, but fiscally crippling Gallagher Amendment, passed by voters in 1982. Today, Colorado ranks second lowest in the nation for residential property taxes.
If you worry about higher education (like we do at the Metro Denver EDC), you might look at the millions of dollars cut from our universities over the past decade. What would $71 million mean to the cost of tuition for students? In 2000, tuition at the state's colleges and universities required 19 percent of the average family's income. In 2011, that number skyrocketed to more than 30 percent of the average family income.
A degree at a community or four-year college is a requirement to participate in the state's innovation economy. And the price of participation is rising.
Is it good public policy to continue to limit more young people from attending college due to rising costs, or to give seniors another property tax break? Is being the No. 1 lowest residential property tax state substantially better than being No. 2?
Tags: Legislation
Posted by Tom Clark January 10, 2012
This past week a business icon left us. Walt Koelbel, Sr., was one of the founders of the Greater Denver Corporation in 1987. In 2002, his son Walt (Buz) Koelbel helped found the Metro Denver EDC. Walt was the first developer to serve as an officer in the Greater Denver Corporation. It was an unusual move. The opportunity for conflicts of interest as an insider on the board had kept many a good real estate person from occupying an officer's seat. But Walt was so highly respected that his nomination was never questioned. He was so conscious of any apparent conflicts that, even though he was an investor, he would never submit his properties for consideration by prospects until he had checked with me.
Walt graduated from the University of Colorado with a bachelor's degree in economics. He stumbled into real estate, loved it, and went on to survive the booms and busts of the Colorado economy, building a great company along the way.
He often went against conventional wisdom. When I saw him build a high-end apartment complex in the middle of the 80s recession and then saw it fill up quickly, I was astounded by his success. He smiled sheepishly and said, "We had so much money in the land that developing a pricy project was the only choice we had. We're not visionaries, just desperate real estate guys." He was honest and humble.
But mostly, Walt was my friend and confidant. When things got chaotic in my professional life back then, it was Walt who took me to lunch, listened to my worries, and supported my efforts. As his health failed, I saw less and less of him. But the accolades and awards for his pivotal role in the business community just piled up and up. In every sense of every award, Walt Koelbel deserved them all.
Posted by Tom Clark October 25, 2011
In the past few weeks there has been some stress on metropolitan cooperation, especially in the area of economic development. This is unfortunate. But while the intrigue around the Gaylord project in Aurora caught headlines, the regional economic development system handled another major project with great efficiency and no acrimony.
While GE's PrimeStar Solar thin film solar manufacturing plant, valued at $300 million, announced its decision to locate in Aurora, there was a trail of contributors who deserve mention for their efforts, starting many years ago.
Our first encounter with the company was when one of its inventor/owners became a member of our Colorado Energy Coalition (CEC). Ken Zweibel was one of three brilliant scientists who came out of the National Renewable Energy Laboratory (NREL) to create PrimeStar Solar.
As the company outgrew its first building, Ken and his partners began looking for bigger and better space. We helped them find a suitable building in Arvada, with the help of our partner, Hazel Hartbarger, who has headed Arvada's economic development operation for many years.
In a few short years, General Electric saw the great promise of PrimeStar's technology and made a $6 million cash infusion to the fledgling company and later acquired it.
The Arvada site was too small to accommodate increasing needs for manufacturing operations. Arvada notified our office that the company was on the hunt for new space. A broker was retained by the company and approached Adams County Economic Development for data on large, available manufacturing space. Barry Gore and his staff offered the Avaya building at 120th and I-25, in Westminster. John Hall and Susan Grafton of Westminster's economic development team were also brought in. Subsequently the broker also found another building-the one that would ultimately be chosen in Aurora.
Westminster and Adams County ED partnered with the State Office of Economic Development and International Trade to develop an incentive package. In Colorado, incentive packages tend to be small in amount and almost always require a joint proposal from the State, County, and City where the deal is happening. Westminster's joint proposal with the State and Adams County Commissioners was the largest incentive package offered-approaching $50 million "all in." By this time the company (GE) had identified itself and 10 other states jumped into the competition.
Unfortunately for Westminster, the Avaya building could not be ready for manufacturing to suit GE/PrimeStar's tough schedule. Another suitable building was identified in Aurora. It was right on I-70 and could be ready in time to meet GE's deadlines. In the meantime, GE/PrimeStar said it would keep its research and development and headquarters operations in Arvada, provided additional testing space for the company's panels could be provided. It was.
Now, this is where things really work well. Westminster had gone from the No. 1 city to No. 2. Aurora was vice versa. Under the Metro Denver EDC Code of Ethics, of which both Aurora and Westminster are signatories, the city in the No. 2 position cannot "go around" the deal until all efforts by the No. 1 city are exhausted. Aurora had waited patiently for the Westminster site to play out and was now ready to try its hand in the deal. Susan Grafton, head of economic development for the City of Westminster was informed that her site was now in second place and Westminster needed to stand down until or if the Aurora site could or could not work.
Meanwhile, the State Office of Economic Development program, Adams County, and Aurora were working with the company to get all the incentives in line and deal with the growing threats of other states, all of which were augmenting their own incentive packages. Adams County ultimately offered the largest local government incentive at $6 million in business property tax rebates over the next five years. Aurora and the State through in-kind, training funds, and tax credits accounted for about another $14 million. The media pegged New York's offer at about $30 million. Our sources tell us that it was much more.
Gov. Hickenlooper played a pivotal role in "closing" the deal. But in the end, Metro Denver and Colorado won, beating out a vigorous offer by Gov. Cuomo. It took this entire string of events and people to make this happen. From the genius of the inventors, the presence of NREL, the initial site in Arvada, to General Electric's purchase, to the many organizations that partnered in the site search that ended in Aurora. This is how our unique economic development process works. And it did not go unnoticed. GE executives commented at the announcement that one of the things that helped them make their final decision was the "state's collaborative economic development process."
"Colorado won the PrimeStar Solar plant because it had a technology head-start and a facility that could quickly be turned into a factory," said Victor Abate, vice president of GE's Renewable Energy business.
But if you don't think there is enthusiasm for the victory of one city by another, here's what Hazel Hartbarger from Arvada said, "PrimeStar Solar is an important corporate citizen in Arvada. We are proud that the company, along with many employees, chooses to do business here. Colorado IS the perfect place for SOLAR! Congratulations to GE on your new facility planned in Aurora!" said Hazel Hartbarger, Arvada Economic Development Association Director.
As they say in the movies, "I love it when a plan comes together." Thanks to all who made this a success.
Posted by Tom Clark September 20, 2011
Site Selection events are designed to introduce Metro Denver to consultants from site selection firms, national real estate executives, national accounting or engineering firms with site selection practices, and high-level executives within companies that are seeking a new corporate home. The Metro Denver EDC has been hosting Site Selection conferences since 1986. These events are our most successful marketing tool other than the Metro Denver EDC website.
Next week, 10 of the nation's most prominent corporate site selection consultants will visit the Metro Denver region. The Metro Denver EDC and its economic development partners will host this important group-providing economic briefings, helicopter tours or the area, discussion panels-giving them a taste of what it's like to live and work in Colorado. The site selectors are coming here to learn more about our region for their clients and to share with us the changing trends in corporate location decisions.
A typical site selector will work six to 10 projects per year. Virtually all site selectors are paid a fee by the company who retains them for location services. They do not make their money from the magnitude of incentives that can be extracted from state and local governments. For an economic development organization like the Metro Denver EDC, site selectors are a valuable upstream marketing opportunity and a lucrative source of corporate intelligence. The upcoming Site Selection conference, for example, can very easily put Metro Denver on the radar of more than 75 companies seeking new expansions this year by virtue of meeting with their consultants.
During our last event in August 2010, one site selector was working an active prospect. On the final evening he told us he was going to inform his client that although Metro Denver was not on the short list for the company's new facility, they needed to come here for consideration. On September 21, 2010, the company came for its first visit, then returned twice in November. Metro Denver went from "not on the list" to the company's first choice. This company is Trulia.com, an Internet-based real estate listing and information website. To date the company has hired about 130 people at its new facility in Centennial.
Each Site Selection event costs about $90,000 to $100,000. One deal that brings 100 new jobs generates about $9 to $10 million a year in salaries alone. That's a $1,000 to $1 return. And what is my savings account paying?
Posted by Tom Clark September 13, 2011
A decade ago, we considered Utah as one considers a mosquito, buzzing around annoyingly but not of any consequence. We were focused on regional competitors in Texas and the Phoenix metro area. A few years later that all changed.
This past week I traveled to beautiful Utah as the guest of the Salt Lake Chamber of Commerce. The Metro Denver EDC has recently added Utah to our list of competitors in our annual publication Toward a More Competitive Colorado. Why? Because Utah seemingly burst onto the scene with smart infrastructure investments, international recognition from the Olympics, and a plethora of targeted programs to grow new jobs. Of course, these advancements didn't happen overnight. What was observed in the data was the outcome of years of good management, strategic vision, and solid execution.
I was honored to meet some of these leaders in my recent visit. Here's what I found:
- In the 1990s, in one year alone, the Colorado General Assembly refunded over $950 million to taxpayers under provisions of the Taxpayers Bill of Rights (TABOR). That same year the legislature cut state programs. At the same time, Utah put its surplus money into a "rainy day" and infrastructure account.
- The Utah legislative leadership continued to fund existing social programs but resisted expansions of those programs, thereby not creating a system that would eventually demand tax increases when the growth spurt ended. This is real leadership.
- Utah used its surplus to rebuild the road system and to construct and repair public buildings. Along with the improvements realized from the 2002 Winter Olympics, Salt Lake City now has a modern road system, commuter transit, and a complete interstate system around the metro area.
- Utah held its Triple A bond rating and dramatically increased exports.
- And, Utah abolished term limits. They wanted to elect representatives who would have to see their decisions through, and not be cobbled by one-issue candidates with narrow agendas.
In the early years of the 21st century, Utah looked at ways to stimulate small business creation and innovation. The state studied a small program in Colorado, created by the Colorado BioScience Association, which provided small amounts of money to pharmaceutical researchers to help with the challenging process of proving the commercial viability of new discoveries. The process is called "proof of concept" and is the most difficult money to obtain. Colorado ponied up $2 million for this fund, which helped create about 20 companies employing more than 200 people.
Utah took Colorado's idea to scale-it provided $14 million for a similar program, creating more than 450 new companies, and adding 4,500 jobs to its economy. When I commented on its surprising success, Utah's leadership were kind enough to acknowledge Colorado's contribution to its innovation economy.
Certainly, Utah is not the center of all things wonderful. Like the rest of us, it is struggling through this recession. The state's birth rate is booming, and 65 percent of its citizens are children or elderly paying virtually no taxes. Schools are over-crowded and the state ranks 50th in student-teacher ratio in K-12. Colorado ranks 40th. Utah's politics have become increasingly polarized with the Tea Party playing a powerful role in next year's elections.
But to Utah's credit and thanks to its business and political leadership, it has evolved into an acknowledged economic challenger in the West. We need to ignore Satchel Page's sage advice, "Don't look back, they might be gaining on you." They are gaining!
Posted by Tom Clark August 16, 2011
Summer is nearing its end and "back to school" time is here. How important is it that we have a highly educated population? Almost everyone who reads this blog will agree that education-and higher education particularly-contributes to a strong economy. When looking at how to get there, however, there's total disagreement.
Let's look at some important data. Our high school graduation rates are dropping. Colorado continues to place in the bottom half of states in this category. Education and income have an almost perfect correlation-the more education you have, the more money you make.
If a high school dropout says he or she wants to "make a million dollars," tell them to get a high school diploma. A high school education will get you a million dollars in income throughout the course of a lifetime. A four-year college degree grosses $1.66 million. Since the year 2000, Colorado's per capita income has dropped from eighth in the nation to 14th in 2011. Given the correlation between education and income, our state is tracking just like the research would predict.
But Colorado's students consistently rank first in SAT scores. What gives? Well, we rank second for college-educated adults. Smart adults raise smart kids, but just not enough of them. These smart kids can succeed in life even if they're educated in a barn. It's called the "Colorado Paradox"-our ability to attract well-educated adults whose kids will succeed, but our inability to educate other children who fall within a wider spectrum of society. While we should never walk away from what lures high-paying jobs to our state, this paradox is the soft underbelly of the Colorado economy. We need well-trained, literate high school and community college graduates to fill the jobs created by Colorado's innovation economy, not just college graduates.
Expected Lifetime Earnings
| No Diploma |
$710,000 |
| High School |
$1,000,000 |
| Some College (no degree) |
$1,130,000 |
| Associate Degree |
$1,240,000 |
| Bachelor's Degree |
$1,660,000 |
| Master's Degree |
$1,970,000 |
| Professional Degree |
$2,740,000 |
| Ph.D. |
$2,580,000 |
Posted by Tom Clark August 8, 2011
You can't find a more picturesque location for a national headquarters than Golden, Colo. A quirky and fun downtown, a world-class university just a pleasant walk away, public art adorning its parks and walks, a snow-fed creek burbling through. Pentax chose Golden as its North American headquarters for all of those reasons. Nestled up against Lookout Mountain and the Table Mesas, Golden has kept a unique identity, refusing to become anything but what it chooses to be. The two were a natural fit. Pentax's distinct brand in the photography industry and its insistence of carving its own way melds well with Golden's independent notions.
But last week, Ned Bunnell, president of Pentax Imaging Company, standing at the Marriott City Center, announced the company's move into downtown Denver. Pentax chose to stay in Metro Denver after looking at relocating to Southern California. The company's employees had a big say in the decision, but ultimately, as Bunnell remarked, Pentax employees live all over Metro Denver. The presence of light rail coming into Union Station from throughout the region brought Pentax's focus into downtown. Its chosen site (Colorado Plaza Tower at 17th and California) is a mall shuttle ride from the soon-to-be-completed station west of the existing terminal. Pentax employees who live in south and west Metro Denver will soon have two transportation options to get to work.
The magnetic pull of rail transit near employment centers is why the Metro Mayors Caucus unanimously supported the FasTracks election in 2004. The region's mayors had seen first-hand the economic impact rail transit brought to places like Dallas and the San Francisco Bay area. They also knew that the presence of rail transit in some areas of Metro Denver would give these communities a significant economic advantage.
I'm often asked why buses do not have the same allure. According to site selectors we meet, the answer is simple. It's difficult to move a train track. Once track is laid, the certainty of "transit availability" increases the value of the property. Such is not the case with buses. While buses are cheaper and adaptable to changing growth patterns, their versatility makes them less influential in site location decisions. Bus routes can be moved at almost a moment's notice. This does not assure the site selector that two modes of transportation are available for employees.
There are other reasons, too. Riders report they feel safer in rail cars than on buses. Having ridden all forms of transit in my years in Chicago, I can attest. If an unruly-type enters a train, you can simply move to another car; if you are in a bus, you can't easily escape the disruption that comes with disorderly conduct. The other reason, often cited by bus travelers, is that their timeliness to work is dictated by automobile traffic. Buses are afflicted by traffic congestion, where trains are not.
We continue to see investments along transit corridors. Property values at stations are rising. The T-REX Corridor has seen upward of $10 billion in construction, for example. But mostly it's convenience that seems to drive decisions to locate nearby a station. The DaVita headquarters in LoDo illustrates the point. After looking at other transit locations and at other sites throughout the Metro area, the company chose to locate within an easy walk of Union Station. Quite simply, DaVita's employees now have a multitude of choices for where they want to live and how they get to work.
Posted by Tom Clark July 11, 2011
The terms "economic impact" and "economic activity" are often used interchangeably. This leads to all manner of bad public discussion and public policy. These economic activity studies, masquerading as economic impact studies, demonstrate either ignorance or a deliberate attempt to impact public opinion with misleading conclusions.
A local think tank recently released a study on the economic impact of state workers. Wow, and I thought public employees were users of revenues, not, as the study asserts, generators of economic growth! I guess if we put every working person on the state's payroll with a guaranteed income of $100,000 a year, we'd be the richest state in the nation.
If you skipped Econ 101 as part of meeting your undergraduate general studies requirements, here's what you missed. And think-tankers....you can learn too.
For the sake of this quick explanation let's define the "market" as the state of Colorado. Economic impact occurs when new revenue is brought into the market. Economic activity is what happens after the new revenue is spent in the market. The new revenue is referred to as "primary." Primary income and the primary jobs associated with it are the new money into the market-the growth elixir that helps the economy expand. To economic developers, it's the gold standard in every sense of the word.
Then, something called "economic activity," follows. This is the money that gets spent after primary income enters the market. This is not new money. These dollars are being "re-spent" by consumers who are making discretionary spending decisions. Jobs benefitting from this discretionary spending are often called "support service" or "spin-off" jobs. This is where the "multiplier effect" comes in. A primary job's new money creates a demand in the local economy for services to support the primary job-jobs like waiters, realtors, lawyers, doctors and, yes, government employees. These non-primary jobs are created by the primary jobs. If there are no primary jobs, then there are no other jobs...period.
Consider a state employee whose entire salary is paid by Colorado taxpayers. There is no new money here at all. The new money has been made someplace else and the result of that new money is taxation. This particular government employee is a spin-off or support service job. He or she has no economic impact. His/her salary is part of the economic activity generated by the primary or new revenue.
Some state employees do have an economic impact. People who work for the Colorado Tourism Board, for example, are engaged in marketing activities that bring out-of-state tourists to spend their money in Colorado. So too, portions of the Department of Natural Resources, Agriculture, and even the Department of Revenue (auditors who collect taxes from out-of-state employers) are part of the economic impact of state government. But these are tiny numbers compared to the vast majority of state workers who gain their salaries from primary revenue already created by someone else.
So, if someone runs up to you and says the economic impact of a state worker is "X" dollars, ask this simple question, "What is the source of the revenue that creates the impact?" If the answer is, "The state's General Fund," refer them to this blog.
April 19, 2011
Last month, I had the opportunity to participate in a panel discussion hosted by the Colorado Health Foundation during the release of the 2010 Colorado Health Report Card. In the wake of the sobering findings from the report card, our panel of business leaders fielded questions about how cost and coverage are two key factors for economic development in our state – and how some of the indicators in those areas are pointing in the wrong direction.
When companies started analyzing county-level health data such as obesity and chronic diseases as part of decision-making on location or expansion efforts, it had already become clear that health and health care were critical parts of economic development and job creation. A healthy workforce is a productive workforce, while an unhealthy workforce costs employers more and produces less for local economies.
Lately, the trends around some of these health indicators are not moving in the right direction. Populations are aging, becoming more obese and have a greater propensity for chronic diseases. And the costs associated with these trends are all the more troubling. Businesses face a frightening sense of futility when they see unpredictable, skyrocketing increases in health care costs – with few options to do anything to reverse it.
If you have a relatively healthy demographic, as Colorado does compared to most states, you should see lower health care costs. But that's not what is happening. In Colorado, there is little correlation between what employers pay in health care costs and how healthy employees might be. Somewhere in the marketplace something is not working, whether that's the market not functioning properly or people not being able to get the care they need and resorting to overly expensive options. We have to identify what's not working and correct it.
Consumers face similar cost hurdles. One example is Colorado's Medicaid program, which spends the second lowest amount in the country. Yet Colorado's expenditures on Medicaid are so thin – the state has saved so much – that in the process, low- and middle-income families who are not eligible for public insurance end up utilizing the most expensive care, such as emergency rooms. Critical care becomes the first option, instead of more cost-effective preventive care. This strains families, workers and employers, and we have to work to undo that strain.
As Colorado climbs out of the recession and we strive to generate new jobs and economic growth, we have to recognize that what's good for health is good for economic development. We need healthy people to live longer and work longer if we're going to be globally competitive into the future. Incentivizing employees to avoid unhealthy behaviors is a good first step. Going forward, we also have to tie those small steps to broader efforts to reverse the trends of unpredictable costs of health coverage and care, make sure people can get the care they need to prevent bad health outcomes and find ways to improve the insurance market. If we don't pursue these and other common sense solutions, we'll continue to face the same problems with health care in Colorado.
This blog is also featured on The Colorado Trust's Community Connections Blog.