Posted by Tom Clark February 25, 2010
2010 is loaded with distractions. Like any other organization, we have had to look hard at where the Metro Denver EDC can be most effective with a watchful eye on our budget. Recently, the EDC’s Executive Committee re-aligned its priorities for the remainder of the year. The appearance of another Doug Bruce-inspired set of initiatives cast a long shadow on our deliberations and will cost the business and civic community millions of dollars to defeat.
For the average Coloradoan, the citizen initiative process is an honored prerogative of the voter – designed to right an egregious failing by the General Assembly to act or to settle a nettling debate on public policy. But Colorado has become a "beta test site" for all manner of national agendas fostered by forces outside the state. There is a simple reason for this...It is incredibly inexpensive to put anything on the ballot in Colorado. For the Colorado business community, it is a hidden tax. Since almost anything on the ballot has an impact of business success (for good or ill), the business community is annually tapped to pay for these elections.
It costs as little as $250K put something on the ballot that can have disastrous impacts on business. Once on the ballot it takes a minimum of $3 million to defeat even the most ill-conceived proposal. For a business that is asked to contribute to the campaign, most of these funds come out of the same budget line item that would go to philanthropy, education, or other civic projects. And the ultimate irony is that the initiative process actually boosts the coffers of chambers of commerce and economic development organizations...but not for the purpose of helping create new jobs. Instead, these dues go to expensive efforts to preserve the existing business climate.
This year is no exception. Instead of focusing on bringing new jobs to the region in the clean tech sector, most of the EDC’s discretionary money will be spent to defeat Proposition 101 and constitutional amendments 61 and 62. Even if these initiatives are defeated, their simple presence on the ballot will cost Colorado new jobs through lost opportunities.
Tags: Legislation
Posted by Tom Clark February 11, 2010
Happy Valentine’s Day California.
Weeeee’re Baaaaack! This time we’re bringing cupids dancing in the streets of Los Angeles and in the parking lot at the Staples Center prior to the Avs-Kings game, really bad YouTube videos, chocolates, romantic song dedications to the Golden State during drive time, and of course, our funny Valentines…asking Sea-Level executives to "feel Colorado’s love." In our never-ending effort to "own" a national holiday and/or steal it from Hallmark if we can, we’ve done it again. Another shameless PR stunt to capture the hearts of Californians and attach them to their friends in Colorado.
Last year we generated over $2 million in national media coverage with our Valentine cards, a banner flying over the 405 during rush hour, etc. It was great fun and brought us both prospects and, yes, a little scorn from those who didn’t see the subtlety in our message.
Like it or not, the entire West needs California. It is the innovation hub of the nation and the source of many jobs that are spun out to the Western states. We need their venture capital to fund our own innovative companies. We trade workers and expertise. Many Colorado companies have been purchased by California companies and relocated to the West Coast. Likewise, we receive many of the operational jobs that emerge from the innovation beehive in San Jose and Southern California.
So, don’t be upset when we send a little love. We want California to recover…and quickly. But like us, the Golden State has a state constitution that is even goofier than ours. Its Legislature has an even bigger Gordian Knot tied around its hands than ours. Both states need to unravel those "governance knots" if we can ever hope to be a nimble and innovative player in the global marketplace.
Tags: COlovesCA, Legislation
February 5, 2010
First the good news. The West Corridor Line to Jefferson County is under construction. If you’ve driven 6th Avenue lately you’ll see the flyovers and sound walls are progressing nicely. The “Air Train” and Gold Line are expected to break ground in August of this year. All the other corridors are at 30 percent of design. If President Obama wanted “shovel ready” infrastructure proposals again, all corridors would meet the criteria.
Now the “other” news. FasTracks needs additional funding to complete the entire system by 2017, as promised to voters in 2004. Over the past several months we’ve been looking at both the revenue and costs of completing the system as planned. The original price tag of $4.7 billion was wrong. We now have confidence, after much research, that the final cost of the system will be $6.9 billion. Sales tax revenue projections made in 2004 have been proven wrong – thanks in part to the national recession and a financial model that has turned out to be less flexible than desired. There is no doubt that at some future time RTD will ask the voters for more tax money to complete the system. Where will this money come from? Or should we even build out the entire system?
Option #1 – Build out the system with existing revenues
RTD’s recently issued Annual Program Evaluation (APE) notes that the entire system, without a tax increase can be completed “sometime after 2035." This is good news if you’re an average male, age 49. In 25 years (2035) you will have reached the average life expectancy of American males, 74 years. You will get to ride the full system just about the time you pass away. It will be a pretty expensive ride. You will have been paying a .4 cent sales tax for the system for about 31 years. Bon voyage!
Option #2 – Pass an additional .4 cent sales tax in 2010
FasTracks can be completed as presented to voters in 2004. Even with the most pessimistic revenue projections FasTracks would be ready for riders in its original timetable of 2017. This assumes that already “grumpy” voters in the most uncertain economic time since the Great Depression would be willing to double-down on a tax increase. This strategy, if successful, means that males age 67 or above are the only ones who will pay without riding the entire system before they pass.
Option #3 – Push Election to 2012
A 2012 election would push completion of the entire system to 2019 with a .4 cent sales tax increase. Males who are retiring today at age 65 will still be able to ride the system before they take the big train ride in the sky. If you’re still doing the actuarial countdown with me, a couple of years of exercise and a better diet ought to keep you alive and riding with those in No. 2 above.
Any 2010 election will be an expensive undertaking. Nationally, the Democrats are loading their coffers to keep a commanding majority in the U.S. Senate. Colorado is a battleground state with a sitting Senator who has never run for election. Incumbency, in any form, is not an asset in this election. Many voters are in the “throw the bums out” mindset, regardless of party affiliation. With Bill Ritter’s decision to not seek reelection, the Governor’s race will draw the same national attention….and money. Advertising costs will skyrocket, especially near Election Day. Mail-in ballots serve to extend the time when television and radio ads must run, further driving up campaign costs.
Voters are unsure about their economic future and very, very angry at anyone in office or running for it. Tax increase elections are difficult to win, even if the cause is just. In Metro Denver they seem to have their greatest chance when the economy is just beginning to recover. Then, people are starting to feel a little “jingle in their jeans” and have greater confidence in their employment outlook. A strong showing in the first quarter’s economic reports could give a 2010 election a chance.
Tags: FasTracks
Posted by Tom Clark February 4, 2010
Just when we thought it was safe to go all out for the economic recovery, our “friends” and aspirants to the Doug Bruce look-alike award have planted three initiatives on November’s ballot that will cut taxes, eliminate public debt, and reduce your auto registration. And that’s not all….If you vote "Yes" in November, we’ll start collecting property taxes from colleges, the Department of Wildlife, every water and sewer district, and local schools. Not enough? If you vote "Yes" we’ll even permit you to roll back your local public school property taxes through a local citizen initiative AND we’ll force the State of Colorado to pay for your local school’s loss of your tax revenue.
I’m not kidding.
Proposition 101 and Amendments 60 and 61 propose to do the above and much more. We’ll explore these three proposals in a subsequent post. But if you think that the absurdity of such initiatives will result in an automatic voter rejection, think again.
In 1992 Doug Bruce placed his TABOR initiative on the ballot. It had already been defeated twice before. Responsible business leaders could not imagine that voters would pass it this time. Those who sought funds to run an opposing campaign were seen as the Henny Penny’s – sky is falling – alarmists.
The historical context of TABOR’s passage in 1992 has an eerily similar to today. Back then Congress narrowly defeated a "balanced budget" amendment. The nation was just beginning to see the final exit of a very difficult economy that saw a deep recession in the mid-80s. The electorate was angry, very angry. Congress had not listened to them. The national economy was in the midst of a restructuring for the coming Digital Age and jobs were hard to come by. Colorado’s Governor Romer was focused on a tax increase for education.
Since voters felt powerless to impact Congressional decisions they found a perfect outlet…TABOR. It was time to send a message, even if it went to the wrong address. TABOR passed. It was preceded by Bird-Arveschoug (setting a 6 percent limit on state revenues) and followed by Amendment 23. The Gordian Knot in the Constitution got tied – TABOR, Gallagher (1982), and Amendment 23 placed the State’s budget on cruise control, making it impossible for the General Assembly to manage government and to respond to economic change.
Fast forward to 2010. Both Republicans during the Bush years and Democrats today are in a spending mood – in the hundreds of billions of dollars. TARP, ARRA, corporate bailouts, and national healthcare have left the electorate very, very angry. They may well decide to send a message, again, to the wrong address. The populous appeal of 101, 60 and 61 will be a great way for frustrated, unemployed, or furloughed workers to vent their anger. If they do, we will be assured of climate change – the business climate. But it won’t be warming.
Tags: Legislation, Taxes
Posted by Tom Clark January 27, 2010
Unlike Governor Ritter’s announcement to not seek reelection, we were not surprised with Denver Mayor John Hickenlooper ‘s decision to enter the gubernatorial fray. The Mayor’s last minute decision to not challenge Ritter in the Democratic primary three years ago indicated that he had the job on his radar for sometime in the future. That future came early, but nonetheless he is prepared for it.
It is impossible to not like John Hickenlooper, even when you disagree with him. I remember walking back from dinner during one of our famous media trips to NYC and Washington, D.C. – those annual sojourns we make to promote Colorado and the Metro Denver region.
The Mayor was thinking through how to handle the homeless problem. He suggested that he would ask voters for a tax to get these folks off the street and into housing. Having seen a similar effort by former US WEST president, Jack MacAllister back in the early 90s, I told the Mayor he was naive to think he could handle the multiplicity of problems that confront chronically homeless people – far beyond just being without domicile. It was a lesson MacAllister learned painfully. I also know a good bit about drug addiction and alcoholism and told him that no matter what he did, drug addicts and alcoholics don’t deal with their issues because someone else tries to "help" them. The decision to get clean and sober comes from within.
As he was wont to do in those days, the Mayor listened patiently. He then laid out the City’s financial burden from a core group of chronically homeless (mostly) men. The annual costs of admittance to Denver General Hospital, the frequent arrests for disorderly and drunken behavior and the incarceration and legal costs associated with all of the above. He contrasted that with the smaller amount of money he needed from the City’s General Fund for The Road Home program. The savings outweighed the costs. The program was a simple, business-like approach to an urban problem. While he may have sympathized with the plight of the homeless, it did not cloud a sensible, pragmatic answer.
Scott McInnis has long been on the short list as a Republican candidate for Governor. I first met him when he served in the Colorado House of Representatives. He assumed his role as House Majority leader during the years Roy Romer served as Governor. Those were different times. The state was flat on its back economically from the Oil Shale Bust and the partisanship that defines American politics today was less vitriolic. It took bipartisan efforts to move Colorado out of the “boom and bust” cycle of our resource-based economy.
The state was mired in tax policies that discouraged international investment and its worker compensation rates were a major deterrent to companies moving here. While McInnis represented his party well, he was also an integral part of the bipartisan work that needed to be done. In many instances Scott McInnis was the "go-to" person in the House.
During that period, changes were made in tax policy to encourage international investment, drive the financial services industry to Colorado, create the State’s first incentive programs, and rewrite our workers compensation laws to a point where real competition amongst carriers could flourish. Much of the work completed during the mid-to-late 80s set the stage for the unprecedented growth period of the 90s, where Colorado moved to the top-five of diverse state economies, and personal income rose to the top-ten. Quite an achievement for those who stood in leadership positions throughout the State, including Scott McInnis.
It then came as no surprise that McInnis would run for the U.S. House from the Western Slope. He was legendary among his colleagues for his long hours and hard work, even sleeping on a cot in his office to save taxpayer money. His background in natural resources and water made his an esteemed member of the House.
As I look back on those days I must admit I miss them. Perhaps the passage of time has made those heady days of the 1980s (when we were all pulling together to diversify our economy and create new jobs) brighter than they were. But the lessons that Scott McInnis and the rest of us learned in those days remain. Reviving, restructuring and rejuvenating a State’s economy is not the job of one party, one Governor or just the business community. It takes everyone contributing their energy and ideas while setting aside personal agendas.
Looking at these two candidates should give us all a sense of confidence that we have two great candidates for Governor. Both know how to cross the aisle to move major issues forward. And both have the experience to govern. And to the business community, it is seldom about party politics or political advantage. It’s all about governing.
Tags: Economic Development, Gov. Ritter, Legislation
January 14, 2010
Governor Ritter’s announcement to not seek a second term caught many of us by surprise. Most foresaw a contentious legislative session with both parties positioning themselves for the November election. Certainly we expected that Bill Ritter would be doing the same. What a surprise.
While the Governor’s epitaph should not be written yet, his announcement does present a point in time to examine his record on economic development.
For Colorado’s economy to be successful, we need every Governor to be successful. We worked well with Roy Romer and Bill Owens. We also found common ground with Bill Ritter, a tough competitor. He is not afraid to push for legislative action that has made Colorado more competitive in the pursuit of new jobs. Here’s the proof:
- For each of the past two legislative sessions the Governor introduced eight economic development bills. All eight passed.
- Today over 30,000 small businesses are now exempt from business personal property taxes.
- Aircraft manufactured in Colorado does not incur sales tax when sold to companies outside of Colorado – thus ensuring that our local aircraft companies will compete on a level “runway” with other states.
- Additional loans are now available to Colorado small business, expanding out capital base.
- In the area of recruitment and retention of companies, the Governor crafted two bills that have dramatically changed our ability to compete.
- “Single sales factor” was a major rewrite of the state income tax code, benefitting companies located in Colorado that sell outside the state. These companies pay proportionately less taxes than companies from outside the state who sell “into” Colorado. In recent discussions with a large Asian company we were told that “single factor” was one of the reasons Colorado is a finalist for its operations.
- Similarly, HB 1001, a five-year tax credit that rebates 3.8 percent of the salaries paid by qualifying companies has lured other companies to Colorado, including SMA, the world’s largest producer of solar invertors and REpower’s North American headquarters.
The Governor’s commitment to economic development has never wavered. He’s led trade missions, authored legislation, and quickly picked up the phone to close a deal for us. We owe our thanks to him for that.
As we face the toughest of budget times we will need the Governor to be resolute in his commitment to keep in place the strides we have made. With Ritter’s new freedom from campaigning, expect tough negotiations and a sharp veto pen.
Tags: Gov. Ritter
Posted by Janet Fritz, Director of Marketing January 7, 2010
The weather hasn't improved much since Tom gave the December 2009 Monthly Economic Summary. But Patty stepped into his snowshoes today to talk about the commercial real estate industry, job growth, and financial markets in our first economic report for 2010.
Click the image below to see the interview. For a full article, see
9NEWS.com; and for the Monthly Economic Summary report, go to our
Metro Denver Economy section.
Posted by Tom Clark December 16, 2009
Local news outlets missed the mark completely when they last reported "layoffs" at the Vestas plant in Windsor. It was page one in the local papers. A local news station followed with, "Is this the beginning of the end?" in its nightly newscast. How unfortunate and what a disservice to our newest employer who is investing $700 million on Colorado's Front Range and will employ over 2,000 workers.
Despites retractions, the damage was already done. In our conversations with local business leaders, the local media have left everyone with the impression that Vestas is laying off employees, the wind industry is endangered, and the State of Colorado is inexplicably paying Vestas incentives.
All these are incorrect. Here are the facts:
Due to the international credit crunch and slowing orders, Vestas has reduced its operations at the Windsor plant. No one was laid off. Workers are still going to work and getting paid. Some of Vestas’ customers, with blades ordered, cannot take possession of their turbines because the credit they require cannot be secured. The global slowdown has also impacted the number of orders throughout the entire industry. Like many companies, inventory has risen and storage facilities are full.
Yet Vestas is still bringing blades into its Windsor facility for repair. The Texas hurricane has required significant repairs for many blades. These are being shipped to the Windsor plant each week.
In the meantime, Vestas’ manufacturing plant in Pueblo, the largest facility making wind turbine towers in the world, has already hired 100 people and has been producing steel towers since October. These activities will continue. Vestas plans to open another blade manufacturing plant and a nacelle assembly facility in Brighton, by the third quarter of 2010, and these plans also have not changed, nor have those for the six supplier companies that have followed Vestas to Colorado.
As to incentives, Vestas has received incentives from the State. For example, some came from the Bush II era in 2006. (Remember GWB’s “mini-stimulus” package?) These funds were disbursed in 2008 from an agreement reached in 2006 with Governor Owens’ staff.
The 464 jobs covered under the 2006 incentive have been paid $62 million (plus or minus) since they came on staff in 2006. The State’s investment in training was $2,000 per job, or $928,000. Not a bad return on investment. Sadly, none of this was noted in any of the stories.
Vestas has invested over $3 million of its own cash this year to train its Windsor employees in 2008-09.
And by the way, the wind industry in the U.S. is expected to grow by double-digits for the next two decades.
Tags: Incentives, Industries
Posted by Janet Fritz, Director of Marketing December 2, 2009
Tom beat most of us out of bed today to deliver the latest verdict on our economy, sharing our latest Monthly Economic Summary with 9NEWS at 6 a.m.
We sure hope the weather and the economy continue to improve in the New Year!
Click the image below to see the interview. For a full article, see
9NEWS.com; and for the Monthly Economic Summary report, go to our
Metro Denver Economy section.
Tags: Economy
Posted by Tom Clark November 23, 2009
While the U.S. basks in 10+ percent unemployment, Colorado is preparing to exit the recession earlier than most other states. Today’s unemployment rate in Colorado is below seven percent. In many ways Colorado is the beneficiary of speculative real estate investments that are banking on Colorado’s healthier economy for greater returns on those investments. Hooray for us.
But deliberate strategies are also in place that will capitalize on more than just investors looking to position themselves for the upturn. We are interested in the opportunity afforded by company consolidations from other states into Colorado. While the economic cycle tends to be more robust in our business during an overall economic recovery, individual companies are often actively engaged in shedding costs and burdensome regulatory environments from higher priced markets. These consolidations represent an opportunity for Metro Denver right now.
The greatest opportunities lie in California where companies are now seeing the impact of recent budget balancing acrobatics. Much of the new costs of government have fallen on the private sector there. We are experiencing the first wave of California’s business outflow. Surprisingly, we are also seeing activity from the Northeast. It is not typically the norm for Northeastern-based companies to move west of the Mississippi. Their investment decisions usually focus on the Carolinas and Georgia.
These are not industry trends, but reflect the actual circumstances of individual companies. As the economy begins to gather speed, we’ll see trends that reflect more industry-wide movements. In the meantime, we’re chasing companies that are interested in moving to more hospitable climates.
Tags: Economy
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