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Concerns with Incentives at Colorado Economic Development Commission

Nobody wants to pay “retail,” least of all a company that pays great wages and like “a gorilla in the room”–sits wherever it wants. That axiom hasn’t changed in all the years we’ve been recruiting or retaining companies here in Metro Denver.

Today, thanks to the efforts of Governors Bill Owens, Bill Ritter and John Hickenlooper, Colorado’s incentives are comparable with tough competitors like Texas and Utah. That’s the good news.

To show how far we’ve come in our knowledge of job incentives, let’s look back into the days of Governor Richard Lamm. Prior to Governor Roy Romer’s election in 1986, the state of Colorado had no economic development department. It had a Rural Development Office, focused on Lamm’s “settlements policy” of pushing companies into rural communities. Gov. Romer gave us our FIRST incentives – FIRST is a company-specific job training program whose improbable initials stand-for Fast-Track Industrial Startup Training. Go figure. Gov. Owens upped the dollar amounts, but in later years, FIRST would still only permit us to offer a grant of $800 to company’s CEO, for which he/she could use for training at a local community college to improve his/her management skills. You can’t make this stuff up!

But the foundations laid by Gov. Owens resulted in a sea change during the Ritter administration. Colorado adopted numerous incentive programs for cleantech, biotech, corporate headquarters’ attraction, changes in tax policy, etc – all in an effort to get Colorado out of the “dot.bomb” recession of 2002 and to create the “New Energy Economy.” During his term Gov. Hickenlooper added a finer point on incentives for advanced industry companies. These programs are a crucial element in our corporate attraction and retention programs.

Recently, the Colorado Economic Development Commission opened the door for discussions that could bring changes to the state’s existing incentive programs. With a challenging state budget year ahead, the legislature and the budget office will be looking for “spare change” in departmental funds to close a gaping deficit. When the economy is growing, the Colorado Office of Economic Development and International Trade’s incentive funds can look tantalizing. And when communities that have not seen the success of Front Range communities, there can be a political push to increase financial support to companies that are looking at rural or slow-growing areas.

Such strategies should be approached with caution. Gov. Lamm’s interest in the concept of “settlements” permeated job attraction policies and created conflicts where the state took sides, supporting one Colorado city over another. Companies such as Sunstrand, hearing of the Governor’s willingness to provide higher incentives for some cities, switched its original decision to locate in Fort Collins; later picking Grand Junction. 

Colorado has two major incentive funds. The Job Growth Incentive Tax Credit (JGITC) and the Strategic Fund. The JGITC is the most commonly used; permitting companies to take a credit equal to 50 percent of FICA expenses for each new job created. The Strategic Fund was specifically created to compete for major headquarters locations, using incentives that can reach to $5,000 cash per job created. Both have served us well. And neither program can be accessed by the company until the jobs have been created and active for a year.

As the Commission enters its discussions, let’s remember that Colorado will see increasing competition from other states. And while incentives do not make a bad deal, good, they are the reality of modern economic development strategy. 

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About Phil Kalin

Phil Kalin joined Pinnacol Assurance as CEO in 2013. He has served as the chief executive of both public and privately-backed companies, including large hospital systems, as well as organizations focused on health care data, technology and education. He has been active nationally on health care topics related to insurance, data analytics, technology innovation, cost improvement and risk mitigation. Phil is providing an informed opinion on what we see in the Monthly Economic Indicators.

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About Pinnacol

Pinnacol Assurance is the Metro Denver EDC's Research Sponsor. Pinnacol is Colorado’s leading provider of workers’ compensation insurance. Pinnacol provides comprehensive, competitively priced coverage; immediate attention to claims; a highly qualified network of medical providers; and proactive safety programs to more than 55,000 Colorado businesses. Annually, Pinnacol supports nearly $500 million of Colorado’s economic activity, spends over 35,000 hours keeping Colorado worksites safe and provides compassionate care to over 40,000 Coloradans injured on the job.

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