House Committee on Finance (02/04/2009)

Final
STAFF SUMMARY OF MEETING

HOUSE COMMITTEE ON FINANCE

Date:	02/04/2009	ATTENDANCE

Time:	09:44 AM to 06:18 PM	Apuan	X
		Benefield	X
Place:	HCR 0107	Gerou	X
		Kefalas	X
This Meeting was called to order by		Kerr A.	X
	Representative Judd	Lambert	X
		Roberts	X
This Report was prepared by		Summers	X
	Ron Kirk	Swalm	X
		Frangas	X
		Judd	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
HB09-1105 HB09-1095 HB09-1051 HB09-1001 HB09-1127 HB09-1071		Amended, Laid Over Postponed Indefinitely Postponed Indefinitely Referred to Appropriations Postponed Indefinitely Amended, Referred to Appropriations

09:45 AM -- House Bill 09-1105 - Concerning the Colorado Innovation Investment Tax Credit

Representative Kefalas, prime sponsor, explained the provisions of the bill and distributed a news article on the measure (Attachment A). Representative Kefalas noted that the bill allows certain investors to receive an income tax credit for investments made in certain aerospace, bioscience, clean energy, and information technology small businesses during tax years 2010 through 2014. The credit is equal to 15 percent of the investment for the tax year in which the investment is made and the following tax year, up to a maximum total of $100,000.

Representative Kefalas continued by noting that the credit is non-refundable, not transferable and may be carried forward for five years. The state may grant a maximum of $3.0 million in credits during each tax year. If applications worth more than $3.0 million qualify, they will be approved on a first-come, first-serve basis. After a brief discussion on the credit, the committee heard testimony.

The following persons testified:

10:01 AM -- Dr. Martin Shields, Colorado State University, testified in support of the bill. Dr. Shields noted that the bill offers Colorado economic opportunities in terms of increasing educational opportunities that is an investment in Colorado's economic future.

Representative Benefield distributed a handout entitled Balancing Taxes, Education Funding and Long-Term Economic"(Attachment B) and discussed the options the General Assembly has in terms of balancing the budget and allocating money for higher education. The committee discussed the challenges of funding education in FY 2009-10.

10:23 AM -- Ms. Su Hawk, Colorado's Technology Association (CSIA), testified in support of the bill and discussed the Information Technology ( IT) industry in Colorado. The industry employs over 60,000 workers in the state with an average salary of $84,000 per year and is an economic engine for the state's economy. She closed by saying that this bill will help the industry and indicate that the state wants entrepreneurs in Colorado.

10:40 AM -- Mr. Mark Forsyth, Rocky Mountain Innovation Initiative, testified in support of the bill and noted that it is important to fund new business start-ups in Colorado to stimulate the economy. House Bill 09-1105 works to provide funding for these companies. This bill will attract more private capital to Colorado businesses. States other than Colorado that have similar tax incentives have seen this credit bring more businesses to their state. In Wisconsin, the total Angel investments doubled in one year. He closed by asking the committee to support the legislation.

10:57 AM -- Mr. Ed DeCecco, Office of Legislative Legal Services, responded to committee questions on the administration of the income tax credits in the bill.

11:00 AM -- Mr. Mark Forsyth, Rocky Mountain Innovation Initiative, continued by responding to committee questions about the bill being a short-term economic stimulus. The committee discussed the types of early-stage companies that would receive investment money under the bill.

11:06 AM -- Mr. Dennis Oddy, Colorado's Technology Association (CSIA), testified in support of the bill and talked about the value of venture-capital to start-up companies in Colorado. Software development companies add to Colorado's innovative spirit and can work to stimulate the state's economy.

11:11 AM -- Mr. Jack Wheeler, Colorado Bioscience Association, testified in support of the bill. This bill will provide small business bioscience companies with the start-up capital companies need to get their companies off the ground to be able to eventually obtain venture capital funding.

11:17 AM -- Ms. Sandra Solin, Northern Colorado Legislative Alliance, testified in support of the bill. Venture capital is an important driver for Colorado's economy, especially when the credit markets are frozen for many small businesses.

11:19 AM -- Mr. Stephen Miller, Denver Ventures, testified in support of the legislation. He closed by saying that by making an investment in a Colorado company, the money invested in the business remains in the state.

11:22 AM

The bill was placed on the table for action and amended by adoption of amendment L.003 (Attachment C). After a brief committee discussion, the bill was laid over to allow the bill sponsor time to make some drafting changes. The bill has been placed on the committee schedule for Wednesday, February 18, 2009, upon adjournment. The Chair did not close the amendment phase.


BILL:	HB09-1105
TIME:	11:22:14 AM
MOVED:	Kefalas
MOTION:	Moved amendment L.003. The motion passed without objection by those members present. After a brief committee discussion, the bill was laid over, as amended.
SECONDED:	Kerr A.
		VOTE
	Apuan
	Benefield
	Gerou
	Kefalas
	Kerr A.
	Lambert
	Roberts
	Summers
	Swalm
	Frangas
	Judd

Not Final YES: 0 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: Pass Without Objection


BILL:	HB09-1105
TIME:	11:26:50 AM
MOVED:
MOTION:
SECONDED:
		VOTE
	Apuan
	Benefield
	Gerou
	Kefalas
	Kerr A.
	Lambert
	Roberts
	Summers
	Swalm
	Frangas
	Judd

Not Final YES: 0 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: TIE

11:29 AM -- House Bill 09-1095 - Concerning Live Greyhound Racing (for action only)

Representative Baumgardner, prime sponsor, initially presented House Bill 09-1095 to the House Finance Committee on January 21, 2009. At the request of the sponsor, the following action was taken.


BILL:	HB09-1095
TIME:	11:29:34 AM
MOVED:	Frangas
MOTION:	Moved to postpone House Bill 09-1095 indefinitely. The motion passed on a 10-0 vote.
SECONDED:	Lambert
		VOTE
	Apuan	Yes
	Benefield	Excused
	Gerou	Yes
	Kefalas	Yes
	Kerr A.	Yes
	Lambert	Yes
	Roberts	Yes
	Summers	Yes
	Swalm	Yes
	Frangas	Yes
	Judd	Yes

Final YES: 10 NO: 0 EXC: 1 ABS: 0 FINAL ACTION: PASS

11:30 AM -- House Bill 09-1051 - Concerning Federal Mineral Lease (FML) Revenue

Representative Baumgardner, prime sponsor, explained the provisions of the bill and distributed amendment L.005 (Attachment D), a flow chart on FML revenue (Attachment E), and a news article by the sponsor (Attachment F) on the bill to committee members. He explained that from FY 2009-10 through FY 2020-21, this bill, requires that 10 percent of all federal mineral lease (FML) revenue that is currently credited to the Mineral Leasing Fund be instead credited to the newly created County of Origin Construction Cash Fund. The remaining 90 percent is to be credited to the Mineral Leasing Fund, and allocated as specified under current statute.

The following persons testified:

11:36 AM -- Mr. Kevin Bommer, Colorado Municipal League, testified in opposition toward the bill.

11:44 AM -- Mr. Bruce Eisenhauer, Department of Local Affairs, testified in opposition toward the bill. He explained that many local governments would lose funds under this bill that are critical to providing the services that they provide. He closed by urging the committee to oppose the bill.

11:50 AM -- Ms. Mary Wickersham, Office of the State Treasurer, testified in support of the bill and spoke to the distribution of FML revenue. The committee discussed the current severance tax and FML forecast.

11:58 AM

Recess.

01:19 PM

Resume testimony.

01:19 PM -- Mr. Aron Diaz, testified in support of the bill.

01:27 PM -- Ms. Sue Jarrett, representing herself, testified in support of the bill and noted that the taxes that are generated from the oil and gas industry should be used to fund activities within the local areas that the money is generated from. She urged the committee to support the bill.

01:31 PM

The bill was placed on the table for action.


BILL:	HB09-1051
TIME:	01:31:35 PM
MOVED:	Roberts
MOTION:	Moved amendment L.005. The motion passed without objection by those members present.
SECONDED:	Lambert
		VOTE
	Apuan
	Benefield
	Gerou
	Kefalas
	Kerr A.
	Lambert
	Roberts
	Summers
	Swalm
	Frangas
	Judd

Not Final YES: 0 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: Pass Without Objection


BILL:	HB09-1051
TIME:	01:32:54 PM
MOVED:	Kefalas
MOTION:	Refer House Bill 09-1051, as amended, to the Committee on Appropriations. The motion failed on a 0-10 vote.
SECONDED:	Roberts
		VOTE
	Apuan	No
	Benefield	No
	Gerou	No
	Kefalas	No
	Kerr A.	Excused
	Lambert	No
	Roberts	No
	Summers	No
	Swalm	No
	Frangas	No
	Judd	No

Not Final YES: 0 NO: 10 EXC: 1 ABS: 0 FINAL ACTION: FAIL


BILL:	HB09-1051
TIME:	01:37:48 PM
MOVED:	Benefield
MOTION:	Moved to postpone House Bill 09-1051 indefinitely. The motion passed on a 9-1 vote.
SECONDED:	Frangas
		VOTE
	Apuan	Yes
	Benefield	Yes
	Gerou	No
	Kefalas	Yes
	Kerr A.	Excused
	Lambert	Yes
	Roberts	Yes
	Summers	Yes
	Swalm	Yes
	Frangas	Yes
	Judd	Yes

Final YES: 9 NO: 1 EXC: 1 ABS: 0 FINAL ACTION: PASS

01:30 PM -- House Bill 09-1001 - Concerning Incentives for Job Growth

Representative Rice, prime sponsor, explained House Bill 09-1001 provides an income tax credit to firms that create jobs in Colorado. If the jobs are created within an enhanced rural enterprise zone, firms must create at least 10 jobs and retain them for one year. If the jobs are not being created within an enhanced rural enterprise zone, at least 20 jobs must be created and retained for one year. In order to qualify for the credit, the jobs must bring wages of at least 110 percent of the average wage of the county in which the new jobs are located.

The following persons testified:

01:50 PM -- Mr. Don Elliman, Colorado Office of Economic Development and International Trade (OEDIT), testified in support of the bill. Mr. Elliman noted that the bill is an incentive to companies that will result in many new jobs that pay for themselves. These are jobs that otherwise would not come to Colorado.

The committee engaged in a discussion on the secondary impacts of job creation and whether these factors would pay for the cost of the credits in the bill. Mr. Elliman responded by discussing the impacts of the federal economic stimulus package on job creation in Colorado. He noted that the federal legislation is aimed at the same goal of job creation as that goal found in the provisions of House Bill 09-1001.

02:38 PM -- Dr. Richard Wobbekind, University of Colorado at Boulder, testified in support of the bill and discussed the secondary effects of job creation. Dr. Wobbekind noted that the quality of a workforce is important to the state. He continued by pointing out that the oil and gas industry's jobs have many secondary impacts that benefit the state of Colorado. He continued by saying that the net tax generated from House Bill 09-1001 will more than offset the cost in the bill.

The committee discussed the fiscal note and questioned whether the cost would be offset by new jobs. Dr. Wobbekind noted that the cost of this tax incentive is minimal in terms of the return to the state. Representative Judd discussed whether studies on dynamic modeling show that job credits pay for themselves. Dr. Wobbekind responded by saying that if jobs were not created by House Bill 09-1001, there is no cost to the state.

The discussion continued on the costs in the bill and whether there is a way to evaluate whether the credits in the bill will work. Dr. Wobbekind responded that it may be possible to track state revenue increases on a job-by-job basis. The committee discussed the reporting requirements in the bill. Dr. Wobbekind said that he would be surprised if the bill was not revenue neutral. The committee continued the discussion on whether tax credits really entice businesses to relocate from one state to another. Dr. Wobbekind mentioned that the decision by firms to relocate or move to another state is decided by a number of factors.

03:14 PM -- Mr. Tom Clark, Metro Denver Chamber of Commerce, testified in support of the legislation. Mr. Clark discussed the industries that locate in Colorado because the state has a competitive advantage. The key to attracting industries to Colorado is to create key niche areas of businesses in the state. Once a business is operating in Colorado, the company generally does not choose to close and move to another state. Mr. Clark closed by discussing the benefits of job creation to the state's weak economy.

Representative Judd discussed the factors that influence businesses to move to Colorado. Mr. Clark responded by commenting on the benefits of tourism to Colorado in terms of its draw in out-of-state dollars to Colorado and the advantages of the university systems in Colorado. The committee discussed whether the bill should be considered in the current economic climate given the legislature's task of balancing the budget or considered in the future when the state has more revenue. Mr. Clark closed by saying the jobs created in this bill will more than pay for costs identified in the fiscal note.

03:47 PM -- Mr. Mike Kazmierski, Colorado Springs Economic Development Corporation, responded to committee questions and testified in support of the bill. Mr. Kazmierski discussed the many quality-of-life issues that Colorado offers out-of-state companies.

04:05 PM -- Mr. Preston Gibson, Jefferson Economic Council, testified in support of the legislation. Mr. Gibson discussed the value of tax incentives to companies in terms of potentially relocating to Colorado. Mr. Gibson discussed the fact that we are competing globally and no longer considering the same competitive environment as we did when the state was competing for U.S. businesses. Mr. Gibson noted that a number of companies have moved their corporate headquarters to Colorado and closed by saying that the cost of House Bill 09-1001 will be paid for by new job creation. Thus, the incentives in the bill are revenue neutral to the state.

After a brief committee discussion, Mr. Gibson responded by talking about Colorado's tax structure in terms of the taxes that corporations pay to the state. The committee briefly discussed the renewable energy industry in Colorado and the level of business activity in Jefferson County. Mr. Gibson closed by saying that incentives make a big difference in the decision of whether companies choose to locate in Colorado.

04:19 PM -- Mr. Mike Mauer, Legislative Council Staff, commented on the secondary impacts that were discussed during testimony on the bill. At best, tax incentives appear to make the difference only in situations where two sites are equally desirable for other reasons and the tax situation is better on the margin at one location. According to a study that reviewed over 300 pieces of literature examining the effectiveness of state tax incentives, the tax literature indicates that when a business makes its location decision "taxes...seem to enter decisions at the very last stage, if at all.

Mr. Mauer continued by noting the reference to findings by the Washington study in the fiscal note. He continued by saying that the study indicates that there appears to be little correlation between the amount of tax benefit received by participants in the tax incentive programs and the growth in employment which resulted. Therefore, these tax incentives may not be a major factor in influencing the location process for businesses. Mr. Mauer closed by reiterating that the challenge is determining whether tax incentives are the real factor that drives an out-of-state company to move its operations or headquarters to Colorado, of whether tax credits will go to companies that would have come here anyway without the credit.

04:38 PM

The bill was placed on the table for action.


BILL:	HB09-1001
TIME:	04:38:37 PM
MOVED:	Roberts
MOTION:	Refer House Bill 09-1001 to the Committee on Appropriations. The motion passed on a 10-1 vote.
SECONDED:	Summers
		VOTE
	Apuan	Yes
	Benefield	Yes
	Gerou	Yes
	Kefalas	Yes
	Kerr A.	Yes
	Lambert	Yes
	Roberts	Yes
	Summers	Yes
	Swalm	Yes
	Frangas	Yes
	Judd	No

Final YES: 10 NO: 1 EXC: 0 ABS: 0 FINAL ACTION: PASS

04:50 PM

Recess.

05:01 PM -- House Bill 09-1127 - Concerning Tax Incentives for Small Business

Representative Miklosi, prime sponsor, distributed a handout on the bill (Attachment G) and explained that House Bill 09-1127 provides an income tax credit for investments in small businesses based in Colorado. The credit is available for tax years 2011 through 2015. To qualify for the credit, an investor must invest in a business for at least three consecutive years. The investment in the third year must be at least $100,000 in cash or capital, such as equipment or buildings, that is provided in exchange for debt or equity in the business. The investment in the first two years must total at least $25,000. The business must have fewer than 20 employees at the time of initial investment. Representative Miklosi continued by saying the amount of the credit is equal to a percentage of the total amount of new wages paid to full-time Colorado-based employees hired by a business over the three-year investment period. The percentage is based on the number of full-time employees hired by the business over the same three-year period. The maximum percentage is 75 percent.

The following persons testified:

05:04 PM -- Mr. Kevin Johansen, Angel Capital Summit Team, testified in support of the legislation and spoke to the effect of tax incentives in bringing jobs to Colorado. Mr. Johansen spoke to the factors that drive the entrepreneurial spirit and closed by talking about how difficult it is to raise money for new business-start up companies. This bill provides incentives to businesses to create jobs in Colorado.

05:24 PM -- Mr. Chris Reim, Breakout Equity Partners and American BioResources, testified in support of the bill. Mr. Reim, an investment banker, discussed the value of tax incentives toward the creation of jobs. He continued saying that Colorado needs to be competitive with other states. The incentives in this bill are an important step toward stimulating Colorado's economy because cash flow is critical to start-up businesses that create jobs.

05:30 PM -- Mr. Jim Holt, Adams Rental, testified in support of the bill and said that it will bring more businesses to Colorado.

05:31 PM

The bill was placed on the table for action and no amendments were offered.


BILL:	HB09-1127
TIME:	05:31:43 PM
MOVED:	Frangas
MOTION:	Refer House Bill 09-1127 to the Committee on Appropriations. The motion failed on a 3-8 vote.
SECONDED:	Kerr A.
		VOTE
	Apuan	No
	Benefield	No
	Gerou	No
	Kefalas	Yes
	Kerr A.	Yes
	Lambert	No
	Roberts	No
	Summers	No
	Swalm	No
	Frangas	Yes
	Judd	No

Not Final YES: 3 NO: 8 EXC: 0 ABS: 0 FINAL ACTION: FAIL


BILL:	HB09-1127
TIME:	05:32:02 PM
MOVED:
MOTION:
SECONDED:
		VOTE
	Apuan
	Benefield
	Gerou
	Kefalas
	Kerr A.
	Lambert
	Roberts
	Summers
	Swalm
	Frangas
	Judd

Not Final YES: 0 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: TIE


BILL:	HB09-1127
TIME:	05:37:14 PM
MOVED:	Benefield
MOTION:	Moved to postpone House Bill 09-1127 indefinitely. The motion passed on a 10-1 vote.
SECONDED:	Summers
		VOTE
	Apuan	Yes
	Benefield	Yes
	Gerou	Yes
	Kefalas	Yes
	Kerr A.	Yes
	Lambert	Yes
	Roberts	Yes
	Summers	Yes
	Swalm	Yes
	Frangas	No
	Judd	Yes

Final YES: 10 NO: 1 EXC: 0 ABS: 0 FINAL ACTION: PASS

05:39 PM -- House Bill 09-1071 - Concerning the Search and Rescue Fund

Representative Gagliardi, prime sponsor, explained the provisions in the bill. She continued saying that under current law, the Search and Rescue Fund provides reimbursements to public entities for the direct costs related to the search and rescue of people engaged in wilderness activities. Such costs are typically incurred by counties. This bill expands the allowable reasons for missions to include searches for adults or juveniles who have a disability. The measure also allows both cities and counties to seek reimbursement for mission expenses, and to request funds for equipment and training from any balance remaining in the fund annually. Finally, the bill increases the surcharge on hunting and fishing licenses, and on off-highway vehicle licenses, from $0.25 to $1.00.

The following persons testified:

05:50 PM -- Mr. Justin Smith, County Sheriffs Association, testified in support of the bill. He indicated that many of these operations occur in very remote parts of the state. He closed by urging the committee to support the bill.

05:56 PM -- Mr. Howard Paul, Colorado Search and Rescue Board and the Alpine Rescue Team, testified in support of the bill. He said that the fund was initially created to aid search and rescue teams around the state. The fund was initially funded with a 25-cent fee on hunting licenses. Since then, it was expanded to many outdoor licenses. Mr. Paul noted that many of the expenses of search and rescue teams are paid for by members of teams and these expenses are not always reimbursed. Mr. Paul closed by urging the committee to support the legislation.

06:06 PM -- Ms. Jocelyn Atadero, representing her brother Jaryd Atadero, testified in favor of House Bill 09-1071. Ms. Atadero discussed her brother, who went missing in the mountains in 1999, and stressed the importance of raising search and rescue fees under the bill.

06:09 PM -- Mr. Alan Atadero, representing his son Jaryd Atadero, testified in favor of the bill. Mr. Atadero explained how additional resources for search and rescue operations may help to save lives, and addressed the issue of the burden of search and rescue fees falling on sportsmen. Mr. Atadero also discussed future efforts to increase funding for search and rescue operations and improve safety programs. Mr. Atadero provided advice regarding how to increase safety when taking children into the wilderness.

06:13 PM

The bill was placed on the table for action and amendment L.005 (Attachment G) was adopted. (After the amendment was adopted, the committee engaged in a brief discussion and found that the amendment was incorporated into the State, Veterans, & Military Affairs Committee Report dated February 3, 2009. Thus, after the following motion was made, the House Finance Committee report reflects that the committee referred House Bill 09-1071 to the Committee On Appropriations without amendments.)


BILL:	HB09-1071
TIME:	06:13:50 PM
MOVED:	Frangas
MOTION:	Moved amendment L.005. The motion passed without objection by those members present. After the amendment was adopted, the committee engaged in a brief discussion and found that the amendment was already incorporated into the State, Veterans, & Military Affairs Committee Report dated February 3, 2009. Thus, although the following motion was made, the House Finance Committee report reflects that the committee referred House Bill 09-1071 to the Committee On Appropriations without amendments.
SECONDED:	Summers
		VOTE
	Apuan
	Benefield
	Gerou
	Kefalas
	Kerr A.
	Lambert
	Roberts
	Summers
	Swalm
	Frangas
	Judd

Not Final YES: 0 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: Pass Without Objection


BILL:	HB09-1071
TIME:	06:17:11 PM
MOVED:	Frangas
MOTION:	Refer House Bill 09-1071, as amended, to the Committee on Appropriations. The motion passed on a 11-0 vote.
SECONDED:	Benefield
		VOTE
	Apuan	Yes
	Benefield	Yes
	Gerou	Yes
	Kefalas	Yes
	Kerr A.	Yes
	Lambert	Yes
	Roberts	Yes
	Summers	Yes
	Swalm	Yes
	Frangas	Yes
	Judd	Yes

Final YES: 11 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: PASS

06:18 PM

Adjourn.