Final
Call To Order

RURAL ISSUES

Votes:
Action Taken:
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09:09 AM -- Call To Order

Representative Hodge, Chair, called the meeting to order and discussed the committee charge. Representative Hodge explained that the committee was created by HJR 05-1055 to consider economic issues facing rural Colorado such as economic development, retention of employees, and access to technology. The committee members introduced themselves and commented on concerns in their districts that fall under the committee's charge. Staff distributed a committee procedural memorandum (Attachment A) and HJR 05-1055 (Attachment B) to committee members.


09:18 AM -- Presentation on the Estate Tax

Ms. Natalie Mullis, Legislative Council Staff, distributed a staff memorandum (Attachment C) on the estate tax to the committee members and discussed an overview of the tax. Ms. Mullis began by commenting on the implementation of the tax and the revenues that are shared by the federal government with the state. The estate tax is levied on the transfer of assets that occurs after someone dies. In 2005, estates valued at more than $1.5 million must file an estate tax return.

Ms. Mullis explained that Colorado receives its estate tax revenue through a credit allowed in the federal estate tax and does not impose any additional taxes on its citizens. The federal government determines the size of the estate tax bill for taxpayers in Colorado. Until recently, the federal government shared some of the revenue from the tax with the state. Ms. Mullis discussed the 2001 federal legislation that would phase out the federal estate tax by 2010.



Ms. Mullis discussed the impact that the 2001 federal tax legislation would have on the revenues that Colorado receives from the estate tax. If Colorado were to repeal the state estate tax, the tax burden on taxpayers would not change. Ms. Mullis closed by discussing the possibility of offsetting the state estate taxes paid with a TABOR refund method.

The committee discussed the estate taxes that are assessed on family-owned farms and the number of taxpayers in Colorado that have paid estate taxes over previous years. Ms. Mullis commented that in 2005, the maximum rate for the estate tax was 47 percent. The committee discussed how farm-land is valued for purposes of the estate tax.

Ms. Mullis discussed the valuation of family-owned farms and businesses and commented that in 2002, there were 971 taxable estates in Colorado. The committee discussed the number of farms and ranches that make up the 971 taxable estates. The committee asked staff to do some research on the number of rural farms and ranches that were forced to sell or liquidate their estates to pay off an estate tax bill.

Committee members closed the discussion by talking about the definition of family-farms for estate tax purposes and asked staff to research definitions for the term.


09:43 AM -- Club 20

Mr. Reeves Brown, Executive Director for Club 20, commented on the business organizations that are part of Club 20 and distributed a handout on his presentation (Attachment D). Mr. Brown discussed the differences between urban and rural economics and the concerns that rural communities have about economic development in rural parts of Colorado.

Mr. Brown commented on the factors that drive economic development in rural parts of Colorado. Affordable, accessible health care and a good transportation infrastructure provide an important framework for economic development to flourish in rural parts of Colorado. Mr. Brown commented on some of the Western Slope water and transportation projects that have aided rural economies.

Mr. Brown discussed the energy boom in Northwest Colorado and the challenges that communities face when they balance the interests of rural communities and energy development. Population growth, water supply issues, and the need for high technology networks are challenging mountain communities on the Western Slope. Mr. Brown noted that in Southwest Colorado, population growth is slowly replacing agriculture. The Las Animas water project is important to rural agricultural communities.

Mr. Brown commented that the entire Western Slope shares common interests. For example, 70 percent is owned by the federal government and affected by the Bureau of Land Management and federal policies. Issues that are important include sustaining agriculture, balancing population growth with the environment, maintaining a recreation industry and the natural habitat, and enhancing access to advanced telecommunications networks.












Senator Fitz-Gerald commented on some of the issues that face rural school districts from lack of funding. Mr. Brown responded saying that the access to high technology is critical to schools and businesses.

Senator Fitz-Gerald discussed whether the assessment rate levied on Bed and Breakfasts businesses and second and third homes are a concern for property tax revenue purposes. The committee and Mr. Brown commented on the social and tax policy issues that affect the ownership of second and third homes.

The committee discussed the availability of good fiber optics lines in rural parts of Colorado. Mr. Brown commented on the telecommunications providers that service rural areas of Colorado and discussed the need for more competition. Mr. Brown closed the discussion by commenting on water-mitigation strategies that are important to western Colorado and the unintended consequences of health care policies that work for urban communities but do not work for rural Colorado.

The committee discussed some of the general issues that affect rural Colorado such as water and transportation issues. Mr. Klein commented on factors that create jobs in Colorado. He also expressed his concerns about the lack of accessible health care and inadequate transportation infrastructures that are present in rural parts of Colorado.


10:16 AM -- Action 22

Ms. Cathy Garcia, President and CEO for Action 22, commented on the regional membership and counties that makes up Action 22. Of the 22 counties that make up Action 22, 15 are in the bottom third median of household income. Ms. Garcia mentioned that policies which stimulate economic development in rural Colorado are interrelated with urban policies. The state needs to look at the differences between urban and rural environments to enact beneficial policies that work for both environments.

Ms. Garcia noted that in concern for family-owned farms and businesses, the estate tax should be repealed. Some of the businesses and/or family farms that are capital intensive in rural parts of Colorado, pay taxes annually and will have to pay taxes again when the estate is passed on.

Ms. Garcia mentioned that some of concerns that rural businesses have is affordable heath care for employees. Ms. Garcia commented on the shortage of nurse practitioners in rural regions of Colorado and the difficulty employers have recruiting physicians and teachers. Ms. Garcia mentioned the lower pay that professionals receive in rural job markets. Grants and incentives that can be used to attract teachers are important to a healthy rural economic environment.

Ms. Garcia commented on the lack of technology providers in rural Colorado. We need a telecommunications infrastructure that would enhance economic development in rural Colorado. There are many parts of rural Colorado that do not have Internet access. An enhanced telecommunications infrastructure will provide technical assistance for businesses, hospitals, and communities. A bill that would assist communities to build telecommunications capacity would help rural communities realize Internet access goals more quickly.












Ms. Garcia commented on the need for high-paying positions in Colorado. We need to provide technical assistance from the state to counties and other local governments build technical capacity to attract economic development to Colorado.

The committee discussed the effectiveness of enterprise zones. Ms. Garcia responded saying that technical assistance is what is needed to stimulate economic development in enterprise zones in Colorado.
The committee discussed some of the safety concerns that result from two-lane highways in rural Colorado. Ms. Garcia commented that four-lane highways will help move more products in rural Colorado. The committee briefly discussed some of the rural highways in Colorado that need widening. Mr. Klein commented on the use of Highway 50 in Southeast Colorado as a major artery for business transportation.

Ms. Garcia noted that along with these concerns, rural businesses also need affordable housing for their employees. The committee discussed a comprehensive plan-approach to solving community issues and discussed ways to make rural health care more affordable for employees of rural businesses. Senator Fitz-Gerald questioned why Medicaid reimbursement was lower for rural providers who face higher health care costs than urban providers.

The committee closed the discussion talking about a number of issues tied to economic development in rural Colorado.


11:15 AM -- Colorado Rural Health Center

Ms. Denise Denton, Executive Director for the Colorado Rural Health Center, distributed a packet of materials on health issues facing rural Colorado to committee members (Attachment E). Ms. Denton commented on the importance of affordable health care insurance for rural employees. Recruitment and retention of employees is dependent on an accessible and affordable health care system. Also, Internet connections are critical to health care professionals because it allows them access to health care information that is essential to the services that they provide. The Internet complements the delivery of health care service. Ms. Denton also discussed the need for a strong transportation network in rural Colorado because it is critical to accessing rural health care networks.

Ms. Denton discussed the low reimbursement rates for Medicaid providers in rural Colorado and the number of Colorado counties that do not have hospitals. There are vast differences for health care needs between rural communities. Many of these rural communities have higher populations of seniors, a higher poverty rate, and fewer insurance options.

Ms. Denton briefly discussed Amendment 35 and said that money from this measure is helping rural communities with primary care costs. The legislature should track the Amendment 35 dollars that fund primary care to see if the money is doing what it was intended to do.














Ms. Denton also mentioned that long-term facilities are struggling in rural areas. These facilities need more nurses and an educated work force. Mr. Denton continued by discussing key issues that need to be addressed. The transportation infrastructure in rural Colorado needs to be improved. Also, the state could provide incentives to encourage professionals to relocate to rural parts of Colorado that really need health care professionals. Ms. Denton suggested that the state can use current resources more wisely. For example, the state could look at some mechanisms that maximize the use of federal dollars and help these rural communities take advantage of these revenues, but in doing so, should protect the interests of rural communities.

Ms. Denton also suggested that the legislature look at how some of these federal programs work. The legislature should look at any unintended program consequences and flexibility features that could allow these programs to be implemented locally.

Representative-elect Gardner closed the discussion by asking if it would be possible to hear from the Department of Local Affairs regarding the technical assistance that is provided to rural communities. Ms. Denton closed by commenting on the federal PILT legislation that allows for federal payments to be paid back to counties.


11:41 AM -- Progressive 15

Ms. Cathy Shull, Executive Directive for Progressive 15, commented that when it comes to rural issues, one size fits-all policies do not work for all counties and rural regions because these areas have significant differences. Economic development policies in rural communities also differ from urban economic development policies and for rural communities, these policies do not immediately bring jobs into the communities.

For rural Colorado, Ms. Shull commented that community colleges play a big role in rural economic development. These colleges are important to the health care industry because they provide professionals that stay in rural communities. Ms. Shull mentioned that some neighboring states have programs to recruit health care professionals to rural areas.

Ms. Shull also mentioned that renewable energy programs are important to regional economies in eastern Colorado. But the state needs to look at ways to improve energy transmission. When it comes to the telecommunications industry, the state needs to do more to ensure that high technology access is available to all parts of rural Colorado. Larger counties are serviced by private providers and for smaller, rural counties, the state needs to look at public private partnerships.

Ms. Shull closed by commenting on the state's Enterprise Zone tax policies have been very helpful to rural regional economies in Colorado. Also, resolving water issues are important to rural regional economies.


11:58 AM -- Lunch Recess















01:33 PM -- Rocky Mountain Farmers Union

Mr. John Stencel, President of the Rocky Mountain Farmers Union, began by speaking about ways to enhance Colorado's water storage resources. Mr. Stencel commented that new water facility projects are important to economic development in rural Colorado. Our water storages can be expanded and dredged. Mr. Stencel stated that state dams need to be maintained. Mr. Stencel commented on the number of counties that are selling water that is being used for agricultural to counties for manufacturing purposes.

Mr. Stencel commented on several county economic development issues and spoke about value-added cooperatives. The advantages of these cooperatives is that they can deliver low interest money to farmers to stimulate the agricultural industry. In regard to farm income, Mr. Stencel mentioned that a large number of ranchers do not even carry health insurance. Mr. Stencel commented that the home-town competitive spirit can do a lot to energize a rural community. We need to bring back youth to the rural counties. Town competitiveness and an entrepreneurial spirit is one of the main pillars of a healthy economic climate.

Mr. Stencel briefly discussed the phase-out of the federal estate tax and suggested that the state look at capital gains when you remove the estate tax. Regardless of the estate tax, the capital gains tax may force some owners to liquidate their properties regardless of the phase-out of the estate tax.

Mr. Stencel closed the discussion by speaking about the benefits of renewable-energy programs. Renewable energy programs can bring significant job-growth benefits to rural Colorado.


01:52 PM -- Colorado Farm Bureau

Ms. Garin Bray, Colorado Farm Bureau, Director, State Affairs, distributed a presentation handout (Attachment F) to committee members and mentioned that there are 44 county farm bureaus with 28,000 members throughout the state. Ms. Bray commented that open space and habitat needs are encroaching on agricultural uses. The number of small farms has decreased over the years due to changes in land use and the economies of scale associated with production on larger farms. The decline in the number of small family farms is due to low commodity prices and higher input prices. These factors are driving farmers and ranchers to operate on larger amounts of land. Current statistics show that less than two percent of the population produces the food and fiber we need.

Ms. Bray discussed the repeal of the estate tax and the detrimental effect the tax has on the farming and ranching community. Congress and the state should advocate the permanent repeal of the tax. Ms. Bray commented that the estate tax can force children to decide whether they intend to continue the family farm. When faced with the realization that their family farm may not survive the cost of the estate tax, many choose to leave and sell off the farm. When this happens, the farms and ranches are often sold off for development purposes. Ms. Bray said that repealing the death tax will prevent the destruction of small farms as they pass from one generation to the next.

Ms. Bray continued to talk about renewable energy, biofuels, and wind energy as factors that can stimulate rural incomes and enhance the economies of many rural communities in Colorado.






Ms. Bray closed by saying that agricultural policies should be geared toward looking at what the agriculture industry will mean to Colorado in the future.


02:21 PM -- Colorado Rural Electric Association

Ms. Donna Moody, Colorado Rural Electric Association, provided a broad overview about the functions of electric cooperatives in Colorado. These cooperatives provide telecommunications services to rural areas and assist rural communities with other projects. These cooperatives have provided financial assistance for the construction of water storage facilities, waste-water systems, the funding for satellite dishes for rural schools, and other community projects.

02:25 PM -- Mr. Jim Herron, General Manager for Mountian View Electric Association, began by providing the committee an overview of the association's role in rural communities. Mr. Heir discussed the Red Light Program and mentioned that it is a rural economic development loan and grant program that allows businesses to borrow money at zero percent interest. This program is a revolving loan program that holds the borrower liable for the loan amount. These programs are a valuable tool for rural economic development but are not always used by businesses.

02:31 PM -- Mr. Rich Wilson, Chief Executive Officer, Southeast Colorado Power, explained that the cooperative was developed seven years ago and is made up of 11 counties. Mr. Wilson mentioned that in 1999, the legislature made $4 million available to Southeast Colorado to facilitate the development of high-speed Internet service. The region now has 1,000 miles of fiber optic lines. Mr. Wilson commented that competition in rural areas is needed to enable Internet and Broadband services to expand. Mr. Wilson closed by saying in Southeast Colorado, the beanpole project was very successful.

02:39 PM -- Mr. Mark Farnsworth, Highline Electric Association, discussed some of the cooperatives that make up Colorado Rural Electric Association (CREA). Renewable energy programs are a very important tool for economic development in rural Colorado counties. Wind and solar resources are abundant in rural Colorado and these programs provide reliable energy and are cost-effective. Mr. Farnsworth discussed some of the methodologies used to decide how many large wind turbines could be placed on a distribution system and closed by discussing the number of jobs that can be created with renewable energy projects.


02:48 PM -- Colorado Cattlemen's Association

Mr. Terri Fankhauser, Colorado Cattlemen's Association, commented that one-third of Colorado counties is dependent on the agricultural industry. Policies that are enacted in Colorado should be reviewed over time to determine the impact on rural agricultural communities. Private property rights are important to Colorado's rural economy (eminent domain issues).

Mr. Fankhauser commented on aspects of Colorado's tax structure that benefit rural communities. The property tax formula for agricultural land provides a significant benefit to farmers and ranchers. Also, the system of tax credits through Enterprise Zones is also valuable as tools to enhance economic development. Mr. Fankhauser mentioned that another useful tool has been the conservation easement tax credit which helps to preserve rural farms and ranches well into the future.






Mr. Fankhauser discussed the size of the beef industry in Colorado. Agriculture is a $4 billion industry and beef production makes up 59 percent of the industry. Beef is not a subsidized industry. Private enterprises have been invaluable for the expansion of this industry. In contrast to the $4 billion agriculture industry, the oil and gas industry is an annual $9 billion business for Colorado.

Mr. Fankhauser commented that the legislature needs to figure out what value agricultural brings to the state. In contrast, agricultural producers need to decide what policies need to be to implemented to maintain a viable Department of Agriculture in Colorado. Mr. Fankhauser commented that policies that enhance rural health care policies and rural transportation need to be evaluated by the legislature. Agriculture in Colorado is at the crossroads because there is less value associated with farming and ranching operations in the state than in prior years. Mr. Fankhauser closed by saying policy changes are needed that will enable these businesses to remain viable in the near and distant future.


03:23 PM -- Public Testimony

03:24 PM -- Mr. David Hiller, U.S. Senator Ken Salazar's Office, Denver, briefly discussed federal legislation that could stimulate rural economies and be of interest to Colorado. Mr. Hiller closed by offering his office's support to the committee.

03:33 PM -- Mr. Clark Becker, Colorado Rural Economic Development Council, commented on the success of the beanpole strategy as a way to extend Internet service to more rural parts of Colorado. Mr. Becker closed by commenting on the technical support that the Colorado Office of Economic Development provides to rural counties in Colorado to expand high-speed Internet capabilities.

03:50 PM -- Mr. Pete Roskop, Colorado Office of Economic Development, commented on the beanpole strategy used in Colorado to provide enhanced Internet services to southwest parts of Colorado.

03:52 PM -- Mr. Gary Witt, Colorado Telecommunications Association, commented on the technical assistance that rural communities receive from the state to extend Internet services to rural parts of Colorado.

03:54 PM -- Administrative Issues

Representative Hodge, Chair, discussed the upcoming scheduled meetings for the committee in Lamar, Alamosa, Greeley, and Grand Junction. Representative Hodge closed by discussing the committee process used for recommending legislation during committee meetings.


03:58 PM

Adjourn.