Final
Presentations

RURAL ISSUES

Votes:
Action Taken:
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09:17 AM -- Call To Order

Representative Hodge, Chair, called the meeting to order and welcomed everyone to the meeting. Representative Hodge explained that the committee was visiting Alamosa to hear public comment on economic issues facing Southwestern Colorado such as economic development, retention of employees, and access to technology. The committee members introduced themselves and commented on the committee's previous meetings. Staff present were Natalie Mullis and Ron Kirk, Legislative Council Staff, and Tom Morris, Office of Legislative Legal Services. (Prior to beginning testimony, Senator Entz distributed a Department of Local Affairs memorandum on department funding in the San Luis Valley (Attachment A)).


09:15 AM -- Presentation by Local Value-Added Manufacturing Firms and the Colorado Potato Administrative Committee

Mr. Jim Tonso, Canyon Potato Co, a potato packaging facility, discussed the benefits of the agricultural value-added industry in the San Luis Valley. Mr. Tonso explained the process his company uses to prepare potatoes for the market and the challenges his company faces. He commented that the value-added process benefits every town in the San Luis Valley. The potato industry employs approximately 8,000 people either directly or indirectly and most of these workers are involved in the value-added process. The value-added process includes four steps: 1) sizing the potatoes, 2) grading the potatoes, 3) packaging the potatoes, and 4) shipping the potatoes. Sizing and grading the potatoes adds value because it provides for a consistent product at a high standard. Packaging has changed during the last ten years. In the past, consumers purchased standard 5-lb and 10-lb bags of potatoes. Buyers are now demanding individualized packaging. The number of varieties that producers ship has also been expanding. There are fewer buyers who are making more individualized demands.

Mr. Chris Voigt, Colorado Potato Administrative Committee described some of the challenges and opportunities of the potato industry in the San Luis Valley. He commented that the potato industry is the largest employer in the San Luis Valley. During the last seven years, the industry was profitable in one year, broke even in another, and has not been profitable for the remaining five years. Colorado is the second largest producer of fresh potatoes in the country. Colorado produces 23 million-lbs each year; 17 million are sold fresh; 1 million are processed at a local mashed-potato processing plant; 1 million are shipped to be processed out of state; and the remaining 4 million are unused. He stressed the need for the San Luis Valley to differentiate their potatoes by using a value-added process. With the aging population, producers are looking at ways to make it more convenient for one- or two-person households to consume potatoes.

Mr. Voigt commented on ideas regarding the unused potatoes that are not sold by the market. For example, these potatoes can be used in the mashed-potato processing plant, or be turned into starch, or can be used to create a slurry that would clean up the Summitville Superfund site in Rio Grande County. Potato waste could be injected into the soil at the site, preventing the soil from breaking down into the toxic acid and instead produce carbon dioxide. They would continue to run the waste-water treatment facility currently at the site until there is no longer any need to do so. Mr. Voigt believes that the proposal has a cost savings of between 40 percent and 50 percent; the waste-water treatment facility is expected to cost $80 million over the next 30 years while this proposal is expected to cost between $40 million and $50 million. The engineering firm has agreed to be paid only if the technology works. The EPA has delayed approval because the technology is new and they are wary of using a pay-for-performance contract.

The discussion shifted to the immigrant workforce employed by the potato industry as the committee briefly discussed worker wages in the San Luis Valley.

Mr. Tonso commented that migrant and immigrant workers are important to the potato industry. He noted that the responsibility for determining whether or not the worker is legal falls on the employer and that the responsibility is cumbersome. Mr. Chris Voigt commented on legislation in Idaho that proposed to streamline the administrative process for immigrant and migrant workers. Regarding wages, Mr. Tonso indicated that wages he pays to all employees range from $6.25/hour to over $10/hour.

Mr. Voigt circulated a handout on the potato industry (Attachment B). He talked about the importance of the highway and rail transportation corridors in Southeast and Southwest Colorado to economic development. The discussion shifted back to unwanted, odd-shaped potatoes that are discarded by the market process. Mr. Voigt continued to discuss the disposal of the extra potatoes that are not sold by the market. Mr. Voigt mentioned one possible way of disposing of the potatoes; one engineering firm using beet molasses is using potatoes to clean up Superfund sites around the country. They approached them and said potatoes are made up of starch and sugars that could be used in place of molasses and they said it would work fine - just create a slurry out of the potatoes. (There is a Superfund site nearby that is leaking acid into water near Alamosa.).

Mr. Voigt wrapped-up the presentation by commenting on transportation concerns that affect economic development in the San Luis Valley. Namely, when moving freight, transportation is the concerning issue because there are not enough trucking companies located in the valley. In addition, there are no fueling stations in the San Luis Valley. Mr. Voigt closed by commenting on the rail car shortage in the valley and its effect on rural economies in Southwest Colorado.

The committee discussed the use of potatoes for mine cleanup at the Summitville project. Mr. Voigt commented that the project could utilize all the potatoes that are grown in the valley.

The discussion moved back to the labor force as the committee commented on the work force in the valley that is used by the potato industry and it's impact on schools and social services.

The committee and Mr. Voigt closed the discussion on the Environmental Protection Agency's (EPA) regulatory control over licensing private pesticide applicators in the valley. Mr. Voigt commented that the state regulates commercial applicators but Colorado is still one of the only states that does not license private pesticide applicators. Mr. Voigt closed by expressing concern that the EPA needs to make some changes in the regulatory process and inquired about the state taking over the EPA role.


10:23 AM -- Break


10:51 AM -- Presentation by Alta Fuels on Renewable Fuels and Regional Impacts

Mr. Dan Mortensen, Alta Fuels, began by commenting on local biodiesel growth in Colorado and distributed a news article on biodiesel producers (Attachment C). Mr. Mortensen discussed the process of using Canola and other agricultural products to manufacture biodiesel in a San Luis Valley production facility located in Monte Vista that is scheduled to be running production in the fourth quarter of this year.

Mr. Mortensen said that a full feasibility study by Farm Sector Economics concluded that many changes have occurred in the biodiesel industry over the past several years. Mr. Mortensen said research finds that canola is the product of choice for biodiesel manufactures and is one of the best products to grow because it takes less water that other crops used for biodiesel production. Mr. Mortensen commented on the high-yield canola production in the San Luis Valley that would make it a profitable crop for farmers to grow. Canola also resists pests.

Mr. Mortensen continued to discuss the production process in a valley biodiesel manufacturing plant. The plant his company is considering would cost $4.5 million and generate 45 million gallons of B20 biodiesel fuel annually. This plant would generate $45.1 million in total economic activity per year and create 239 net new jobs for the local economy.

Mr. Mortensen commented on the diesel market. The current diesel production in the Rocky Mountain Region is about 3.8 billion gallons each year. Alta is the largest seller of biodiesel in Colorado.

The committee discussed retail pricing for diesel and biodiesel and talked about the crops that are used to produce biodiesel. Mr. Mortensen commented that Alta Fuels uses canola grown in the Midwest, mostly soy. He further commented that Blue Sun receives crops from Minnesota, Iowa, Kansas, and Colorado. Each year, we’re using more canola from the San Luis Valley.

Mr. Mortensen continued to discuss the market conditions that warrant biodiesel production and said that once it is produced, the market can easily absorb current production. He continued to discuss the incentives that the federal government is providing through the 2005 energy legislation and commented that the biodiesel industry needs to be regulated. We need good monitoring standards. Mr. Mortensen closed by commenting on some state tax incentives that may be helpful to promote the use of biodiesel in Colorado.

The committee closed by discussing other state tax treatments for biodiesel and asked staff to look at the Minnesota biodiesel legislation.


11:19 AM -- Presentation by the San Luis Valley Medical Center

Mr. Russell Johnson, and Ms. Cathy Rogers, San Luis Valley Medical Center, began by discussing rural health care issues in the San Luis Valley and regional demographic trends that are placing greater demands on the health care industry. Ms. Rogers distributed a handout on the center (Attachment D) and discussed the center's role in providing health care in the San Luis Valley.

Mr. Johnson commented that rural hospitals are important to economic development and the availability and accessibility of affordable health care is central to attracting businesses to rural areas. In rural parts of Colorado, health care employers are often the largest employers in the region and is certainly the case for the San Luis Valley region. Mr. Johnson commented that the medical center is a $40 million operation that has invested over $3.5 million in technology, services, and facilities. The center has a payroll of over 450 employees that spends $23 million annually on employee salaries and benefits. The center competes with the front range for employees, services, acquisition of supplies, and physicians.

Mr. Johnson continued by discussing the demands placed on the medical center and health care industry in the San Luis Valley. In rural areas, when the economy falters or is stagnant we have growth in Medicaid services and other services that are provided to uninsured persons. We are moving toward a two-tiered system that is forcing more of the uninsured population to use emergency room care. Mr. Johnson closed by commenting on the economic factors that are making health care less affordable in rural areas of Colorado and the expenses that the medical center has when regional economic declines occur.

The committee and Mr. Johnson closed the discussion by talking about the ways the center and other health care providers are responding to economic, demographic, and industry challenges. Mr. Johnson concluded by saying that without affordable and accessible health care, it is difficult to entice new businesses to relocate to rural parts of Colorado.


12:06 PM -- Presentation by the Colorado State Veterans Center at Homelake

Ms. Vicki Olson, Colorado State Veterans Center at Homelake, distributed a handout on the center (Attachment E) and began by discussing the services that the facility provides. Ms. Olson commented on the center's impact on the regional economy and showed the committee a video. The center's mission is to provide a peaceful and comfortable home for veterans. The center has been in existence for over 100 years and has a 60 resident-capacity in the modern nursing home and a 48 resident-capacity in the domiciliary assisted living facility.

Ms. Olson commented on the effect the Fitzsimmons facility has had on Homelake and commented on the moneys that Fitzsimmons received from the state's General Fund. Colorado is one of four states that does not subsidize veteran homes. Homelake is the third largest employer in Rio Grande County with 60 employees. To add to Homelake's operating expenses, pharmacy costs have gone up and the cost of physician services is increasing.

Ms. Olson continued to comment on the value the center brings to the San Luis Valley in terms of economic and historical benefits. Ms. Olson closed by speaking about the effect the state budgetary cuts have had on the center's funding.


12:22 PM -- Lunch


01:35 PM -- Presentation by the Rio Grand Hospital

Dr. Norman Haug, Rio Grand Hospital, commented on the value that new hospitals districts bring to rural economies. Dr. Haug talked about the local sales tax option that was used to finance the district in Rio Grand County. The new hospital in the district received some financing from a 0.6 percent sales tax in Rio Grand County that generates about $650,000 per year. The revenue is used to partially fund ambulance services and the hospital. The ambulance services in that district gets half the money and the hospital gets the other half.

Dr. Haug continued to comment on local government and other types of financing for other regional hospitals. We also had a hospital that had been operated by the Sisters of St. Joseph from Wichita which had been open since 1907 but closed on October 10, 1993, for various reasons; partly financial. The closure may have had to do more with internal politicals than budget problems. A group of people in the community used a grant of $180,000 to reopen the hospital in January 1996.

Dr. Haug commented on the issues pertaining to the hiring and retention of rural health care professionals in the San Luis Valley. In our region, it is almost impossible to recruit physicians to work in older rural health care facilities. We have an adequate number of patients and an efficient administration to collect money and provide support for the community. But ultimately, the facility needs to be able to hire doctors. Our hospital sees recruiting and retaining physicians as very important and we have been able to recruit an adequate number of physicians.

Dr. Haug closed by commenting on the hospital's client-base and the economics of collecting and financing hospital operations. Fifty percent of the hospital's clients are Medicare patients. We need to at least break even on Medicare patients since that’s half the business. The other half comes from Medicaid, HMO private patients, and CICP patients. In regard to immigrant case loads, undocumented immigrants generally do not pay and cost the hospital $27,000 last year.

The committee engaged in a brief discussion on the economics of rural health care.


02:04 PM -- Presentation by the Cumbres & Toltec Scenic Railroad

Mr. Steve Malnar, Interim Executive Director for the Cumbres & Toltec Scenic Railroad, distributed a handout on his presentation (Attachment F) and commented on the railroad's regional economic impact. The Cumbres & Toltec Scenic Railroad is jointly owned by Colorado and New Mexico. Prior to the joint ownership, it was owned by the Denver and Rio Grande Western Railroad. Mr. Malnar commented on the history of the railroad's operations and began to discuss its historical value to Colorado.

Mr. Malnar commented on the railroad's historic preservation value. In May 2003, the Cumbres & Toltec Scenic Railroad was recognized by the U.S. Advisory Council on Historic Preservation in a ceremony in Washington, D.C. for track restoration work. The council is a group of 21 individuals appointed by the President of the United States to be the historic preservation watchdogs for the country.

Mr. Malnar discussed the regional economic impact. The railroad is the primary economic engine for the Antonito and Chama economies. These villages are located in two of the poorest counties at each end of the railroad. With a projected count of 45,000 passengers in 2005, the railroad will provide 60 seasonal jobs and approximately 28 full-time positions. Mr. Malnar cited one study which found that the train brings about $40 million into the area annually.

Mr. Malnar commented that ridership has increased along with ability to run trains in the last three years. Last year, the railroad had 30,000 riders and this year, the railroad may see 45,000 riders. Recently, the railroad received economic development grants from the federal government to restore tracks and rebuild three of our locomotives. The 1925 engines cost $1 million each to refurbish and put back on the track.

Mr. Malnar commented on a five-year economic plan. In June 2004, the railroad put together a five-year comprehensive plan that calls for $31 million in capitol expenses. Of this money, over the next five years $21 million will be spent on restoring track and $6 million will be spent on three more locomotives and passenger cars which will accommodate 50,000 to 60,000 passengers. The remaining moneys will be spent on operating and other expenses.

The committee and Mr. Malnar discussed the economic impacts of the railroad on the regional economies and engaged in a discussion about state General Fund support for the railroad.


02:30 PM -- Presentation by the San Luis Valley Region Airport

Mr. Herry Andrews, San Luis Valley Regional Airport, discussed the airport's history and commented on its impact on the regional economy. Mr. Andrews said that the airport is a joint venture between the city and county of Alamosa and discussed the airport's FAA funding and short history. Under a Class 2 airport, the FAA funds $150,000 each year for different projects. Other funding comes from another pot of money called a discretionary fund which is used for bigger projects.

Mr. Andrews discussed the airport's history. The airport was formed in 1930 and the first runways were developed by the few pilots that loved to fly to the San Luis Valley. In the 1940's, the airport was expanded and by 1947, was used for commercial flights. During the peak usage in the 1960s and 1970s, there were seven round trips per day to Denver; now there are three per day during the weekdays and two on weekends. In the late 1990s when Denver International Airport was built, they inherited one of their instrument landing systems. The system gives the airport an advantage because business air flights require one to land jets. In the last three years, the airport has upgraded a runway for $2.2 million, expanded the safety areas at $780,000 (areas on either side of runway), and is currently expanding the ramp space so more airplanes can park. In the last two years the airport has doubled the number of business jets that use the airport. Many of these changes were funded with federal money. Up to 2004, the federal government would fund 90 percent of the project; state and local support would fund the remaining 10 percent, generally, 5 percent state and 5 percent by local governments. After 2004, the federal funding increased to 95 percent with the remaining 5 percent split by state and local governments.

Mr. Andrews said that funding is lacking on the land side. The airport needs more ways to raise revenue for the airport infrastructure for parking. Mr. Andrews said the airport's enterprise zone status is very helpful and urged the legislature to support tax credits in enterprise zones.

Mr. Andrews concluded by talking about the airport's economic impact on the regional economy. A recent study indicated that the airport has created about 568 direct and indirect jobs which pay about $10.6 million in wages. The total direct and indirect impact to the economy is estimated at about $28 million.

The committee concluded the discussion by commenting on the airport's funding.


02:52 PM -- Public Testimony - Mr. Ken Swinehart

Mr. Ken Swinehart, President and founder of amigo.net, voiced his concern about the need for more economic development in rural parts of Colorado. Mr. Swinehart discussed the concept of a rural stock market. When people in the San Luis Valley invest in NYSE companies, money is taken out of the San Luis Valley and invested in companies in New York City We should use our own money to invest in our own localized communities by looking at a rural stock exchange where a person in a rural community could decide to invest in their own community. When we invest in stock markets in New York City we don’t know anything about the community; when it’s a rural community the person you’re investing in is someone you know. “If we had hundreds of rural stock markets across the U.S. we wouldn’t have the variation in the U.S. stock market.”


02:59 PM -- Public Testimony - Mr. Richard Nadley

Mr. Richard Nadley, representing self, spoke about the statistics that make Costilla and Conejos Counties the poorest in Colorado. The people in these counties are not poor when it comes to lifestyles and what we believe in. Infrastructure is the most important factor in the development of sustainable economic growth. Mr. Nadley commented that his area of expertise is in the telecommunications industry and this type of development would be good for these counties.

Mr. Nadley continued by discussing local school districts and the need for more high-paying jobs. Children in local school districts are intelligent and need to remain in rural Colorado. If jobs are not available, the children in local school districts will eventually move to urban areas for higher-paying jobs and do not return to their birthplaces until they retire. This is the reason more jobs are needed in rural Colorado. Mr. Nadley commented on the number of local area telecommunications providers and said that citizens in the local communities can only have high speed internet service within a localized area and cannot get this service in their homes. Mr. Nadley concluded by commenting on the need for a more capable telecommunications infrastructure in rural Colorado.

The committee briefly commented on the types of telecommunications services available in the San Luis Valley and requested that Mr. Ken Swinehart join the discussion. As an owner of a local Internet Service Provider company, Mr. Swinehart said that wireless and DSL capability is available in some valley areas and DSL is available in northern Costilla County. But two miles from Alamosa is where service ends. Mr. Swinehart talked about the local transmitter sites and said that residential DSL service is available for about $35 per month. His company has about 30 to 50 high speed customers from the valley.

The committee discussed the future of economic development in the valley and talked about the potential for the creation of more technology-related jobs. Mr. Swinehart commented on the downside of more economic development in the valley but said there would be less of an impact if more technology-based businesses would locate there. There are a lot of entrepreneurs in the valley.

The committee commented on the use of a revolving fund for businesses to access who could not get capital at conventional lending institutions.


03:27 PM -- Presentation by San Luis Valley Development Resources Group

Mr. Michael Wisdom, San Luis Valley Development Resources Group, distributed a handout (Attachment G) on rural economic development and discussed the benefits from the revolving loan fund and enterprise zone program to rural businesses. Regarding the enterprise zone program, Mr. Wisdom said that the state needs a better system to track businesses that claim enterprise zone credits to determine whether the program is effective and taxpayers are benefitting from the program. But Mr.Wisdom mentioned that the enterprise zone program is the most significant rural economic development tool available to businesses. Mr. Wisdom closed by saying the state needs something like an enterprise zone program to give a tax credit to someone who invests in their home town even if they no longer live in their home town.

The committee briefly discussed the enterprise zone program and some of the businesses that benefit from the program incentives.


03:48 PM -- Public Testimony - Mr. Lawrence Gallegos

Mr. Lawrence Gallegos, representing himself commented on the contribution that value-added programs make to regional rural economies.


03:56 PM - Discussion on Legislation

The committee briefly discussed legislation that would place a cap on the number of patients that could be housed at the Homelake facility, grant the state oversight on pesticides, and invest money in the Cumbres & Toltec Scenic Railroad. The committee also discussed legislation that would pursue tax and other incentives for biodiesel and ethanol production.


04:47 PM

Adjourn.