Economic Development (09/23/2005)

Final
STAFF SUMMARY OF MEETING

ECONOMIC DEVELOPMENT

Date:	09/23/2005	ATTENDANCE

Time:	10:08 AM to 03:35 PM	Bacon	X
		Evans	*
Place:	HCR 0112	Lindstrom	X
		Massey	X
This Meeting was called to order by		Tapia	*
	Representative Borodkin	Borodkin	X

This Report was prepared by
	Jason Schrock
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
Interim Committee on Economic Development The Economic Impact of the Arts Role of Arts and Culture in Economic Development Economic Development and Tourism in Colorado Tourism and Economic Development in Colorado Economic Impact of Colorado Hospitals Committee Discussion and Recommendations		- - - - - - -

10:09 AM -- The Economic Impact of the Arts, Ms. Deborah Jordy, Colorado Business Committee for the Arts 牋牋

Ms. Deborah Jordy, Colorado Business Committee for the Arts, began by discussing the economic impact of the arts and culture in the Denver Metro Area. There is no comparable statewide estimate, but she recommended that the Colorado Council on the Arts provide a study. A packet of information on the Colorado Business Committee for the Arts (CBCA) and the economic impact of the arts was distributed to the committee (Attachment A). She indicated that culture in metro Denver generated $1.311 billion in economic activity in 2003, with 11.3 million people attending cultural events. She provided information on the amount and types of arts-related businesses throughout Colorado. There are 12,087 arts-related businesses and 50,852 jobs statewide.

Ms. Jordy provided information on the Colorado Council on the Arts. State funding declined from $1.9 million in FY 2001-02 to $200,000 in FY 2003-04; the state ranks 49th in state per capita spending on the arts. Currently, the council receives just enough to receive federal matching dollars. She discussed the activities of the council, including providing grants for arts projects. She discussed an upcoming strong arts/strong communities initiative involving the council and the CBCA and Arts for Colorado, an arts advocacy organization, intended to show the link between the business and the arts community and the economic impact of the arts. Representative Borodkin discussed the need to market the economic impact of the arts and culture and the link between business and the arts. Senator Bacon discussed how companies and individuals want to locate in areas with a strong quality of life and that arts and culture are important aspects of quality of life. Ms. Jordy discussed examples of the economic impact that arts and cultural projects can have in communities.

10:26 AM -- The Role of Arts and Culture in Economic Development, Ms. Ginger White, Senior Economic Development Specialist, Denver Office of Cultural Affairs

Ms. Ginger White, Senior Economic Development Specialist, Denver Office of Cultural Affairs, discussed data on the role of arts and culture in economic development (Attachment B). Arts is becoming a critical component of the "new economy." Arts includes nonprofits, artists, performing arts, culture, and film, or the "creative industries." The City of Denver ranks 4th in the nation for the number of arts-related businesses, institutions, and organizations per capita. She discussed trends in the opportunities that arts can provide for economic development. Communities are increasingly focusing on providing more investment, tools, and infrastructure to allow creative industries to grow. Today's economy involves a more mobile workforce and people are increasingly deciding where they want to live first, as opposed to where they can find a job. As noted by creative industry expert, Mr. Richard Florida, creative people choose to live where there are vibrant and creative areas with attractive arts and cultural amenities. Mr. Florida listed the Denver area as 14th in his creativity index. The new economy industries, such as the engineering, high tech, biotech, and education industries, are increasingly looking for creative people to hire. Denver ranked 7th in neweconomy.org's new economy index. She discussed the importance of cultivating a high quality of life as part of an area's economic development efforts.

Ms. White continued by discussing development projects in Denver that utilize the arts in economic development. She indicated that economic development policies have a role and responsibility to support the creative sector because of the benefits the sector brings. She stated that creative industries are outpacing traditional business growth nationwide. She also discussed the difficulty that small creative businesses are having in surviving and that they need technical assistance and professional development opportunities. Her office is examining how to stabilize and help the creative sector survive by encouraging the infusion of arts in development projects, promoting professional development and businesses assistance training, and creating sustainable polices that promote the creative industry. She discussed the upcoming efforts of her office to promote the creative sector.

Representative Borodkin commented on the need for site selectors and economic development professionals to understand the importance of the arts. Senator Bacon discussed the benefits of the Scientific and Cultural Facilities District (SCFD) and discussed the possibility of having a similar organization in other areas of the state. Ms. White discussed the importance of the regional cooperation that SCFD fosters among arts and culture organizations.

Mr. Anthony Radich, Western States Arts Federation, stated that the primary contribution of the SCFD is sustaining all types of arts and cultural organizations in the area. Ms. Jordy stated that the SCFD helps strengthen the whole arts community, including large and small facilities. Senator Evans discussed the amount of tax dollars provided to SCFD from Douglas County. He also commented on the political nature of SCFD's tier system. Representative Borodkin commented on the need to focus on more visionary policies, not on political issues. Mr. Radich stated that the larger SCFD arts and cultural institutions are shared by the region. Senator Evans indicated that all large SCFD institutions do not need to be in downtown Denver and can be located in different locations.

10:51 AM

Mr. Anthony Radich, Western States Arts Federation (WESTAF), discussed his organization and its effort to help organizations develop creative economy industries. He includes art and culture in his definition of the creative economy. He discussed the impact that arts and culture have on the economy. Other states are involved with developing the arts as an economic cluster. He stated that there are a number of ways to promote and attract creative industries, including incentives and economic development planning efforts. He stated that Montana is doing the most to promote the arts through the use of incentives and planning efforts. Most states are involved with trying to promote the arts and culture, such as including the creative economy industries in economic development plans. WESTAF is looking at creating a creative vitality index in order to focus the attention of site selectors and businesses on creative places and to help an area identify how it can improve its creative industries.

Mr. Radich continued by discussing other state creative economy initiatives' implications for Colorado. He explained that Colorado has started looking at attracting more creative economy industries, but that it needs to create a strategy and conduct more planning to attract more creative economy businesses; most other states are doing more to attract creative economy businesses. It should also encourage planning at all levels and think about how to create synergies.

Representative Borodkin agreed that Colorado needed to put more effort into attracting creative economy businesses. She discussed the need to increase Colorado's marketing efforts and to develop a long-range economic development plan that includes the arts. Senator Evans also agreed that the state needed to put forth efforts to develop a plan for the arts, but that the state should not define arts and culture narrowly.

11:09 AM

Ms. Jordy provided recommendations on how to help promote the arts and culture as an economic development tool in Colorado, including: 1) restoring the Colorado Council on the Art's (CCA) funding to $1.9 million in order to give it the ability to serve every county in the state; 2) restoring support for K-12 arts education; 3) providing capacity-building assistance for cultural organizations; 4) moving the CCA to the Office of Economic Development and International Trade; 5) developing a statewide cultural strategic plan in order to help Colorado achieve competitive quality of life, cultural vitality, and economic development; 6) implementing a statewide cultural advisory committee to direct statewide planning for cultural economic development and cultural tourism, and guide community-based efforts to capitalize on cultural assets; 7) creating a new economic development position within the CCA to promote commercial arts and creative industries or allocating existing OED staff to support the arts and culture effort; and 6) appointing cultural experts on state board and commissions.

Senator Evans stated that the distribution of money from the CCA should help the entire state. He also expressed his concern that it may be more difficult to defend the Council's budget if it were in the Office of Economic Development compared to being under the Colorado Commission on Higher Education. Representative Borodkin discussed a memorandum by Legislative Council Staff about other state legislative arts caucuses. She asked for Ms. Jordy's assistance in trying to strengthen Colorado's arts caucus.

11:17 AM -- 牋Colorado Office of Economic Development Panel on Economic Development and Tourism in Colorado, 燤r. Pete Meersman, Colorado Tourism Board, Mr. Scott Campbell, Ms. Kim McNulty, and Mr. Brian Vogt, Office of Economic Development and International Trade

Mr. Brian Vogt, Director, Office of Economic Development and International Trade (OEDIT), began the presentation by discussing the announcements of 1,275 new jobs being created in the state through relocations and expansions by Aviation Technology Group, Intel, and Northrop Grumman. The new jobs are estimated to have a total payroll of $91 million and generate $2.5 million in income tax revenue to the state. Each of the new jobs were incentivized by the state, totaling $1.2 million in job creation incentives and $824,000 in job training grants. He discussed the importance of incentives.

Ms. Kim McNulty, Director, Office of Tourism, OEDIT, discussed the state's tourism programs that are used to market Colorado. Materials on OEDIT's tourism and marketing efforts were distributed to the committee (Attachment C). The tourism office receives about $5.7 million from the state each year. The office's main goal is to market the state to tourists. It does so through advertising, public relations, the production of a vacation guide, a toll free number, and a website. The office markets the state both domestically and internationally, targeting France, the United Kingdom, and Germany. She discussed Colorado's welcome centers, which receive about 1 million visitors each year, and the office's tourism industry outreach programs. The market research firm, Longwoods International, provides information on visitor profiles for Colorado and the state's return on its marketing investments.

Representative Borodkin questioned whether the tourism office should place tourism information kiosks at Denver International Airport (DIA).

11:32 AM

Mr. Scott Campbell, Heritage Tourism Program Manager, OEDIT, discussed the opportunities there are to market heritage tourism at DIA. He discussed the heritage tourism program which is funded by a $550,000 grant from the State Historical Fund. The goals of the program are to help market the state's heritage tourism sites and develop a heritage strategic plan. He discussed upcoming projects to promote Colorado's heritage tourism industry. Heritage tourism is a growing market; the market is growing two times faster than the regular tourism market. Research has shown that heritage travelers spend more money and stay longer. Although Colorado has invested in its heritage tourism sites, it is not experiencing growth in its heritage tourism market as other states. He stated that the focus of the Heritage Tourism Program is therefore to market Colorado's heritage tourism opportunities. A study by Longwoods International indicated that tourists are not aware of Colorado's heritage tourist sites. He stated, however, that heritage tourists are pleased with Colorado's heritage tourism sites after they visit. He commented that heritage tourism is a useful economic development tool, especially in rural communities.

Senator Bacon discussed the importance of heritage tourism in Trinidad and its strong efforts to develop the industry. Representative Lindstrom discussed restoration projects in Lake County and their economic development benefits. Representative Massey discussed competition among Colorado's regions for scarce tourism dollars. Mr. Campbell discussed the need for regional cooperation efforts and discussed examples of current efforts. Representative Lindstrom questioned how OEDIT markets its collaboration efforts. Mr. Vogt discussed the development of regional long-term strategic plans to build collaborations among communities. Mr. Pete Meersman, Colorado Restaurant Association and the Colorado Tourism Office Board, discussed ways to promote the culinary tourism market.

11:48 AM

Mr. Meersman discussed the economic impact of tourism in Colorado. He stated that 200,000 people work in the tourism industry in Colorado. He discussed the existence of tourism ambassadors throughout the state that help promote tourism. A map showing the number of tourist ambassadors throughout the state was distributed to the committee (Attachment D). Travelers in Colorado spent $7.3 billion in 2004. He discussed the impact of tourism promotion. The 2004 state advertising campaign influenced 5.2 million visitors who spent $1.4 billion. Every $1 of state money spent on tourism marketing generates $18.10 in state and local tax dollars and $292 in tourism spending. Colorado is the 5th most desired vacation state, 23rd in market share, and 35th in tourism funding. The Tourism Board is trying to increase the state's market share. He stated that the state should spend $15 to $20 million annually on tourism promotion. Representative Borodkin discussed how ambassadors could work with state legislators to promote tourism in the state.

Representative Lindstrom questioned how he can stay informed about preservation projects in his district. The committee discussed the need for more communication about programs and projects that are occurring. Ms. McNulty discussed the revenue sources of the tourism office's budget; besides the General Fund, the heritage tourism grant is the only other revenue source. Representative Lindstrom commented on the great job of the tourism office. He stated that he believed that the tourism office should be a nonprofit organization because it could generate more money for funding.

Mr. Vogt stated that many people do not understand how marketing generates money and discussed the need for the state to look at dynamic modeling and how it can show a return on investment. He also mentioned that the money for incentives that were used for the four businesses that have recently announced expansions in Colorado came from money received by the federal government.

Representative Borodkin discussed the need to continue the conversations on how to better promote the state and economic development.

12:04 PM -- Lunch Break

01:34 PM -- Tourism and Economic Development in Colorado, Mr. Eugene Dilbeck, Center for Travel and Tourism, University of Denver

Mr. Eugene Dilbeck, Center for Travel and Tourism, University of Denver, discussed his belief that the tourism industry has been declining in Colorado since the tourism tax was defeated in 1993. A summary of his testimony was distributed to the committee (Attachment E). He stated that tourism is the state's second largest industry, based on retail sales. He indicated that tourism spending in the state, adjusted for inflation, has declined. From 1997 to 2004 the state lost $1 billion in spending, which is affecting jobs in the state. Provided in his attachment is data on the economic impact of Colorado overnight visitors. Total direct employment resulting from tourism declined 14.3 percent from 1998 to 2003. He explained that the main reason for the tourism industry decline is that the state does not have an overall statewide tourism development policy, which could address the role of the public and private sectors in promoting the industry.

Mr. Dilbeck offered four steps the state could take to help address its declining tourism industry. The state cannot rely on its scenery to attract tourists and outdoor recreation is declining. The four steps include: 1) adequately staffing the Colorado Tourism Office with individuals experienced in tourism development and promotion; 2) creating a statewide tourism development policy to bring together the state's tourism-related assets and programs that it funds. He explained that the state is spending millions of dollars marketing and promoting these assets without any strategic direction or coordination; 3) creating a tourism planning and development program within the Colorado Tourism Office that forecasts, monitors, and analyzes travel trends and consumer preferences for travel experiences in Colorado; and 4) finding a consistent funding source to fund state tourism promotion.

Mr. Dilbeck continued by indicating that the highest 15 states in tourism promotion funding have experienced a growth in market share. The average tourism budgets of the six states surrounding Colorado is $9.4 million.

01:53 PM

Mr. Dilbeck summarized by stating that a primary reason for the tourism industry's decline is the absence of state leadership that includes a strong state policy on tourism development.

Representative Borodkin discussed national site selectors' perceptions of Colorado and noted that Colorado needs to improve its image by improving its marketing. She agreed with Mr. Dilbeck's recommendations.

Mr. Dilbeck discussed ways the state could start implementing his recommendations. The state could write a statewide tourism plan that involves public and private entities. He stated that bringing together of state agencies and private entities to pool resources would be beneficial. Representative Borodkin discussed the need to bring together agencies to help develop a state tourism policy plan. Mr. Dilbeck commented on the need to show the private sector that the state government is behind a statewide tourism policy so that it will invest more money in tourism.

Senator Bacon discussed the implications of TABOR on the state's ability to receive a return on its investment in tourism.

Mr. Dilbeck discussed the Center for Travel and Tourism at the University of Denver. The Center's purpose is to support and help the tourism industry grow.

02:07 PM -- The Economic Impact of Colorado Hospitals, Mr. Larry Wall, President, Colorado Health and Hospital Association

Mr. Larry Wall, President, Colorado Health and Hospital Association, discussed the impact of hospitals to the state's economy. A copy of his presentation was distributed to the committee (Attachment F). Hospitals are the second largest employers nationwide and support one in nine jobs, directly or indirectly. He stated that 51,143 employees worked in Colorado hospitals in 2003; total salaries and benefits for Colorado hospital employers was over $3.1 billion. He discussed other economic benefits of hospital jobs such as providing consistent employment and attracting related businesses, including the biotech industry. He also commented on the importance of a skilled workforce to Colorado hospitals and on the short supply of medical professionals which could lead to cutbacks in services and less access to health care. The estimated shortage of nurses in Colorado is 11 percent, but there are waiting lists for future nurses at Colorado's schools. Colorado's schools have difficulty attracting and retaining faculty. It is critical to health care and the economy overall that the state invest in educating health care professionals.

Mr. Wall continued by discussing Colorado hospitals' spending on goods and services of more than $7 billion. Investments in capital improvements for hospitals also have a positive impact on the economy. He also discussed the importance of the availability and location of quality hospitals to employer location decisions.

02:17 PM

Mr. Wall continued by stating that, other than workforce supply issues, the underfunding of care is one of the biggest challenges to hospitals. He stated that the total cost of uncompensated care in Colorado was $1.4 billion in 2004. One problem is that providers are paid less for services from the government which causes cost shifting. When hospitals are provided less than the cost for services they provide, the costs are shifted to individuals and business which result in a decline in the number of insured individuals. He indicated that cost shifting causes Colorado to be unattractive to employers. He commented on the economic benefits of healthy citizens. He also discussed ways for the state's hospitals to remain viable, such as providing adequate payments to cover the cost of care and access to qualified health care professionals, and to be included in economic development efforts at both the state and local level. He commented on the potential health care benefits of the passage of Referenda C and D.

Mr. Wall indicated that the Colorado Hospital Association hospitals have not been involved in economic development efforts and discussed the need for them to get more involved in economic development efforts.

Representative Massey discussed that the lack of health care is a huge issue in rural Colorado and stated the importance of regional medical centers. Mr. Wall indicated that the longer that care is delayed it becomes more expensive.

Representative Lindstrom discussed the importance of regional hospitals in rural areas. Mr. Wall stated that employers consider the location of hospitals in their site decisions. He also mentioned that the loss of medical facilities in a rural area would be hard on a community and that it is difficult to sustain these facilities due to the cost of care and underfunding issues.

02:33 PM

Representative Borodkin discussed the need for the Colorado Hospital Association to be included in economic development efforts.

Senator Tapia questioned how hospitals were undertaking expansions of hospitals if they are having revenue problems, especially if reimbursement rates are low. He also commented on how the expansion of more elaborate facilities are making care less affordable for some people. Mr. Wall stated that revenue comes from higher charges to health consumers that do pay. Senator Tapia continued to discuss the funding issues of the health care system. Mr. Wall explained that a lot of the new facilities are resulting from consumer demand and that the delivery of services can be made more efficient with new facilities.

Representative Borodkin discussed the need for a workforce development commission to evaluate the supply of the health care workforce. Senator Bacon discussed the issue of nursing homes and long-term care. Mr. Wall discussed the need to look at insurance mechanisms that enable long-term care to be funded privately. The committee also discussed the state's inability to train enough health care professionals. The problem will have to be addressed by all stakeholders.

02:50 PM -- Committee Discussion and Recommendations

Senator Bacon indicated that he wanted to explore Mr. Dilbeck's statewide tourism policy idea. He also discussed moving the Colorado Council on the Arts into the Office of Economic Development. He wondered whether it is advisable to move the Council out of the Colorado Commission on Higher Education.

Representative Massey discussed his motion picture incentive bill (Attachment G). He stated that the first version of the bill that was introduced during the 2005 session was far reaching and had a large fiscal impact. He discussed how the bill was revised to reduce the fiscal impact. The bill that passed was watered down. The form of the bill will depend on what happens to Referenda C and D. He questioned how a bill would qualify to use a dynamic model and wondered how far reaching his bill should be. The committee discussed film incentive packages in other states and the return on the investment of film incentives.

03:00 PM

Representative Lindstrom discussed the benefits of films being made in Colorado. Representative Massey commented that a film in Boulder generated $100,000 a day in spending. Representative Lindstrom discussed the return on investment of incentives and the need for the state to be willing to give up money in order to receive money.

Mr. Pete Roskop, Office of Economic Development and International Trade, stated that the head of the Colorado Film Commission, Martin Cuff, is available to testify before the committee. The committee continued to discus the role of film incentives in attracting films to Colorado.

Senator Tapia commented on the need for the committee to be careful in not recommending new programs and spending in anticipation of the passage of Referendum C. He stated that Referendum C money is intended to provide funding for programs that have been underfunded. Mr. Roskop discussed the history of the film commission and its funding. Representative Massey indicated that his film incentive program is new for the state.

03:17 PM

Senator Tapia discussed his idea of developing a design-build requirement for state construction projects which is intended to complete projects more quickly and less expensively. The committee discussed whether Senator Tapia's bill fits under the charge of the committee.

Senator Bacon discussed the need to continue an economic development committee in some form. Representative Borodkin discussed her thoughts on creating a permanent economic development committee.

03:21 PM

Mr. Danny Tomlinson, representing the Economic Developers' Council, provided information on HB 05-1046, the dynamic modeling legislation from the 2005 session. He explained that the money that was donated for the project was not in an account by the legislation's deadline. He discussed the need for legislation to be introduced again during the 2006 session to implement the project and the time lines involved with developing and implementing a dynamic model.

03:24 PM

Mr. Josh Harwood, Legislative Council Staff, discussed the issue of dynamic modeling. He explained the difficulty of trying to gauge what influences business decisions and whether specific policies cause revenue increases by themselves. He also discussed the complications involved with dynamic modeling and how legislators and other interested persons in other states that have used dynamic modeling have been disappointed with the results of dynamic models. A copy of a Legislative Council Staff memorandum on dynamic modeling was distributed to the committee (Attachment H).

Mr. Danny Tomlinson made announcements relating to upcoming economic development related meetings.

Representative Borodkin clarified what legislation ideas the committee wanted to be drafted for the committee to look at. A copy of the Adams County Education Consortium Strategic Plan was distributed to the committee (Attachment I).

03:35 PM

The committee adjourned.