Final
Introduction and Presentation by Tucker Hart Adams on Economy
ECONOMIC DEVELOPMENT
Votes:
Action Taken:
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09:34 AM -- Introduction
Representative Borodkin, chair, introduced the committee and discussed the committee's charge. Other committee members present were Representative Massey, Senator Bacon, and Senator Tapia. Senator Evans arrived later. Legislative Council Staff present were Jason Schrock and Josh Harwood. Nicole Hoffman and Ed DeCecco were present from the Office of Legislative Legal Services. Representative Borodkin discussed the advisory board that was created to help the committee in its work.
09:39 AM -- Presentation from Tucker Hart Adams on Colorado's Economy
Dr. Tucker Hart Adams,
President, The Adams Group, Inc.
, discussed Colorado's recent economic indicators. Most of these indicators were positive. Colorado was one of last states to come out of the recession and is finally moving in the right direction. She indicated that job growth for the first half of 2005 was
2.3 percent over the same period last year. Although the state is experiencing only modest job growth, this indicator is positive compared to the state's employment picture during the economic downturn. She discussed how the state's 4.9 percent unemployment rate was not a reliable indicator because of the job market's volatility. Colorado's personal income growth is outpacing the nation's. Nationally, inflation-adjusted personal income growth is negative, while it is positive in Colorado.
Dr. Adams continued by indicating that housing construction and home values were both positive, but that the effective vacancy rate was relatively high; there are a significant amount of empty apartments in Colorado. The commercial vacancy rate is about 21 percent. Nonresidential construction is strong. She indicated that inflation, measured by the Denver-Boulder-Greeley consumer price index (CPI), was low. However, she explained that the index does not measure home ownership costs, only rental costs, and thus, the index likely understates real inflation in the area. The state's population is growing slowly compared to its historical trend; there are not as many people moving to Colorado as there were in the 1990s.
Dr. Adams explained that Colorado's economic forecast looked positive in the near term, as long as the national economy continues to grow. She stated that job growth will likely continue. She discussed concerns she had with the economy. Oil prices could continue to go up due to production constraints and significant increases in demand worldwide. She stated that higher oil prices could cause inflation and impact tourism in Colorado. She also expressed her concerns about consumer debt levels. Debt levels in Colorado are some of the highest in the country. Since consumer spending makes up such a large portion of the economy, even a small reduction in consumer spending would hurt the economy.
09:47 AM
Dr. Adams continued by discussing her concerns about the possibility of a housing bubble. She explained that there is an oversupply of housing and that there was a lot of speculation in the real estate market. She stated that interest rates will rise as foreign investors buy less treasury securities, especially now that China has decided to revalue its currency. Consumers who have used adjustable rate mortgages to buy larger houses could be in trouble when their payments rise. Also, rising rates could cause consumers to feel less wealthy, which could reduce spending and cause a slowdown in the economy.
Dr. Adams stated that the state legislature is in a position to impact higher education. The dynamic global economy requires workers who are well educated. Also, a growing economy requires fluid labor markets. She stated that legislatures and local governments can enact policies that impact the business climate.
Senator Tapia discussed his concerns that the Denver-Boulder-Greeley CPI is not representative of the entire state. Dr. Adams explained that economists have to work with what is available and that the Denver-Boulder-Greeley CPI takes into account 55 percent of the state's population. Senator Tapia also discussed the affordability of housing and that people are living beyond their means. Dr. Adams indicated that consumers can function outside of basic market fundamentals for only a short period; overextended borrowing will hurt consumers and the economy in the long term.
10:03 AM
Dr. Adams stated that telecommunications infrastructure enables people to do business from anywhere and that the state could help rural areas obtain better infrastructure. However, she acknowledged that small businesses that do business over the Internet do not contribute much in property taxes.
Senator Bacon commented that an economy with a fluid labor market needs a good safety net to deal with gaps in employment and a viable transportation system. Dr. Adams stated that FasTracks will improve the Denver area's public transportation system, and that the country needs to figure out a way to provide adequate basic health care to everyone. Child care also needed to be affordable. She commented that some social safety net issues could only be addressed at the federal level.
The committee discussed Referenda C and D and whether they would enable Colorado to provide a better social safety net for Coloradans.
10:15 AM
Dr. Adams concluded her presentation by stating that policy makers needed to consider trade-offs when it enacts policies. If the state spends money on one policy, it cannot spend money on something else.
A member of the advisory board to the committee, Mr. Tony Robinson, CU-Denver instructor, discussed a potential housing bubble. Dr. Adams stated that predatory lending is not much of a problem; consumers are mostly living beyond their means. She stated that she preferred spreading the costs of providing affordable housing as widely as possible.
Another member of the advisory board, Ms. Marguerite Salazar, representing a health center in Alamosa, discussed her concerns with calling Colorado the 7th richest state. She thought that a relatively small number of rich Coloradans presents a false picture. Dr. Carolyn Siegel, member of the advisory board from the AFL-CIO, commented that the state needs to look at economic development from the perspective of enabling low-income Coloradans to become more self-sufficient and decreasing the number of Coloradans who are unemployed or underemployed.