Final
State's Enterprise Zone Program
ECONOMIC DEVELOPMENT
Votes:
Action Taken:
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09:29 AM -- Call to Order
Representative Borodkin called the meeting to order and began by discussing the advisory board's activities. Members of the committee present were Representative Massey, Senator Tapia, and Representative Borodkin. Senator Evans arrived later. Members of the advisory board present were Mr. Bill Becker, Adams County Economic Development, Ms. Carolyn Siegel, AFL-CIO, Mr. Tom Clark, Metro Denver Economic Development Corporation, Ms. Carla Perez, Carter and Burgess, Mr. Matt Baker, Environment Colorado, Doug Aden, retired bank president, and Ms. Elaine Mariner, Colorado Council on the Arts. Legislative Council Staff present were Mr. Josh Harwood and Mr. Jason Schrock. Mr. Ed DeCecco and Ms. Nicole Hoffman from the Office of Legislative Legal Services were also in attendance. Representative Borodkin encouraged all the day's presenters to be in contact with the advisory board regarding their comments and recommendations.
09: 33 AM -- Presentation on the State's Enterprise Zone Program by Dr. Devon Lynch, University of Denver
Dr. Devon Lynch, University of Denver, discussed his research on the state's enterprise zone program. A copy of his research paper, co-authored by Dr. Jeffrey Zax, University of Colorado, entitled, "An Evaluation of Colorado's Enterprise Zone Program," was distributed to the committee (Attachment A). Overall, his research found that the program is generally not meeting its intended goal of improving employment and wages in the state's "depressed" areas. The agricultural industry is benefitting more than other industries from the program. His research found that the program is having positive effects on employment and wages in four of the state's seven rural zones, and that the program was having a negative impact on the Denver urban zone. He thought that people were commuting into zones in urban areas to work in order to benefit from the program's incentives and that jobs were not being filled with people living inside the zones. He explained that he did not want to conclusively state that the program is not effective because he was not able to look at investment data in his research; the investment tax credit is the most significantly used tax credit in the program. His research did look at investment indirectly, however. He stated that there is no evidence that the program is resulting in new firms, or leading to firm closures. In addition, his research found that the program was not improving income in the zone areas. He explained that he did not look at accountability issues of firms taking credits.
Dr. Lynch responded to committee questions about the large size of the state's enterprise zones. He stated that most of the state's economic activity occurs in non-enterprise zones. He noted that a large amount of incentives are being provided to firms and that he is not sure if the state is receiving economic benefits in return.
09:49 AM
Mr. Evan Metcalf, Enterprise Zone Administrator, Office of Economic Development and International Trade, stated that total investment data is not available for all businesses in Colorado.
Dr. Lynch explained that he did not find much evidence that the enterprise zone program was slowing the decline of certain industries. Mr. Metcalf stated that the agricultural industry was benefiting from the program. Mr. Metcalf discussed a study by BBC Research that found that certain counties in Colorado were benefitting from the program compared to counties in neighboring states that were not part of an enterprise zone program.
Mr. Tom Clark, advisory board member, explained that firms are frequently interested in whether there is an enterprise zone in Colorado. Dr. Lynch found that the number of new firms were not higher in enterprise zones compared to nonzones during the period 1990 to 2000. He explained that it is possible that most of the benefit of enterprise zones could have occurred after they were first created in 1986.
Senator Tapia stated that incentives are typically not an important factor in business location decisions. Dr. Lynch explained that there are many things that factor into a business location decision and that his research tried to control for all factors in location decisions. He thought that it is possible that certain struggling firms maybe attracted to zones to help them stay in business. Mr. Metcalf countered that businesses need to have a tax liability to qualify for the tax credit incentives and that the incentives are not as beneficial to struggling firms.
Mr. Bill Becker explained that businesses have significant interest in whether there is an enterprise zone program in Colorado. He stated that enterprise zones are a small incentive but they do factor in business decisions because businesses evaluate operating costs. He stated that it is possible that the only way to know whether the program is working is to take away the zones.
10:05 AM
Mr. J.J. Johnston, Northern Colorado Economic Development Corporation, discussed the importance of the charitable contribution tax credit and of enterprise zones overall in business location decisions.
Dr. Lynch responded to questions from Ms. Carolyn Siegel, advisory board member, regarding how his research tried to isolate the effect of enterprise zones given that there are many other incentives and factors that businesses consider in their location decisions. Representative Borodkin explained that the advisory board would look further into enterprise zones and incentives. She questioned whether an indepth survey or further study of enterprise zones was needed. She asked the advisory board to look into the issue and to consider making a recommendation to the committee.