Final
STAFF SUMMARY OF MEETING

ECONOMIC DEVELOPMENT
Date:11/02/2005
ATTENDANCE
Time:09:10 AM to 12:44 PM
Bacon
X
Evans
X
Place:HCR 0112
Lindstrom
X
Massey
X
This Meeting was called to order by
Tapia
X
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:
Committee on Economic Development-

09:09 AM - Committee Consideration of Proposed Legislation

Representative Borodkin, Chair, called the meeting to order. Committee members present were Senators Tapia, Vice-Chair, Bacon, and Evans, and Representatives Lindstrom and Massey. Legislative Council Staff present were Mr. Jason Schrock and Mr. Josh Harwood. Mr. Ed DeCecco, Ms. Nicole Hoffman, Ms. Esther Van Mourik, and Mr. Bob Lackner, from the Office of Legislative Legal Services (OLLS) were also present.

Senator Tapia discussed his proposed bill that would require the use of integrated project delivery, or "design/build," methods in state-funded construction projects (Attachment A). He discussed Senator Groff's efforts to introduce similar legislation and indicated that he was pulling his bill from consideration.

09:11 AM -- Discussion on Committee Bill C

Representative Massey discussed his proposed bill that could create financial incentives to attract production companies to film motion pictures in Colorado (Attachment B). Senator Tapia discussed his concern with the potential fiscal impacts of the financial incentives provided by the bill. Representative Massey commented that the bill would generate new tax revenue in the state. Senator Evans stated that an assessment of the fiscal impact of bills should be conducted by the first committee of reference. The committee agreed to continue the discussion on the bill later in the meeting.

09:20 AM -- Committee Bill D

Representative Borodkin discussed the legislation that would transfer the Colorado Council on the Arts from the Department of Higher Education to the Office of Economic Development and International Trade (OEDIT) (Attachment C). She stated that the bill was recommended by the Colorado Business Council on the Arts and that Mr. Brian Vogt, Director of the Office of Economic Development and International Trade (OEDIT), agreed with the recommendation. Senator Bacon discussed how the bill would have no fiscal impact and that there was general agreement that the Council should move to the Office of Economic Development.
BILL:Committee on Economic Development
TIME: 09:25:32 AM
MOVED:Evans
MOTION:Motion to recommend Committee Bill D (Transfer Council on the Arts from CCHE to the Office of Economic Development). The motion passed on a 6 - 0 vote.
SECONDED:
VOTE
Bacon
Yes
Evans
Yes
Lindstrom
Yes
Massey
Yes
Tapia
Yes
Borodkin
Yes
Final YES: 6 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: PASS



09:26 AM -- Committee Bill F

Representative Borodkin explained that the legislation making changes to the Colorado Tourism Office and creating a state tourism policy was not being considered by the committee.

Representative Massey discussed his proposed legislation to create an income tax credit to further the study of math and science at state colleges and universities (Attachment D). He stated that a common theme of the committee's discussions was the importance of a math and science educated workforce. He commented that the state should pursue policies that it believes are necessary and not let the fiscal impact of policies drive decisions. Senator Tapia discussed his concerns with the potential fiscal impacts of the legislation and the General Assembly's need to backfill programs that were cut during the recession. He commented that voters were told that the state would not create new programs with Referendum C money.

Mr. Ed DeCecco, OLLS, explained the provisions of the bill.

Representative Massey discussed the need for the state to be proactive in its economic development policies and the importance of math and science education. He stated that it generally costs more to provide math and science education at state colleges and universities. Representative Borodkin agreed, but discussed the need to wait to see how the General Assembly would fund priorities from Referendum C revenue. Senator Bacon stated that he was conflicted over the bill because of the testimony that the committee heard regarding the importance of a math and science educated workforce. However, he stated that he wanted to wait to see how the General Assembly would deal with higher education more broadly, before supporting individual measures.

Mr. Tony Robinson, advisory board member, discussed the importance of higher education and stated that the committee should not approve other tax credits if it does not approve the tax credit for math and science education. He questioned why the other tax credits being discussed could be carried forward to future years if the credit exceeded the taxpayer's income tax liability while the tax credit under the proposed legislation cannot be carried forward.

Representative Massey commented on the need for the state to take action because it may be falling behind other states in educating its own workforce. He explained that the bill offered one piece of a broad puzzle to address a specific need. He indicated that a carry forward provision was not put into the bill in order to diminish the fiscal impact of the bill. A sunset date to the credit was also added.

BILL:Committee on Economic Development
TIME: 09:43:50 AM
MOVED:Massey
MOTION:Motion to recommend Committee Bill F (Math and Science Higher Education Tax Credit). The motion passed on a 4 - 2 vote.
SECONDED:
VOTE
Bacon
No
Evans
Yes
Lindstrom
Yes
Massey
Yes
Tapia
No
Borodkin
Yes
Final YES: 4 NO: 2 EXC: 0 ABS: 0 FINAL ACTION: PASS



09:47 AM -- Committee Bill G

Representative Borodkin discussed her proposed legislation to create a permanent committee on economic development, tourism, and international trade (Attachment E). She explained her belief that the state needed to continue to discuss and explore the issues that the interim committee addressed during the interim. She explained that the General Assembly needed a forum to address international trade issues. Senator Bacon commented on whether it was best to create a caucus or a select committee, rather than a statutory permanent committee.

Senator Evans explained that he was at first skeptical of the economic development interim committee. However, he thought that the committee addressed important issues. He explained that he liked the concept of having individuals outside the General Assembly participating in the interim committee.

BILL:Committee on Economic Development
TIME: 09:55:08 AM
MOVED:Evans
MOTION:Motion to recommend Committee Bill G (Economic Development, Tourism, and International Trade Committee). The motion passed on a 5 - 1 vote.
SECONDED:Massey
VOTE
Bacon
No
Evans
Yes
Lindstrom
Yes
Massey
Yes
Tapia
Yes
Borodkin
Yes
Final YES: 5 NO: 1 EXC: 0 ABS: 0 FINAL ACTION: PASS



09:57 AM -- Committee Bill A

Representative Borodkin discussed her proposed legislation to create statutory standards for entities that receive a loan or a grant from the Economic Development Commission (EDC) (Attachment F). Senator Bacon inquired about the fiscal impact of the bill.

Ms. Nicole Hoffman, OLLS, discussed the provisions of the bill. Representative Borodkin indicated that she is aware that the EDC requires standards and reporting requirements for entities receiving loans and grants, but she wanted to consolidate the requirements into state law. She discussed the need to work further with businesses on the requirements of the bill, including the health care requirements. She explained that she is not convinced that the state has the level of accountability that is needed.

10:06 AM

Mr. Brian Vogt, Director, OEDIT, stated that the current requirements of the EDC are much stronger than those required in the proposed bill. Representative Borodkin explained her desire to have minimum standards in statute. Mr. Brian Vogt commented that the state should not micromanage the activities of the EDC in statute. He stated that the EDC's annual report is delivered to all members of the legislature each year. Senator Evans discussed his concern with putting requirements on businesses. He thought that the state should send a message to businesses that the state is business friendly. Representative Borodkin commented that she just wanted increased accountability over the money that the state spends on economic development.

Ms. Carolyn Siegel, advisory board member, discussed the benefits of the proposed legislation. She stated that taxpayers have the right to know how their money is spent and that the state's economic development goals are being met. Mr. Vogt stated that the EDC's annual report is required annually and is on-line.

Senator Bacon discussed the issue of the EDC's requirements being stricter than those proposed in the bill. Mr. Vogt stated that he thought the committee's efforts would be better placed toward creating better economic development incentives. The state needs to use the OEDIT's limited resources for more strategic investments, such as helping develop the nanotechnology industry in Colorado.

BILL:Committee on Economic Development
TIME: 10:18:56 AM
MOVED:Bacon
MOTION:Motion to amend Committee Bill A (Economic Development Fund Minimum Standards) to state that the Economic Development Commission's requirements for entities receiving a loan or grant must meet or exceed those established in the bill. The motion passed on a 6 - 0 vote.
SECONDED:Borodkin
VOTE
Bacon
Yes
Evans
Yes
Lindstrom
Yes
Massey
Yes
Tapia
Yes
Borodkin
Yes
Not Final YES: 6 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: PASS


BILL:Committee on Economic Development
TIME: 10:20:38 AM
MOVED:Bacon
MOTION:Motion to recommend Committee Bill A (Economic Development Fund Minimum Standards), as amended. The motion passed on a 4 - 2 vote.
SECONDED:Tapia
VOTE
Bacon
Yes
Evans
No
Lindstrom
Yes
Massey
No
Tapia
Yes
Borodkin
Yes
Final YES: 4 NO: 2 EXC: 0 ABS: 0 FINAL ACTION: PASS



10:22 AM -- Advisory Board Bill 1

The committee discussed Advisory Board Bill 1 (Dynamic Modeling Pilot Program), which re-establishes a dynamic modeling pilot program that was created during the 2005 session (Attachment G). Senator Tapia commented that the state needs to utilize more dynamic modeling in its decisions. However, he explained that he is not sure if he can support the program because he did not know its costs and the state does not have money to invest in new programs.

Mr. Ed DeCecco, OLLS, discussed last year's dynamic modeling bill and how the proposed bill makes changes to the pilot program.

Representative Borodkin discussed the concept of making assumptions in fiscal notes. She thought that fiscal notes should not drive the policy decisions of the General Assembly. Representative Massey asked about the money that was raised last year and commented on how a dynamic model could help the legislature make decisions. Representative Borodkin asked about the timelines set forth in the bill.

10:32 AM

Mr. Mike Mauer, Legislative Council Staff, explained that dynamic modeling can be complex, especially because it attempts to look at the entire state economy. He stated that the cost of a dynamic model can be very expensive. He also discussed his concern that other states have put too much emphasis on their dynamic model results, and that they have been disappointed in the results of their models. He discussed the amount of money that has been raised for the pilot program. He indicated that a simpler model could be used, but that the state would still need to purchase more data and multipliers.

10:42 AM

Mr. Mauer discussed his concerns with the deadlines and lack of a funding source in the proposed bill.

Senator Tapia explained that he wanted a pilot program to go forward. However, he thought the deadlines for using a model should be removed and that the state should not commit the use of capital construction dollars for the project.

Senator Evans expressed his concern that the Office of State Planning and Budgeting's (OSPB) potential use of a dynamic model would put the General Assembly at a disadvantage. Mr. Mauer commented that he did not think OSPB was acquiring a model.

10:47 AM

Mr. Robinson, advisory board member, commented that he had discussed the proposed bill with other organizations and that he was concerned that the use of a dynamic model could be too influential in policy decisions. He thought that model assumptions could be manipulated so that there is too much emphasis placed on the potential benefits of certain policies without addressing the potential costs. He thought that the advisory panel for evaluating the dynamic model should be more broad-based.

Mr. Mauer stated that models are driven by the data and assumptions put into the model, which are not perfect and can be subjective. He stated that the bill did not prohibit the advisory panel from being more broad-based.

Representative Massey stated that he thought a dynamic model can be an important tool in the policy-making process if it is used in an appropriate way.

BILL:Committee on Economic Development
TIME: 10:57:23 AM
MOVED:Tapia
MOTION:Motion to require $120,000 in donations in order for Legislative Council Staff to start the pilot program and to remove the timeline requirements of Advisory Board Bill 1 (Dynamic Model Pilot Program). The motion passed on a 6 - 0 vote.
SECONDED:Bacon
VOTE
Bacon
Yes
Evans
Yes
Lindstrom
Yes
Massey
Yes
Tapia
Yes
Borodkin
Yes
Not Final YES: 6 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: PASS


BILL:Committee on Economic Development
TIME: 10:57:51 AM
MOVED:Evans
MOTION:Motion to require the Committee on Economic Development, Tourism, and International Trade, if it becomes a committee, to: be notified that the dynamic model is ready to be used; recommend the 10 bills to be analyzed by the dynamic model to the Executive Committee of the Legislative Council; and be provided the report on the use the dynamic model. The Business Affairs Committees would have these requirements if the Committee on Economic Development, Tourism, and International Trade Committee does not become a committee. The motion passed on a 6 - 0 vote.
SECONDED:Tapia
VOTE
Bacon
Yes
Evans
Yes
Lindstrom
Yes
Massey
Yes
Tapia
Yes
Borodkin
Yes
Not Final YES: 6 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: PASS

BILL:Committee on Economic Development
TIME: 11:11:46 AM
MOVED:Bacon
MOTION:Motion to eliminate the language that moneys from the capital construction fund could be used for the dynamic model pilot program. The motion passed on a 6 - 0 vote.
SECONDED:Tapia
VOTE
Bacon
Yes
Evans
Yes
Lindstrom
Yes
Massey
Yes
Tapia
Yes
Borodkin
Yes
Not Final YES: 6 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: PASS

BILL:Committee on Economic Development
TIME: 11:15:46 AM
MOVED:Tapia
MOTION:Motion to recommend Advisory Board Bill 1 (Dynamic Modeling Pilot Program), as amended. The motion passed on a 6 - 0 vote.
SECONDED:Evans
VOTE
Bacon
Yes
Evans
Yes
Lindstrom
Yes
Massey
Yes
Tapia
Yes
Borodkin
Yes
Final YES: 6 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: PASS



11:19 AM -- Advisory Board Bill 2

Representative Lindstrom discussed Advisory Board Bill 2 (Travel and Tourism Additional Source Fund) (Attachment H). He stated that the bill would provide a consistent source of funding for tourism promotion in Colorado. Senator Tapia discussed his opposition to the bill because it created an income tax credit which would cause the state to lose revenue. Senator Bacon also indicated he would not commit to a bill creating an income tax credit.


11:21 AM

Representative White explained that the proposed bill could have passed last year, but he was asked by leadership and the Governor to pull the bill because of its fiscal implications. He commented on how money invested in tourism promotion would generate a significant return to the state. He discussed the decline of the Colorado tourism industry's market share and the beneficial impacts of increased tourism in Colorado.

Senator Tapia explained that he could be persuaded to support the bill if it can be demonstrated that the cost of the bill represents how much the state was spending on tourism before the recession and budget cuts. He stated that the state needs to backfill programs that were cut during the recession first before starting any new spending programs. Representative White discussed the amount of money the state has spent on tourism since 2000. He stated that the state was spending about $13 million ($20 million in today's dollars) a year before the tourism tax was repealed in 1993, and that the state needed to regain its market share. He explained that the bill provides for a tourism funding source outside of the TABOR revenue limit and it would help the private sector invest in the tourism industry. He stated that tourism promotion funding is the state's best program to generate a return in tax revenue.

Representative Borodkin agreed with Representative White, but explained that the state needed to focus on how to best use the revenue from Referendum C first. Representative White explained that the General Assembly and the Governor supported increased tourism funding.

BILL:Committee on Economic Development
TIME: 11:33:24 AM
MOVED:Lindstrom
MOTION:Motion to recommend Advisory Board Bill 2 (Travel and Tourism Additional Source Fund). The motion failed on a tie vote.
SECONDED:Evans
VOTE
Bacon
No
Evans
Yes
Lindstrom
Yes
Massey
Yes
Tapia
No
Borodkin
No
Final YES: 3 NO: 3 EXC: 0 ABS: 0 FINAL ACTION: TIE



11:35 AM -- Advisory Board Bill 3

Senator Evans discussed Advisory Board Bill 3 (Enterprise Zone Tax Credit Commercial Vehicles) (Attachment I). He stated that he thought the bill would not have a fiscal impact. He also discussed the sunset of the tax credit. Senator Tapia reiterated that he would not support new tax credits. Mr. Robinson, advisory board member, commented that the state should not encourage an increase in the presence of the trucking industry in certain areas that are in enterprise zones.
BILL:Committee on Economic Development
TIME: 11:44:28 AM
MOVED:Evans
MOTION:Motion to recommend Advisory Board Bill 3 (Enterprise Zone Tax Credit Commercial Vehicles). The motion failed on a 2 - 4 vote.
SECONDED:Massey
VOTE
Bacon
No
Evans
Yes
Lindstrom
No
Massey
Yes
Tapia
No
Borodkin
No
Final YES: 2 NO: 4 EXC: 0 ABS: 0 FINAL ACTION: FAIL



11:46 AM -- Advisory Board Bill 4

Mr. Ed DeCecco, OLLS, discussed the provisions of Advisory Board Bill 4 (Selling Bioscience Net Operating Loss) (Attachment J). Senator Tapia questioned whether other industries in Colorado can participate in a similar net operating loss program. Mr. DeCecco explained that he was not aware of any other industry that could participate in a similar program. However, other states have similar programs. He explained that the bill would allow companies that purchase a bioscience company's losses to reduce their taxes, while providing bioscience companies that are experiencing losses access to cash for operating and capital expenditures. Representative Massey discussed whether the bill would provide an incentive to companies to have losses. Senator Evans explained how the bill was aimed at startup bioscience companies to help them develop into profitable businesses. Bioscience companies have high startup and development costs. He stated that the bill would help encourage bioscience companies to locate in Colorado. Further, the bill would not cause a revenue loss to the state government because companies with losses would just transfer their losses to another company; otherwise the company could write-off their losses in a year when they have profits.


11:58 AM

Mr. Brian Vogt, OEDIT, stated that there are 16 states with some version of a net operating loss program, and that the state needs to position itself to compete nationally and internationally in the bioscience industry. He discussed how the program would work and why it would be beneficial to the state.

Mr. DeCecco was unsure whether the bill would be revenue neutral or not. Senator Bacon discussed whether companies could attempt accounting tricks to enable them to sell losses. Mr. Vogt explained that bioscience companies with losses would not have revenue to enable them to attempt accounting tricks. Also, OEDIT would provide oversight over the program.

Mr. Josh Harwood, Legislative Council Staff, discussed the potential fiscal impacts of the bill. He commented on the timing issues presented by the bill. Under the bill, the state would likely give up revenue in the short term that it would have given up anyway at a later time.

Senator Evans stated that it was important for the committee to recommend legislation that would help create jobs in the state.
BILL:Committee on Economic Development
TIME: 12:07:21 PM
MOVED:Evans
MOTION:Motion to recommend Advisory Board Bill 4 (Selling Bioscience Net Operating Loss). The motion passed on a 4 - 2 vote.
SECONDED:Massey
VOTE
Bacon
Yes
Evans
Yes
Lindstrom
Yes
Massey
Yes
Tapia
No
Borodkin
No
Final YES: 4 NO: 2 EXC: 0 ABS: 0 FINAL ACTION: PASS



12:10 PM -- Advisory Board Bill 5

Ms. Nicole Hoffman, OLLS, explained the provisions of Advisory Board Bill 5 (Income Tax Credit for New Jobs Created) (Attachment K). Senator Tapia reiterated that he would not support any bills creating an income tax credit.

Mr. Vogt discussed the importance of the bill because it creates a new job creation incentive as the state's pool of federal money for economic development is diminishing. He explained that he thought the bill would have a positive revenue impact as it would generate new jobs and economic activity in the state. Also, the state needs to compete with states that have much more significant resources for economic development than Colorado does. He thought the bill should classify as a restoration of funding because of the cuts OEDIT experienced during the recession.

Senator Evans discussed the need to consider the positive benefits of the bill, including that it would help generate new jobs.

Mr. Vogt discussed the range of the fiscal impacts of the bill that was introduced during the 2005 session. He stated that the General Assembly could put in a maximum number of credits that could be claimed by each employer to reduce the fiscal impact of the proposed bill.

Representative Massey commented on how the fiscal impacts of the bill could be analyzed using a dynamic model.

Mr. Josh Harwood, Legislative Council Staff, discussed the difficulty of estimating the fiscal impacts of the bill because some of the new jobs for which tax credits are claimed would have been created anyway.

Mr. Vogt discussed how a large part of business location discussions involve the amount of financial incentives that Colorado can offer. He said that the state would lose deals if it cannot offer much. He commented that the pool of federal money being used for economic development is diminishing rapidly because it is being used for business location deals.

Representative Borodkin commented that she thought the bill was a good idea, but that the state should not create new programs just because Referendum C passed. Representative Massey commented that he thought the state promised that Referendum C would help the state's economic recovery, including creating new jobs. Senator Evans stated that he thought that the bill did not represent a new program, only increased resources for economic development.
BILL:Committee on Economic Development
TIME: 12:34:09 PM
MOVED:Evans
MOTION:Motion to approve Advisory Board Bill 5 (Income Tax Credit for New Jobs Created). The motion failed on a 2 - 4 vote.
SECONDED:Massey
VOTE
Bacon
No
Evans
Yes
Lindstrom
No
Massey
Yes
Tapia
No
Borodkin
No
Final YES: 2 NO: 4 EXC: 0 ABS: 0 FINAL ACTION: FAIL



12:35 PM -- Committee Bill C

Representative Massey began the discussions on the film incentives bill that was discussed earlier in the meeting. He explained that the state is competing with other states that offer film incentives to production companies, including nearby states. He discussed the benefits of filming in the state. He explained that the bill would help bring in new money to the state and would not cause a loss in revenue.

Representative Borodkin agreed with Representative Massey but commented on the need for the state to focus on how to best use the revenue from Referendum C first. Representative Lindstrom made similar comments.
BILL:Committee on Economic Development
TIME: 12:42:12 PM
MOVED:Massey
MOTION:Motion to recommend Committee Bill C (Incentives for the Motion Picture Industry). The motion failed on a 2 - 4 vote.
SECONDED:Evans
VOTE
Bacon
No
Evans
Yes
Lindstrom
No
Massey
Yes
Tapia
No
Borodkin
No
Final YES: 2 NO: 4 EXC: 0 ABS: 0 FINAL ACTION: FAIL



12:44 PM

The committee adjourned.