Date: 02/04/2009

BILL SUMMARY for HB09-1001


Votes: View--> Action Taken:
Refer House Bill 09-1001 to the Committee on ApproPASS

01:30 PM -- House Bill 09-1001 - Concerning Incentives for Job Growth

Representative Rice, prime sponsor, explained House Bill 09-1001 provides an income tax credit to firms that create jobs in Colorado. If the jobs are created within an enhanced rural enterprise zone, firms must create at least 10 jobs and retain them for one year. If the jobs are not being created within an enhanced rural enterprise zone, at least 20 jobs must be created and retained for one year. In order to qualify for the credit, the jobs must bring wages of at least 110 percent of the average wage of the county in which the new jobs are located.

The following persons testified:

01:50 PM -- Mr. Don Elliman, Colorado Office of Economic Development and International Trade (OEDIT), testified in support of the bill. Mr. Elliman noted that the bill is an incentive to companies that will result in many new jobs that pay for themselves. These are jobs that otherwise would not come to Colorado.

The committee engaged in a discussion on the secondary impacts of job creation and whether these factors would pay for the cost of the credits in the bill. Mr. Elliman responded by discussing the impacts of the federal economic stimulus package on job creation in Colorado. He noted that the federal legislation is aimed at the same goal of job creation as that goal found in the provisions of House Bill 09-1001.

02:38 PM --
Dr. Richard Wobbekind, University of Colorado at Boulder, testified in support of the bill and discussed the secondary effects of job creation. Dr. Wobbekind noted that the quality of a workforce is important to the state. He continued by pointing out that the oil and gas industry's jobs have many secondary impacts that benefit the state of Colorado. He continued by saying that the net tax generated from House Bill 09-1001 will more than offset the cost in the bill.

The committee discussed the fiscal note and questioned whether the cost would be offset by new jobs. Dr. Wobbekind noted that the cost of this tax incentive is minimal in terms of the return to the state. Representative Judd discussed whether studies on dynamic modeling show that job credits pay for themselves. Dr. Wobbekind responded by saying that if jobs were not created by House Bill 09-1001, there is no cost to the state.

The discussion continued on the costs in the bill and whether there is a way to evaluate whether the credits in the bill will work. Dr. Wobbekind responded that it may be possible to track state revenue increases on a job-by-job basis. The committee discussed the reporting requirements in the bill. Dr. Wobbekind said that he would be surprised if the bill was not revenue neutral. The committee continued the discussion on whether tax credits really entice businesses to relocate from one state to another. Dr. Wobbekind mentioned that the decision by firms to relocate or move to another state is decided by a number of factors.

03:14 PM -- Mr. Tom Clark, Metro Denver Chamber of Commerce, testified in support of the legislation. Mr. Clark discussed the industries that locate in Colorado because the state has a competitive advantage. The key to attracting industries to Colorado is to create key niche areas of businesses in the state. Once a business is operating in Colorado, the company generally does not choose to close and move to another state. Mr. Clark closed by discussing the benefits of job creation to the state's weak economy.

Representative Judd discussed the factors that influence businesses to move to Colorado. Mr. Clark responded by commenting on the benefits of tourism to Colorado in terms of its draw in out-of-state dollars to Colorado and the advantages of the university systems in Colorado. The committee discussed whether the bill should be considered in the current economic climate given the legislature's task of balancing the budget or considered in the future when the state has more revenue. Mr. Clark closed by saying the jobs created in this bill will more than pay for costs identified in the fiscal note.

03:47 PM -- Mr. Mike Kazmierski, Colorado Springs Economic Development Corporation, responded to committee questions and testified in support of the bill. Mr. Kazmierski discussed the many quality-of-life issues that Colorado offers out-of-state companies.

04:05 PM --
Mr. Preston Gibson, Jefferson Economic Council, testified in support of the legislation. Mr. Gibson discussed the value of tax incentives to companies in terms of potentially relocating to Colorado. Mr. Gibson discussed the fact that we are competing globally and no longer considering the same competitive environment as we did when the state was competing for U.S. businesses. Mr. Gibson noted that a number of companies have moved their corporate headquarters to Colorado and closed by saying that the cost of House Bill 09-1001 will be paid for by new job creation. Thus, the incentives in the bill are revenue neutral to the state.

After a brief committee discussion, Mr. Gibson responded by talking about Colorado's tax structure in terms of the taxes that corporations pay to the state. The committee briefly discussed the renewable energy industry in Colorado and the level of business activity in Jefferson County. Mr. Gibson closed by saying that incentives make a big difference in the decision of whether companies choose to locate in Colorado.

04:19 PM --
Mr. Mike Mauer, Legislative Council Staff, commented on the secondary impacts that were discussed during testimony on the bill. At best, tax incentives appear to make the difference only in situations where two sites are equally desirable for other reasons and the tax situation is better on the margin at one location. According to a study that reviewed over 300 pieces of literature examining the effectiveness of state tax incentives, the tax literature indicates that when a business makes its location decision "taxes...seem to enter decisions at the very last stage, if at all.

Mr. Mauer continued by noting the reference to findings by the Washington study in the fiscal note. He continued by saying that the study indicates that there appears to be little correlation between the amount of tax benefit received by participants in the tax incentive programs and the growth in employment which resulted. Therefore, these tax incentives may not be a major factor in influencing the location process for businesses. Mr. Mauer closed by reiterating that the challenge is determining whether tax incentives are the real factor that drives an out-of-state company to move its operations or headquarters to Colorado, of whether tax credits will go to companies that would have come here anyway without the credit.

04:38 PM

The bill was placed on the table for action.
TIME: 04:38:37 PM
MOTION:Refer House Bill 09-1001 to the Committee on Appropriations. The motion passed on a 10-1 vote.
Kerr A.

04:50 PM