There's nothing like a good old-fashioned payoff to get the ball rolling. But when it comes to paying companies to move in or simply stick around in Colorado Springs, the stakes are enormous and competition fierce. All states and hundreds of cities offer bait to lure big employers with payrolls and taxes they hope will fire their economy and, eventually, fill local coffers.
Incentives are more crucial now, as the sour economy compels businesses to look for the best deals from cities desperate to bring jobs. Yet our city and state are knifing services and budgets more often than they're forking over money.
That's one reason Colorado Springs' deal for a record-high $31.5 million package to keep the U.S. Olympic Committee headquarters here was so controversial. It locked the city into payments spanning two decades, making a similar offer to another company highly unlikely. Without a specific incentives budget and no other group amassing incentives money, we may watch promising prospects chase pots of gold elsewhere.
Schott Solar Inc., for example, considered Colorado Springs, but went to Albuquerque, N.M., last year after receiving a package worth over $100 million, says Greater Colorado Springs Economic Development Corp. CEO Mike Kazmierski.
"Jobs are considered the pathway to economic vitality," he says, "and communities across the country know this and are desperate. You think of the Rust Belt, where incentives got ridiculous because those communities needed those jobs so desperately. The reality is the rest of the country and the West, which has traditionally shunned incentives, are doing them now more than ever."
The Springs also lost a 2008 bid for one of two Hewlett-Packard technical service centers, with 1,200 jobs each, after a bidding war in which incentives reached $60 million. Conway, Ark., and Rio Rancho, N.M., landed the plants.
"The good old days when a pretty view of the mountain mattered, those days are done," Kazmierski says.
The Springs has shifted its focus from huge companies that have their hands out to mid-sized and small companies for which quality of life, good schools and well-trained employees are key.
Leaders are working with local business people, realty agents and developers to satisfy businesses' needs. Sometimes it can be as simple as extending a bus route two extra blocks, says the city's business development manager, Elena Nunez.
"The message we use is, 'We're not a big cash-incentive state or community, but we provide an affordable business climate and a structure that supports business,'" she says.
Tools of the trade
Instead of cash, the city offers tax breaks, utility bill paybacks, property and sales tax diversions, fast-tracking development review and grants. But the biggest incentive comes from Tax Increment Financing (TIF), used by the city's Urban Renewal Authority to divert property and sales taxes from governments to specific projects.
If an urban renewal area generates $10,000 in taxes before TIF is adopted, that $10,000 still goes to various taxing entities. But anything over that amount goes to the Authority, which puts it toward acquiring land and site preparation, building roads, relocating utilities and other projects. After 25 years, the diversion ends.
"The rationale is revitalization," Lisa Bigelow, the city's economic development director, says, noting that TIF helps transform blight into thriving areas that yield lots of taxes.
Six urban renewal areas in Colorado Springs have TIF, for which the city gave up $32,000 in property tax money this year. One of those, the new North Nevada Avenue shopping area called University Village Colorado, gets sales tax money, too, which came to about $113,000 this year. Next year, the sales tax tab is expected to increase to $1.3 million as more retailers open alongside the area's anchor, Costco.
In all, the Urban Renewal Authority plans to spend $100 million in tax revenues to help developers build at University Village, which extends from Austin Bluffs Parkway to the Interstate 25 interchange along Nevada Ave.
Now, the city is backing a proposed TIF that would funnel millions into extending Powers Boulevard from Colorado Highway 83 to Interstate 25 by drawing tax money from 200 acres of raw land that Gary Erickson wants to make into a retail and commercial mecca southwest of North Gate Boulevard and Voyager Parkway. But first, the land must be declared blighted — with deteriorated buildings and unsafe conditions — to qualify as an urban renewal site. A study is underway to see if it qualifies.
The city supports the project, says Bigelow, because extending Powers would "strengthen the potential for that area to bring in major retail that would stop the leakage [of sales taxes] to Denver."
But some argue that diverting all sales tax money generated in this area to the Urban Renewal Authority might violate voters' intent to earmark portions of the tax for public safety and parks.
"Is that bait-and-switch?" El Paso County Commissioner Sallie Clark asks.
Clark also notes that City Council approval is all that's required, although TIF would divert other agencies' property taxes, too: "What we've been asking for," she says in reference to the county, "is a seat at the table."
Variety of dealings
On a smaller scale, the city paid semiconductor manufacturer dpiX, LLC, which moved one operation here recently, $129,712 this year to reimburse its power and natural gas usage in 2008. The money came from city-owned Colorado Springs Utilities' payment in lieu of taxes (PILT) to the city, and the 10-year agreement will pay dpiX up to $3 million. (How Issue 300, which phases out the PILT, will affect the agreement isn't clear.)
In return, Nunez says, the city's analysis shows dpiX will bring 157 jobs within five years and create 283 spin-off jobs to meet supplier and service demands.
In a similar deal, the city paid Progressive Casualty Insurance Co. $102,665 this year in utility rebates and waived part of the city's business personal property tax on equipment. It expects to see 546 new jobs and nearly $6 million in sales and property taxes over 10 years in return.
Business personal property tax rebates meant the city won't collect $75,000 from 10 companies this year and $100,000 in 2010. El Paso County abolished its business personal property tax a decade ago, forgoing $4 million to $6 million annually.
In the even-smaller-potatoes category, the Downtown Development Authority, formed three years ago, has used taxes from the downtown area to provide $400,000 to jazz up shops' façades, such as at Regina's Unique Boutique and Sparrow Hawk Gourmet Cookware, says authority spokesman Ron Butlin. It also loaned $500,000 to the Cottonwood Center for the Arts to purchase a building at 427 E. Colorado Ave., keeping the school downtown.
Butlin says the DDA also could recruit: "If [prospective businesses] were struggling between us and Powers, we would try to use that [tax money] to encourage them to locate here."
Whether incentives pay off can't be known, because Colorado Springs has been at it for only four years.
"If that's the sole incentive that [businesses are] coming for," Councilman Randy Purvis says, "are they going to leave when the incentives run out?"