DENVER (AP) — An official leading a review of tax credits designed to promote Colorado economies in distressed areas said Wednesday that the goal of the study is to restore confidence in the decades-old program, which now covers most of the state.
“I think we’ll start even more fundamental than that — should we have the program, and some may think we shouldn’t at all,” said Ken Lund, the executive director of Colorado’s Office of Economic Development and International Trade.
The state’s Enterprise Zone Program was created in 1986 to help economic development in struggling areas — places with high unemployment rates, low per capita income, or slow population growth. Once available in a few areas, the program distributed about $100,000 in tax credits in 1987. Now, 70 percent of the state is in an area designated as an enterprise zone and businesses were eligible for $99.3 million in tax credits in 2010.
However, companies claimed only $48.8 million of that amount that year, state economic officials said, and some of that amount may have been carried over from previous years.
The state’s economic development office estimates that at least 40 states have similar tax credit programs.
Critics of Colorado’s program have questioned its effectiveness, asking whether the tax credits really promote development and if unemployment rates and per capita income have improved in areas where the credits exist.
But Kevin Tilson, the former manager of the program, said the intent has been to create a business-friendly environment and not necessarily change the unemployment rate.
“There’s no way to say, ‘Yes, it’s effective or no it’s not,’ just based on what the unemployment rate did,” Tilson said. “There’s millions of factors that go into why an unemployment rate is high or low in a particular area.”
The amount of credits businesses qualify for ranges from a few thousand dollars to up to $6 million. About 5,000 businesses qualify for the credit on average, and nearly all are for less than $100,000, according to state data. Another 17 companies are eligible for between $1 million and $6 million, according to the data.
About 82 percent of the credits available are in mining, oil and gas, and communication and utilities.
The group lead by Lund was created by the Legislature this year to examine the program’s effectiveness. Wednesday was the first of several meetings throughout the fall, and the group will give lawmakers recommendations.
“I think there’s definitely change needed,” said Rep. Mark Ferrandino, the Democrat’s leader in the House, who sponsored the bill to study the program.
He agrees that the effectiveness of the tax credits can’t be measured only by unemployment numbers, but said that officials need to see whether the credits are going to attract companies, and not companies that would be coming to the state anyway, such as oil and gas developers.
The incentives range from tax credits for jobs created, employee training, equipment purchases, and employer-sponsored health insurance. Ferrandino said officials should study which tax credits are working and whether any need to be replaced.
The group analyzing the program includes state officials and business leaders. That prompted a question from one member about how objective the group can be.
“I don’t want to speak out of school here, but seems like everybody here has an interest in an enterprise zone, so isn’t it going to be difficult for you to decide whether, objectively, they should be done?” asked John Vecchiarelli, senior director of taxation for the Colorado Department of Revenue.
___
Ivan Moreno is on Twitter: http://twitter.com/IvanJourno
