Enterprise zones face surgical cuts

Administrators resigned to loss of some areas

One of the broadest economic-development programs ever to sweep Colorado is in for a major overhaul.
And even if enterprise zones aren’t completely on their way out the state’s back door, they are at least in for certain surgical cuts.
“There’s no guess on what percentage might be diminished,´ said Evan Metcalf, enterprise-zone coordinator with the state Department of Local Affairs.
He’s referring to the ongoing process initiated by the state Legislature last session to review the intent and scope of enterprise zones.
“Most large parts of rural areas are covered now,” he said. “About 70 percent of the state’s land area is in enterprise zones, but it only includes about 15 percent of the state’s population.”
Enterprise zones were created a decade ago and offer a menu of incentives to lure expanding or relocating businesses to economically distressed areas. Incentives include an investment tax credit, job tax credit, research and development tax credit, exemption from state sales and use tax for manufacturing and mining equipment, and local government tax incentives.
The much-talked-about enterprise zone reform centered on the concern that many areas once targeted as economically depressed – and thus eligible for enterprise-zone status – no longer are disadvantaged and therefore should lose their enterprise-zone designation.
As a result, the Legislature created a state Economic Development Commission with the explicit ability to terminate zones where they are no longer deemed necessary. Modifications also were made to the rules governing zones that aren’t eliminated.
The commission will accept recommendations from Metcalf’s office. His staff is now in the process of reviewing recertification packets submitted by enterprise-zone administrators from around the state. Updated business-development plans and job-creation objectives are central to the review process.
Insiders do not seem alarmed by the possibility that all enterprise zones eventually will be phased out.
“It certainly is a scenario that makes sense,” Metcalf said.
Even zone administrators acknowledge that changes are inevitable, even necessary.
“It was time to take a look at it,´ said Cathy Schulte, senior vice president of the Greeley/Weld Economic Development Action Partnership Inc. and enterprise-zone administrator for Weld County.
“As zone administrators, we had talked about areas that needed to be reviewed,” she said.
“In some regard, the intent of the law probably has changed since 1986 because Colorado has changed since 1986,´ said Lew Wymisner of Larimer County Employment & Training Services and zone administrator for that county.
“It occurred to me when we took this over (administration of the zone) that it was a loosely run program that needed some tightening,” he added. “What the Legislature did was important, but we may have thrown part of the baby out with the bath water.”
He was referring to one area in particular where a credit for new projects in zones was reduced from 50 percent to 25 percent.
There are legitimate concerns that if enterprise zones are ushered out, new, strong economic-development lures must be established.
“As a whole, the state of Colorado doesn’t have a lot of incentives,” Schulte said. “It has hurt our ability to attract high-quality, high-paying jobs in the industries of the future. Because of that, more emphasis was placed on enterprise zones [than perhaps was intended].”
Metcalf said he hopes to have all recertification packets reviewed by the end of this month, then sent to the Economic Development Committee. It’s likely the committee will not hand down decisions until early January.
Because the process is ongoing, no one will speculate about what zones might be cut.
“New boundaries haven’t been approved or denied,” Schulte said. “Any boundary changes will not go into effect until July 1, 1997.”
What is clear, though, is what areas no longer qualify for enterprise-zone eligibility.
The recertification process helped point out areas that no longer met the distress criteria required for a zone designation.
“Most of the towns in Weld County did qualify, but others didn’t,” Schulte said.
For example, Eaton, Windsor and parts of Greeley did not meet the requirements. And only Erie’s downtown area qualified.
Most of Fort Collins’ zone is on Mulberry Street between Interstate 25 and College Avenue. However, last month the Fort Collins city council voted to petition the state for another zone that would go south along the Poudre River between the interstate and County Road 9.
Some of the new criteria for businesses locating in zones requires that they promote job creation and job retention, employ the homeless or promote child care. Wymisner likes the idea of promoting these human-service needs with enterprise zones and suggested that the state pursue tying the two together, along with retraining of existing employees.
Though specific changes remain unknown, many companies already in enterprise zones are concerned about their tax credits and what will become of promises made when they chose to move into a zone.
“The Legislature did make a grandfather clause,” Schulte said. “But it has to be approved by the commission.”
Indeed, an information sheet circulated by Metcalf’s office states: “Protects companies which have made prior commitments – authorizes agreements with taxpayers in terminated areas to continue to claim credits for up to five years based on long-term investment and job creation plans.”
The committee must certify such plans within six months of terminating a zone where a company wants to keep receiving its credits.
“For the past year, I’ve tried to warn companies and I’ve been talking with a lot of employers about this,” Schulte said.
The Economic Development Commission is charged not only with reviewing current zones, but also with exploring new types of incentives for the state.
“It’s very important that if this state wants to be successful, that we’ve got to be aggressive in coming up with some meaningful solution,” Schulte said.
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