DENVER (AP) – A report by The Denver Post shows that tax credits created more than 20 years ago to spark economic development in the poorest areas of Colorado are now available in more than 70 percent of the state.
The newspaper reports that the Enterprise Zone Program benefits businesses ranging from oil companies to the Colorado Rockies.
Last year, companies filed documents stating they were owed more than $75 million in tax credits. The Post says those companies created a net 564 jobs, a cost of nearly $133,000 per job.
Some former supporters from both parties say the program has overexpanded.
“I think it’s expanded way too far,” said former Democratic state Sen. Jim Rizzuto, who helped draft the legislation that created the program in 1986 and is now president of Otero Junior College in La Junta.
Denver Councilwoman Jeanne Faatz, a Republican who co-sponsored the legislation that created the program when she was a state legislator, agreed.
“I don’t believe, at this point, that it’s nearly as effective a tool as it was supposed to be,” Faatz said. “It’s just become corporate welfare.”
Over the past decade, the Colorado Economic Development Commission expanded the zones more than 60 times but took an area out only once. The newspaper based its review on more than 29,000 records contained in a database on the state’s Enterprise Zone Program and analysis of more than a decade of paper documents related to the program.
The original enterprise zone legislation created eight zones in economically blighted areas. The plan was to fuel job growth through tax credits in areas such as Pueblo, reeling from the closure of steel factories, and portions of the Eastern Plains, wracked by farm foreclosures.
In 1987, its first year of operation, the program gave Colorado businesses $100,000 in tax credits.
“For many areas, it’s really the only economic development tool left,” said Don Elliman, a former director of the state’s economic development department and now a member of the Colorado Economic Development Commission, which oversees the enterprise zones.
But at least six state audits, the last in 2007, have faulted the program for its failure to show whether the tax credits actually improved the economy or created new jobs.
Three years ago, under better economic conditions, companies participating in the program reported they created more than 8,000 jobs and were owed $92 million in tax credits. After the recession struck, the jobs created dropped by 93 percent while the tax credits fell just 18 percent.
The Post review also found companies have received tax credits for investments they would have made without the incentive.
Suncor Energy, for example, filed documents in 2006 and 2008 claiming $14.2 million in tax credits for overhauling and upgrading its Commerce City oil refinery. Company officials said they did the work to come into compliance with federal pollution standards.
“The driver of that project was a regulatory one,” said Lisha Burnett, Suncor’s spokeswoman. “The tax benefits resulting from being in an enterprise zone did not have a direct impact on the scope of that project, obviously.”
Next year the state will require companies to attest on a form that the “enterprise zone tax credits are a contributing factor to the startup, relocation or expansion of my business in the enterprise zone,” but the nonpartisan Colorado Legislative Council expects the impact on tax credits claimed from that requirement to be “minimal.”
Among the highest-dollar beneficiaries of enterprise zones have been oil and gas companies.
Since 2004, 21 companies each filed for tax credits of more than $1 million for a single capital investment. Three companies alone — Williams Field Services, Encana Oil and Gas Inc., and Pioneer Natural Resources? — said the state owed them $65.4 million in tax credits.
Karen Brown, a spokeswoman for Pioneer, said her firm has used only a fraction of its tax credits, which can be carried into future years.
“Enterprise zone credits, while not the primary factor driving our investment decisions, do have the effect of improving projected economic returns, which can make investments in Colorado more competitive,” Brown said.
Last year, state Rep. Dickey Lee Hullinghorst, a Democrat from Boulder who is a member of the Finance and Appropriation committees, pushed legislation during the budget crisis to cap the enterprise zone tax credits that a company can claim. She hoped to limit a company to $250,000 in credits annually, but, to get the bill passed, she raised that cap to $500,000 and made it temporary.
The legislation signed into law allows companies to stockpile credits in excess of the cap so they can claim them in 2014, when the cap goes away.
As a result, in two years, an estimated deferred tax credit bill of more than $45 million will hit a state still struggling with sluggish revenues, according to estimates by the Colorado Legislative Council. That amount, coupled with the annual enterprise zone tax credit bill, could push the program’s cost past $100 million for that year.
“It’s a huge drain to our revenues that we otherwise could be putting to very good use for the citizens of the state of Colorado,” Hullinghorst said.
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