Bell urges reform of enterprise zone program

On Wednesday, February 29th, two enterprise zone bills (House Bills 1241 and 1251) will come before the House Finance Committee for action. Last week George Awuor, policy analyst at the Bell, testified before the same committee in support of three bills, including HB 1260, which would have limited these credits but was defeated.

HB 1241 as amended would create an enterprise zone review task force to assess the effectiveness of enterprise zones in expanding economic development and ensure credits are only available in economically distressed areas. House Bill 1251 would make permanent a cap of $500,000 on the amount of state income tax credit that could be claimed by a business for qualified investments in an enterprise zone. Currently, the law sets a temporary requirement that businesses defer claiming enterprise zone income tax credits exceeding $500,000 in 2011, 2012 and 2013.

We have long maintained that Colorado's enterprise zone program has not been effective at promoting economic growth. Our 2009 research showed that zones created in the 1980s to jump-start economic growth in depressed areas have since expanded to cover 70 percent of the state. Credits are often given to companies, such as oil and gas exploration firms, that would locate in an area regardless of the tax credit. In addition, some companies have claimed the credit even while laying off workers.

Last November, The Denver Post published a detailed article calling for an urgent review of the program. In its article, the Post found that even though the enterprise zone program was designed to help small- and medium-sized companies, large companies such as Qwest (now CenturyLink), oil and gas companies and even the Colorado Rockies have been beneficiaries. In 2010, companies filed requests for tax credits totaling $75 million for making capital investments or training workers in enterprise zones. The Post found that these companies created 564 jobs, meaning that each new job cost the state nearly $133,000.

In several recent editorials, The Denver Post has added its voice in support of reforming the enterprise zone program. This past Saturday its editorial expressed disappointment with the committee for voting down HB 1260. According to the Post, HB1241 and 1251 are "... good steps toward returning enterprise zones closer to what they were originally intended to be."

We urge legislators to vote for these two bills. They are reasonable reforms that better target and limit enterprise zone tax credits.