HB 12-1241 Enterprise zone designations

House Bill 12-1241

Testimony to the House Finance Committee
George Awuor, policy analyst
February 22, 2012

Thank you for the opportunity to speak before this committee today.

I am George Awuor, and I am a policy analyst at the Bell Policy Center. The Bell is a non-partisan, non-profit research and advocacy organization dedicated to making Colorado a state of opportunity for all.

The Enterprise Zone Program was established in Colorado more than two decades ago to encourage investment and job creation in economically distressed areas. Today the program covers 70 percent of the state.

I'm here in support of HB 12-1241. The bill requires any new enterprise zone designation to meet at least two of the criteria listed in statute. Currently, an area must either have high unemployment rates, low per capita income and/or slower population growth to qualify to be designated as an EZ. HB 12-1241 requires a review of the enterprise zone designations at least once every five years by Colorado Economic Development Commission (CEDC). In addition, the CEDC director will be allowed to make changes or terminate existing enterprise zone designations based on the review. Areas such as Crested Butte and some locations in Denver and Adams counties currently designated as EZs clearly do not meet any of the above criteria.

We have been saying for several years that Colorado's EZ program has not been effective at promoting economic growth. In 2009, we released a review of research showing that enterprise zone tax credits resulted in minimal long-term investment and few, if any, jobs. Job creation or retention is not necessarily occurring, and when it does, there is a high cost for every job. Both nationally and locally, incentives are not a cost-effective strategy for achieving economic growth, and it makes sense that states should continuously re-examine the need for incentives.

We believe that HB12- 1241, in addition to two related bills that passed in the 2010 session (SB 162 and HB 1200), will ensure that once economic conditions in an area improve, the area is removed from the enterprise zone. Additionally, consistent annual reporting and consistent documentation will make it easier to evaluate the effectiveness of the EZ program.

By more effectively drawing the boundaries of the areas designated as enterprise zones, the resulting tax credits will be better targeted to areas that would benefit the most from investment. This should also reduce the overall amount of tax credits granted for enterprise zones, freeing up funds that could be better invested in K-12 and higher education. The availability of good schools, an educated workforce, access to transportation and quality of life are usually far more important to firms when they are making decisions on where to locate than tax credits.

Thank you for the opportunity to share our thoughts with you.