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11/14/2004

City considers bigger business incentives

By Tony Kindelspire
The Daily Times-Call

LONGMONT — The city council next month will discuss whether to increase the size of the carrot it offers to companies that consider expanding their operations here or relocating to the Longmont area.

“I was approached initially a few months ago by some elements in the city council saying that we’ve got to get more competitive and proactive in terms of recruiting businesses,” said John Cody, president of the Longmont Area Economic Council.

At its monthly meeting Monday, the LAEC board gave Cody approval to go before the city council with the group’s annual contract for services with the city. Along with fees paid into it by primary employers, the LAEC budget receives $150,000 annually from the city.

The dollar amount has been the same for the past five years, Cody said, but next year’s contract has an addition.

“There’s a new line item to explore or evaluate incentive alternatives with the city council,” Cody said. The council will discuss the LAEC’s contract for services at a meeting in December.

The city already has some monetary incentives in place for businesses considering expansion or relocation here. Since 1988, the city has allowed new and expanding industrial developments to receive up to a 30 percent waiver on most of the fees a business would have to pay to get a building permit.

The city also allows for a sales and use tax exemption: For their first two years of operations, businesses new to Longmont can be exempt from paying the city’s 2.95 percent sales and use tax on the purchase or use of measurement and inspection equipment or research and development equipment.

There is also a clause that says all Longmont businesses can be exempt from the 2.95 percent tax on machinery and machine tools worth more than $1,000.

“I’ve always thought that those are two of the better incentives, because that’s real money, right now,” said Tom Clark, executive vice president of the Metro Denver Economic Development Corp.

City finance director Jim Golden said the manufacturing exemption is exactly similar to what the state offers. It is Golden’s office that will review the LAEC contract for services and then present it to City Council.

Cody said the council members with whom he spoke noted that the economic climate is improving, and also took notice that other Front Range communities are becoming more aggressive in luring businesses.

Boulder’s leadership is now attempting to stem the flow of companies that leave for more business-friendly environs, Cody said, and the Denver City Council is exploring additional incentive alternatives.

“These are both areas where, in the past, incentives have not been a high priority,” he said. “And now they are, so the timing is absolutely right on this thing.”

Cody said a Longmont company he didn’t want to name has plans for expansion, and “incentives will be part of the mix. We’re talking to them, and they’re saying, ‘We’re being offered incentives in other communities.’”

So far, as far as Longmont is concerned, the talk of additional, or discretionary, incentives is in the preliminary stages. But many economists are predicting an increase in business activity in the coming year, and there are signs of that locally: Earlier this year, for the first time in 31 months, the commercial vacancy rate in the Longmont area dropped below 20 percent.

City Councilman Roger Lange, who also sits on the LAEC board, said he has not spoken to Cody or other councilmembers about the idea of exploring incentives but thinks it’s a good idea — within reason.

The top two considerations, Lange said, should be the location of the project and the company itself.

“If there were some very desirable businesses that we were interested in seeing come to town, I guess I would find that acceptable, but I would emphasize that they should be used on a very limited basis,” he said.

The LAEC concerns itself only with primary employers — those who produce goods or services here that are sold outside the area, bringing new money into the community. But Lange thinks that in some cases, incentives could be appropriate for non-primary employers.

In the recent case of the Wal-Mart Supercenter, the city offered no incentives, Lange said. But if a developer could be enticed to redevelop the Sugar Mill property or the Flour Mill, Lange said it could be appropriate for the city to bend a bit.

“The thing people miss about incentives is they think they are a portion of the existing base,” Cody said. “They are not. They are a portion of the new taxes generated by the project.”

He added that while some in the public sometimes look upon incentives with disapproval — hence the term “corporate welfare” — those in his profession have an old saying about the subject.

“Economic developers look at it like, 100 percent of nothing is nothing,” Cody said.

In the case of Wal-Mart, there was at least some public perception that incentives were being offered. Had that been the case, Lange said, it would have been perfectly acceptable for the public to be concerned.

“I’m sure I’d be sensitive to that, and I think what would disturb people the most is primarily how significant is the incentive, and secondly, how often do you use it?” said Lange. “Would the public see it truly as an added value to the community?”

Lange also said he would be sensitive to using incentives to pit Longmont against some of its neighbors in a bidding war, a point with which Cody agreed.

Ultimately, it would be the City Council’s decision to approve or disapprove of any discretionary incentives, according to city manager Gordon Pedrow.

But for the first time, councilmembers appear ready to at least talk formally about the idea.

They’ll be deciding, as Cody put it, “Do we want to have a mechanism in place so we can evaluate additional incentives, and do we have a formula with which we can evaluate it?”

In Adams County, where Cody used to work, the county itself offers incentives to new and expanding companies, as do most of Colorado’s counties. Boulder County does not.

“Incentives are tie-breakers; that’s all they are,” said Cody. “They never make a bad deal look good.”

Tony Kindelspire can be reached at 303-776-2244, Ext. 291, or by e-mail at tkindelspire@times-call.com.