How was it possible that less than a week after trumpeting the planned relocation of Rocky Wind Power to Colorado Springs, the Economic Development Corp. was now putting out a press release casting doubts about the company’s credibility?
After all, some of the area’s more prominent businessmen and women, joined by the mayor and the county commission chairman, had gathered to hear the news about the renewable energy company’s move here.
Didn’t the EDC know who it was dealing with? Hadn’t it checked on the company’s reputation, verified its claims?
In fact, it appears the EDC never dug very far, settling on a site visit, an Internet search and little else.
Mike Kazmierski, president and CEO of the EDC, said the organization’s job doesn’t require it to take a deep look at a company’s record.
He said the EDC’s job is primarily to promote the city and the region. “It’s to try to get more companies to move here, to create jobs.”
And so it’s not the EDC’s role, he said, to carefully vet potential corporate relocation prospects — even as it promises tax breaks and job-training incentives.
Kazmierski said he was “absolutely not” embarrassed by disclosures that the company’s product didn’t work as advertised, or that the Iowa Attorney General was investigating complaints against the company.
The EDC offered more than $300,000 in job-training and tax incentives to coax Rocky Wind to move to the Springs.
The company, headed by Steve Stultz, held a press conference with the EDC at the Antlers Hilton announcing its planned relocation. Mayor Lionel Rivera attended the Feb. 25 press conference, as did other business and political leaders. By the weekend, however, the rumors came rolling in — and the EDC was forced to backtrack.
The deal is now on hold, while the company “settles issues in Iowa,” Kazmierski said.
“But if they get those issues settled, and can prove independently that the product they sell works, we’d be happy to have them in Colorado Springs,” he said.
“Our incentives are based on their success once they arrive,” he said. “When we’re talking to a company we have to treat what they tell us with confidentiality, we can’t let it get out that the company might be moving.”
That fear — that the company might be wooed by other cities — keeps the EDC from actively investigating a company. It prevents it from calling local chambers of commerce and asking about the company. The EDC also doesn’t require financial statements or tax records from privately held companies.
“You can’t ask those questions on a first date,” Kazmierski said. “That would send them in the arms of other cities.”
But some people believe the questions should have been asked — including reviews of financial reports, and audits, as well as calls made to local officials in Iowa.
“The Better Business Bureau and the local chamber of commerce — those are easy calls,” said Tom Zwirlein, professor of finance at the University of Colorado at Colorado Springs and director of the Southern Colorado Economic Forum. “And if cash is actually changing hands — which it didn’t in this case — you’d probably want to do more.”
Because the EDC’s reputation is on the line, Zwirlein believes that looking at a company’s financials and checking the U.S. Patent Office would be reasonable precautionary steps for the group to take.
The Denver Economic Development Corp. does an extensive background check on companies it woos, said Jeff Romine, interim director of business and housing services. And its checks go beyond a simple Web search.
“Background work is obviously important, and it’s important not just to rely on the company’s word or how it looks,” he said. “There are things we have to do — due diligence — prior to confirming the company’s arrival here.”
Kazmierski said he believed the case with Rocky Wind Power was an “isolated incident,” but that the EDC would begin to vet smaller companies more closely in the future.
He said the group would ask more questions and review the companies’ performance — but only after a relationship is established.
“We did our due diligence,” he said. “We did an Internet search, we went to the physical location. There were people working, they had offices, they had vans with the company logo. We had every indication they are a viable business.”