The debate over public money for private jobs

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Should public dollars be used to fund job-creation?

That question came up once again this week after Colorado Springs councilmember Sean Paige set off a scrum by calling for an audit of the Economic Development Corp., which receives about 5 percent of its budget from city taxpayers.

That’s enough public funding, according to Paige and his colleagues on the council, to warrant closer scrutiny of the EDC’s track record.

It’s the sort of debate that Pueblo hasn’t seen in years. The second-largest city in southern Colorado often competes against the Springs for jobs and corporate relocations.

Nearly 100 percent of Pueblo’s jobs-creation effort is supported by public dollars.

Forty minutes to the south, the Pueblo Economic Development Corp. receives between $500,000 and $600,000 a month from a half-cent city sales tax dedicated strictly to new job development — and it has $11 million in the bank to provide incentives to business willing to relocate.

The difference between how the two cities fund their economic development efforts can be tied, in part, to a clear difference in each city’s political will.

The Springs has for years been a bastion of conservative fiscal policy. Residents not only helped pass the Taxpayer Bill of Rights in 1992 but enacted a local version of the bill as well. In 1991, city voters also nixed the continuation of a half-cent capital improvement tax that had been in place for four years.

Pueblo voters, on the other hand, not only like the idea of public funding, but have supported it in election after election for more than 25 years.

Libertarian in their attitude, the local EDC’s founders opted from the start to fund the organization’s budget primarily with private-sector dollars.

Co-founder Steve Schuck recalled this week how, even then, no one wanted to become dependent on public funding.

“We required that any such funds be limited to non-recurring and operational items so that if they went away, we weren’t dependent on them,” he said.

Almost 40 years later, the local EDC remains largely independent of government.

Both the EDC and Pueblo’s equivalent spend their money is roughly the same way, though the source of their budget dollars are far different.

The EDC employs nine full-time people and operates on a $1.4 million budget. That’s down 3 percent from last year’s budget and is expected to decreased again next year due to economic conditions, said CEO Mike Kazmierski.

About $70,000 of its budget comes from the city. The rest of its operating funds are contributed by private “investors” that include Colorado Springs Utilities. The city-owned enterprise is one of the organization’s largest contributors, anteing up $192,000 last year. But even when factoring in those dollars, about 80 percent of the EDC’s budget is raised from private companies.

New-business development and marketing are handled by EDC Executive Vice President David White. This year he will make 20 trips to call on businesses in other cities at a cost of about $250,000.

A similar percentage of the budget is dedicated to business retention, which Kazmierski said often helps new job generate leads.

So far this year, more than 800 new jobs have been announced by the EDC.

In an Angelou Economics study of economic development efforts in the Springs, analysts determined the city spent about $2.35 per capita for new-job creation and business retention.

That’s much lower than $4.80 per capita spent by Pueblo.

PEDCo employs five full-time staff. Its $730,000 annual budget is about half the size of Colorado Springs.’

The budget relies on proceeds from a city-wide sales tax, in effect since 1984 and repeatedly approved by the voters in subsequent elections.

PEDCo CEO Dan Centa said the organization last year contacted 39 prospects. Two of those overtures paid off. Incentives and funding helped attract a Big R Stores distribution center which moved from Lamar.

In 2010 and for the next five years , he projects about 300 new jobs will be added in Pueblo, including another 50 to 60 recently announced by wind turbine manufacturer, Vestas Corp.

Though Pueblo has lots of cash available for its EDC, Centa said the Springs has another advantage.

“(The Springs EDC) doesn’t have a bucket of money for incentives. But they have Colorado Springs Utilities, which is a powerful resource. Because it’s a bigger town with more resources, you have $50,000 and $100,000 corporate members. We don’t come close to that,” Centa said.

That said, when times are tough for Corporate America, those corporate contributions tend to shrink, so Pueblo is better insulated from the ups and downs of the economy because its EDC budget is more constant.

Asked whether he’d like to have additional funding from the public sector, Kazmierski dismisses the option as “unrealistic,” given the lack of political support for such notions at the moment.

“We don’t expect the city or the county to increase its funding. We’ve cut our budget back this year and last — and we’re already planning more cuts next year,” Kazmierski said.

In his call for an audit of the EDC, Paige affirmed Kazmierski’s assumption.

“(The EDC) has cumulatively received a lot of taxpayer and ratepayer money over the years, which makes up a sizable portion of its budget, but it has never, as far as I know, been subjected to an independent audit by the city,” Paige said.

Independent audits, however, had shown the EDC to be a good steward of its dollars.