Let’s be serious about economic development

Filed under: Economic Development,Photo,Print | Tags:
LART taxes, such as from hotels,  no longer can be counted on to help in economic development.

LART taxes, such as from hotels, no longer can be counted on to help in economic development.

In many communities, economic development is viewed as an investment in the community’s future. Economic development can be viewed in several different ways, from encouraging an entrepreneurial and startup-friendly business environment to actively recruiting larger companies to relocate to our region.

Communities across the country see economic development as a requirement to remain competitive in retaining young professionals, maintaining a qualified workforce and expanding the tax base, which leads to economic growth.

Public money is often used to help fund economic development activities in a municipality. While it is rarely the sole source of economic development funding, it supplements private funding and grant funding often available to these types of activities.

Public funding of economic development activities is an investment in the community’s future; it is not an expenditure.

There is a distinct difference.

The difference in cash spent

Expenditures are money spent now to receive a return now or to pay for a past return. Investment is money that is spent now and that will achieve a return sometime in the future.

Communities invest in many things; infrastructure, technology and public transportation are investments. Communities also have many legitimate expenditures; legal fees, salaries and debt payments are all expenditures.

In Colorado Springs, both taxpayers and ratepayers fund some level of economic development or, as the city calls it, economic vitality.

The ratepayers of Colorado Springs Utilities have traditionally funded a portion of the economic development activities in the region. This year, that funding was in question due to reservations by the Utilities Board (also the Colorado Springs City Council) but was ultimately extended recently at its regular meeting.

After much deliberation, the Council approved a reduction in funding from $310,000 to $250,000, to be disbursed in the following manner: $210,000 to the Colorado Springs Regional Business Alliance (CSRBA), $35,000 to the Colorado Springs Technology Incubator (CSTI), and $5,000 to the Colorado Procurement Technical Assistance Center (PTAC).

Colorado Springs also charges a Lodgers and Automobile Renters Tax (LART), which generates revenue to fund tourism and economic development activities. For the past three years, LART has provided economic development funding to several organizations in town that have a mission to develop small businesses and entrepreneurs and to actively encourage outside employers to relocate here.

In 2014, LART anticipated $4 million in revenues to be generated by the tax. The budget allocates $188,000 in line-item economic development investment after removing the two-thirds of the entire LART budget allocated to the Convention and Visitors Bureau (CVB) and reserves: $43,000 to the Cultural Office of the Pikes Peak Region, $70,000 to the CSRBA, $10,000 to the CSTI, $55,000 to the Colorado Springs Small Business Development Center (CSSBDC) and $10,000 to Innovations in Aging.

Funding could vanish

In 2015, this small amount of economic development investment is at risk and may be pulled from these organizations.

The LART committee has decided that the tax generated from LART should be spent on tourism-related activities only, and have asked the city administration to move the funding of other economic development activities to the city’s general fund.

This is will be a tough sell as revenue growth for the general fund has been stagnant, and the infrastructure needs of the city are well-known and expensive.

But let’s look at what the city’s general fund currently allocates toward economic development or economic vitality, as our city refers to it. In the 2014 budget for the city, the Economic Vitality office receives approximately $678,000 of a nearly $250 million general fund budget. Included in the $678,000 are the salaries, benefits and pension obligations for the employees of that department.

It is also important to note that the city’s economic vitality office spearheads the city’s work on homelessness and also the City for Champions project. Regardless, economic vitality is far less than 1 percent — actually 0.27 percent — of the city’s overall general fund budget.

It begs the question of whether we are investing enough in the future of our community in a way that will allow us to be competitive with other communities?

When one considers that the $188,000 in LART funding could possibly be eliminated, that leaves less than $1 million in economic development investment being made by the ratepayers and taxpayers of our city.

With the lackluster economic growth we have seen over the past several years, particularly coming out of the recession and during a time that other Colorado cities have rebounded much better than we have, it begs the question of whether we are investing enough in the future of our community in a way that will allow us to be competitive with other communities?

Example to the north

One can look up the road at Fort Collins to see successful economic development in action.

The Rocky Mountain Innosphere is an incubator that works closely with both Colorado State University and the local business community to help entrepreneurial startups with funding and mentoring.

A bank in Fort Collins has helped invest in a startup fund, in conjunction with the Colorado Enterprise Fund. The Innosphere receives $60,000 in public funding from the city of Fort Collins, a city one-third our size, as pointed out by Ric Denton, the President and CEO of the CSTI, in his presentation to City Council earlier this month.

If we were to invest equivalent public money in our incubator, we would invest at least $180,000 a year, much more than the current level of $35,000.

As I did my research before writing this piece, I looked at several economic development plans for cities across the nation.

While they all have their own goals and strategies unique to their strengths and assets, one thing is very clear: They have input and accountability from all of the community stakeholders. The city is involved, the economic development organization is involved, and the public is involved.

There is a plan, there is a road map, and there are specific goals that the community will reach in specified timeframes.

In reviewing the number of strategic plans available from our own community, it appears that everyone has one, but there is not one cohesive plan for our city going forward.

Perhaps this is something that should be considered by our own community and its leadership?

What we need here

I am no economic development expert. I am a banker. I do know, however, how to look at economic results and make an educated opinion about whether they are positive or negative. I would venture to say that our current economic results are lackluster and, therefore, a drastic change in decision-making needs to be made.

There is no need to reinvent the wheel as we have examples of successful communities all around us, specifically right here in our own state.

We need a cohesive plan of the investment we are going to make in our future, and then we might look at funding that plan to the extent possible, with expectations, accountability and measurement tools very clearly defined.

It is clear that the decisions we have been making are not yielding positive results. Our rates of major firm attraction, new local startups and overall job creation are not at a level to assist in expanding revenue for local government operations.

Is it not time, then, to make different decisions?

Robin Roberts is president of Pikes Peak National Bank.

2 Responses to Let’s be serious about economic development

  1. Hi Robin,

    Thanks for taking time to explain what we are up against in Colorado Springs. Great job of assessing our position here in Colorado Springs. I would like to write back with my thoughts and ideas on how to help. Thanks again for your call to action.

    I came to Colorado in the early 80’s fresh out of trade school. I worked in Boulder Colorado for a great company called Complex Tooling. We supported IBM, HP, Compaq and a long list of others. As time went by, manufacturing left Boulder for SE Asia. I followed the jobs and spent more than a decade in SE Asia. It was an eye opener to see the manufacturing efforts in that region of the world.

    In the 90’s semiconductors started to arrive in Colorado Springs. I followed and worked at a plant on Garden of the Gods. We all watched these plants get built up, then many of these factories backed out. I started a small robotics company at that time, then sold it to a large conglomerate. We hired local shops to help us with our products and technologies. It was a growing effort on all vendors in the city. I found a lot of great talent here in the city with many great employees, partners arriving through the military portal.

    If we could put some marketing bucks into focused marketing to executives in areas like Silicon Valley to make them attuned to our talent pool, we might do what the Northern part of the state has done. Right now the defense contractors are turning down the heat and it is going to be harder to grow.

    Currently I am providing engineering services to a number of local companies. I machine, design, and build parts for their manufacturing processes. My background is manufacturing and it has been very hard finding those accounts over the past decade after 911 hit, then the mortgage crisis.

    I took a last ditch approach to revive my business and it worked. Here is how I grew my services business from going out of business to turning away work in less than 60 days. The city might learn a lot about what I am about to reveal.

    I used Linked in to find key decision makers in major companies around the world. For 30 days I spent 8+ hours a day writing to local business leaders and executives abroad. Linked in is kind of a Google search engine for business if you have not used it. So I dressed up my Linked in page with photos of products I had developed, then went out to explore opportunities. In the end, I have landed more great accounts, and hope to start staffing up after debts get paid back.

    I think that the moral of my story is that at times we forget how important marketing is for a community. We certainly spend on marketing for tourism, yet we forget about manufacturing and technology companies. I might add that I have lived in Colorado Springs for just over 20 years now. I have never thought of the city as a product development mecca. Many of my successful friends in technologies tell me that they get all of their work outside of Colorado Springs. LinkedIn broke that model and I am back working locally.

    I think that if a few of us get together and put a strategy in place to seek and find strategic partners that could bring expansions to the city based on the fact that we have incredible managers and technologist that have been trained by the military, our growth could be unstoppable. We need to get with the higher powers at many of the bases and let them know that officers retiring from the bases are needed in the local business sector, a massive talent pool would stay in the community.

    I would like to put a call to action plan in place for the community to look at how we sell our “Value Proposition” to the rest of the world. We can start a LinkedIn page for free, then work it hard for the next 90 days to see what happens next. Colorado College has found millions for a new technology center from contributors out of Silicon Valley. We need to walk a parallel path and set out to find those crowded cities that have no more room to expand.

    I am networking with aerospace company procurement managers that tell me many of their vendors are 18 weeks out on deliveries. If I could bring shops together to deliver the components they need, they would come to Colorado Springs. I am in discussions with local shops to do just that. When any investor decides to inject their hard earned capital into a venture, they want to see a strong management team. We Colorado Springs innovators need to put that team together so that the investors feel good about getting out their check books.

    I suggest that we get all of the greats together in the community, then launch a marketing plan through Linked in to go fishing. Intel was one of the best run companies I have ever supported. They hire managers out of the military to run these very complex operations. We can sell that statement through to help instill our management teams are effectively trained and strong leaders here in the community. I think we need to go back to Intel and ask them how we might be able to get them to come back to Colorado Springs. We all make mistakes, the city certainly did not support Intel, yet that is in the past. We need to come together and push more in the field of manufacturing. Think about all the machines that the military must maintain, and all the supporting systems that are used to control those processes. If we do it right, we could be bigger than our Northern entrepreneurial brothers and and sisters.

    When I started seeing increases in my business in the past 3 months after a hard campaign on Linked in, I thought why did I not start this focused marketing earlier. I guess I forgot. It is now clear that a direct like to business leaders is a way to change one mans’ business and a possible way to change a community.

    By the way, I came across your article on Ric Dentons’ Linked in page.


    Pat Conarro

    Pat Conarro
    June 26, 2014 at 7:59 am

  2. Wow! A banker who gets it!

    Colorado Springs business, civic and political leaders know what our city needs. What’s missing is, what Robin Roberts calls, “a road map and goals” — the kind of thinking, action and initiatives touched upon in my Gazette Guest Editorial of April 6th: http://gazette.com/guest-column-focus-on-key-components-for-economic-development/article/1517722.

    That piece is by no means a defined road map but it’s a great start. A Center for Innovation and Business Development; a showcase project like C4C; a public market like Denver’s The Source; and Olympic Museum, an Air Force Academy visitor center and a Science Education Museum can be major parts of a comprehensive road map to our city’s economic revival. Now let’s get a professional in to conduct the kind of strong mayor/city council orientation that should have been provided the day after the election.

    Greg Olinyk
    June 30, 2014 at 1:53 pm