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Wellington and other Larimer County communities could fall out of eligibility for a business tax credit program as the state redraws enterprise zone boundaries based on new census data.
State law limits the Colorado State Enterprise Zone Program to 16 economically distressed areas. Larimer County is one of those areas and parts of Wellington, Berthoud, Fort Collins and Loveland are designated as enterprise zones.
Businesses within those zones can apply for state income tax credits, which are intended to encourage businesses to reinvest to create or maintain jobs. The program offers investment tax credits, job training tax credits, new business facility tax credits, R&D tax credits and vacant building rehabilitation tax credits.
Ninety-nine percent of enterprise zone certifications, or businesses that qualify, are small businesses and 95 percent of enterprise zone land area is in rural areas of the state.
At a Nov. 19 meeting in Wellington, Larimer County enterprise zone administrator Jacob Castillo gave a basic overview of the enterprise zone tax credit program and described program changes anticipated for 2014, which include legislative mandates for deferring tax credits over $500,000 for enterprise zone investments made from 2011 to 2013.
Castillo said 150 Larimer County businesses have taken enterprise zone tax credits since 2005 and that businesses have applied for more than $10 million in tax credits since 2009.
Castillo also said an evaluation of existing enterprise zone boundaries is underway using the 2010 census numbers and that information will be used for determining enterprise zone eligibility.
The state of Colorado requires that two of the following three criteria must be met for an area to qualify as an enterprise zone:
• Population growth in the area must be 25 percent or more lower than in the rest of the state.
• Unemployment in the area must be 25 percent or more higher that the state unemployment rate.
• Per capita income rate must be less than 75 percent of the state rate.
Wellington might not qualify
A North Forty News analysis of 2000 and 2010 census numbers and state statistics indicate that Wellington no longer qualifies for enterprise zone status.
Census figures show that Wellington’s population has grown 79 percent from 2000 to 2010 (from 4,809 to 8,642), a much higher growth rate than the state’s 17 percent growth rate during the same period. Wellington’s 2010 unemployment rate has hovered at about 5.5 percent, lower than the 2010 state rate of roughly 9 percent. And Wellington’s per capita income for 2010 is 90 percent (and not less than 75 percent) of the state’s 2010 per capita income of $30,816.
Attempts to verify enterprise zone statistics with Castillo — including what Wellington businesses have utilized the tax credits — were unsuccessful. When contacted by phone, Castillo’s assistant Lori Zuccolin said he was too busy to talk about the enterprise zone program. In subsequent emails, Zuccolin said she too didn’t have time to answer questions about the program.
Castillo, who was hired a year ago, also serves as economic development manager for the Larimer County Workforce Center.
Jeff Kraft, director of Business Funding and Incentives at the Office of Economic Development and International Trade, said that 2010 census tracts will determine 2014 eligibility. “It’s good news that some areas will no longer qualify, because the program has accomplished its goal in helping an area become economically viable. If areas of Larimer County have poverty or are economically distressed, it is possible that those areas will become eligible,” said Kraft. “But if the area doesn’t meet the qualifications, it will fall out of eligibility.”
Wellington town manager Larry Lorentzen said he thinks the enterprise zone designation has encouraged business development in the community. The designation has been good for small businesses that used the tax credits, Lorentzen said, but “because we don’t have access to business tax reports, these positive results are anecdotal.”
Lorentzen also said that enticing business development to town is extremely competitive and anything that gives Wellington an edge — including enterprise zones — is helpful.
If Wellington is dropped from the program, Lorentzen said changing the qualification criteria would be the town’s only option. “Repealing the current legislation would likely take the lobbying effort of a group of small towns,” he said.
Other changes take effect
Beginning in 2012, legislative changes to the program required businesses to obtain pre-certification before they were eligible to receive enterprise zone business tax credits. This rule means that a company will not be given enterprise zone tax credit for a qualifying expenditure unless they have obtained pre-certification before the expenditure takes place.
Zuccolin did answer questions about the pre-certification changes, and encouraged businesses to apply for pre-certification even though they may not have an opportunity to make use of it in a given year. This ensures that if they do have an eligible expense, they will be able to take advantage of the tax credit. Business must pre-certify annually.
Preliminary enterprise zone qualification information requested by the state legislature will be available by mid-December and a final report documenting changes to boundaries will be published during the first quarter of 2014. Changes will take effect in January 2015.
Larimer County’s Economic Development Incentive Policy was updated by county commissioners in August and encourages businesses to take advantage of the enterprise zone program. It also includes guidelines for municipalities’ use of Tax Increment Financing.
“It is important to me that Larimer County become and remain a business-friendly community,” said Larimer County Commissioner Lew Gaiter III. “Successful businesses are the best hope we have for positive economic development.”