Latest Aurora incentive deal raises questions about equity
BY SARA CASTELLANOS Staff writer
AURORA | The latest deal to entice a local business to stay in Aurora comes as city and state lawmakers begin to question whether taxpayers are getting a return on those investments.
The incentive, an $80,000 offer to a bioscience company, is the fifth of its kind in about seven months.
At an Aurora City Council committee meeting May 23, city staff members are expected to give a rundown of all the incentives given to businesses in the past decade and how they’ve performed.
The request for that information was made by Councilman Bob LeGare.
“I just thought it’s prudent to look back and see how effective have these incentive offers been, have they been fulfilled, and what have the results been,” LeGare said.
LeGare has been a supporter of deals clinched by the city to stimulate the local economy in the form of luring businesses to the city or keeping them from leaving. But he does recall some deals that were not ultimately successful at creating or keeping jobs, the most notable being the deal struck with Amazing Jake’s.
In 2006, the city agreed to give the children’s entertainment complex about $2 million worth of tax rebates over a period of 10 years, said Andrea Amonick, the city’s manager of development services.
The business failed in 2010, when city officials had already given them about $155,000, and the city never fully recouped that money.
Since that company’s headquarters were in California, the city would have had to hire California-based state lawyers and file legal paperwork in that state in order to regain the funds.
“It was determined that the benefit would not have been worth the cost,” Amonick said.
The building is now home to the EcoTech Institute.
Under a typical incentive deal, a company is given rebates on taxes — sales and use or property — up to a certain amount. The money is given in increments and over a period of years.
In the largest and most contentious incentive deal thus far, Aurora agreed last year to give up to $300 million worth of tax rebates to Gaylord Entertainment, for the company to reinvest in the construction and maintenance of a hotel and conference center. The project is slated to be developed near Denver International Airport.
The contract, and deals like it, garnered heavy criticism from state lawmakers including state Sen. Morgan Carroll, D-Aurora.
Incentive deals like those shouldn’t be as popular as they are, she said.
“As giving this money away becomes a new norm, things like libraries, roads, police, fire and a variety of different public services are inherently in competition with this,” she said.
It becomes harder for local governments to meet public demands when money that would have otherwise gone to the city’s coffers is going toward private companies, Carroll said.
“A race to maximizing corporate subsidies will leave everyone broke, and it’s not necessary,” she said.
Councilwoman Renie Peterson has also taken issue with incentive deals, saying if the agreements become too prevalent, companies will begin to expect them.
But Aurora Mayor Steve Hogan doesn’t see it that way.
Hogan, who previously served six nonconsecutive full council terms, said in his experience the vast majority of incentive deals have proven to boost the economy and create jobs.
“There have been a couple of exceptions, but I think in the overall history of what’s gone on, the companies have performed, and the result is jobs for citizens and tax revenues that the city wouldn’t have had otherwise,” he said.
The pacts that have been successful include the financial incentives given to defense technology company Raytheon and engineering firm Merrick and Co., Hogan said.
Merrick and Co. is slated to relocate after having spent more than two decades in the city, but Hogan said that’s an indicator of a challenge the city has with its lack of new office space.
Companies have been lured to cities through incentive deals for decades. Hogan remembers almost 30 years ago when the city made a deal with a motel at Interstate 225 and East Sixth Avenue.
But the deals have become more prolific in recent months, as the city faces more competition from nearby cities who might also be trying to entice the same company with financial incentives.
“You have companies and businesses who are looking to relocate, and they’re just simply not going to unless someone is going to give them an incentive,” Hogan said.
The city’s economic development officials say incentives aren’t the only way to bring companies
The Aurora Economic Development Council worked to either bring in or retain 14 companies last year, and only two of those received incentives — Cooper Lighting and General Electric.
“We don’t give incentives unless we absolutely have to,” said Wendy Mitchell, director of the AEDC.
In order for a company to qualify for an incentive, city officials and Mitchell’s team ensure that the wages and benefits the company pays will be average or better. Then, the incentive is paid to the company from the taxes and fees the company earns after they’ve arrived in the city and opened for business.
The incentive contracts with the businesses are drafted by city lawyers and are “ironclad,” Mitchell said. The companies will be required to give back a portion of the rebate if they don’t fulfill their promises or bring in the amount of jobs they allege. The city was responsible for negotiating the failed Amazing Jake’s deal, since the AEDC only works with primary employers or companies that export at least 50 percent of its products or services outside the city.
But there are far more deals made to recruit businesses to the city that don’t involve giving them financial assistance, Mitchell said.
“At the end of the day, we don’t offer incentives to everybody,” she said. “They have to demonstrate that there’s competition.”
But some Aurora residents have fundamental, philosophic qualms about governments incentivizing businesses.
Duane Senn, who was a chief surveyor for the city for 30 years until he retired in 2005, said he understands that local governments have to offer incentives. But he said the city should be careful about how much money they’re agreeing to give away.
“I’m not a big fan of incentives,” he said. “I believe in capitalism, free market, and a free enterprise system, and incentives defeat the purpose of all of that.”
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