Oil and gas operations benefit from enterprise zone incentives | PostIndependent.com
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Oil and gas operations benefit from enterprise zone incentives

A statewide economic incentive program to encourage business growth in distressed counties is still in place in many rural areas despite economic growth that has at times exceeded the Front Range.The Northwest Enterprise Zone covers seven counties, including Garfield County west of New Castle, Rio Blanco County, Moffat County, Routt County excluding Steamboat Springs, Jackson County, most of Grand County, and a slice of Clear Creek County along Highway 40. The zone excludes Mesa County, which has its own enterprise zone.Businesses within the zones can now get tax breaks on everything from new employees to new equipment. Now, in a relatively healthy economic climate for rural counties, including the Northwest zone, businesses continue to reap the benefits initiated to bring those areas out of economic depressions. In Garfield County, oil and gas companies gain sales tax credits for purchasing new equipment and get a break on state income tax.Enterprise zones were established by the state legislature in 1986 to give a boost to economically depressed counties. To qualify, an area had to have lower population, lower personal income and higher unemployment rates than economically advantaged counties.Over the 20 years since their inception, enterprise zones have seen an ebb and flow in the criteria used to measure economic growth. According to the Colorado Office of Economic Development and International Trade Web site, in 1995, for example, employee numbers grew faster in rural enterprise zones than statewide. In 1980 and 1986, there had been a loss of jobs in those areas.Population growth has also waxed and waned in rural zones. In the 1990s, state population grew 30 percent and rural population by 33 percent.Last year, according to an annual report from the economic development office, per capita income in the Northwest zone still lagged behind the statewide average. In 2004, it stood at 88 percent of per capita income in the state. By comparison, the economically depressed San Luis Valley saw per capita income at only 59 percent of the state average during the same year. One industry that is reaping an advantage from the Northwest zone’s incentives is oil and gas. “It appears the overall economy in the region has deteriorated since 2001, along with the state and national economies. The one bright spot … is the mineral extraction sector, especially natural gas production, which has had a remarkable 20.6 percent average annual production increase from 2001 to 2003,” the report said.Extractive industries, such as oil and gas and coal mining, qualify for sales tax credits when they buy new equipment, said Jim Evans, former executive director of the Associated Governments of Northwest Colorado, which administers the Northwest Enterprise Zone for the state.In 2005, extractive companies took tax credits worth $13.5 million. In Garfield County, EnCana took $4.3 million worth of sales tax credit in 2004, and $4.5 million in state income tax credit, said EnCana spokesman Doug Hock.On the other side of the spreadsheet, EnCana’s total 2004 investment in its oil and gas development and production operations in northwest Colorado was $148.5 million. The company paid $13.6 million in property tax in 2005 and $5.4 million in severance tax related to its gas production.While it may appear that enterprise zones are no longer necessary, Evans supports them.”I would recommend keeping the zones going because you never know when (the economy) is going to turn,” he said, referring to the oil shale bust in 1982 that left Garfield County economically depressed for years. “It also sets the investment climate.”However, as rural economies improve, the boundaries of enterprise zones should be re-examined. Eight years ago, the state dropped Glenwood Springs, Carbondale and all of Eagle County out of the Northwest zone, Evans said.For Carbondale businessman Barry Maggert, such long-term government programs, which may have outlived their usefulness, don’t seem to go away.”Once they get started you can’t get rid of it,” he said. “Someone is making money on this. It’s forcing people through their tax dollars what business should be investing in. People ought to decide with their pocketbooks.”Contact Donna Gray: 945-8515, ext. 510dgray@postindependent.com

Tax breaksAmong the tax breaks afforded to businesses in Enterprise Zones across the state are: 3 percent investment tax credit, $500 job tax credit, state sales tax exemption for manufacturing and mining equipment, a $200 job tax credit for employer-sponsored health insurance, 3 percent research and development tax credit, 25 percent tax credit to rehabilitate vacant buildings, 25 percent tax credit for contributions to economic development projects and a 10 percent tax credit for job training.


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