Dubworks closure raises questions how Pueblo monitors companies receiving half-cent money

The phone numbers for Dubworks, a cabinet company with a manufacturing facility in Pueblo, are disconnected. And the downtown warehouse where Dubworks has operated since 2013 sports an eviction notice for not paying more than $26,000 in rent.

Four years ago, there were high hopes that the Erie-based company would do well in Pueblo. So well, in fact, the city put money behind the company in the form of a loan from the half-cent sales tax fund, which is reserved for companies that agree to contribute primary jobs to Pueblo’s economy.

Dubworks agreed to create 25 jobs in its manufacturing facility, and in return the City of Pueblo would loan Dubworks $545,000 for equipment.

Today, Dubworks has shut its doors and the city has sent notice to Dubworks that it intends to retrieve the equipment that was bought with the loan.

In May, the City of Pueblo, couldn’t, or wouldn’t, answer questions of whether Dubworks had closed, how many jobs the company created and if they had started to repay any of their loan. The case of Dubworks presents bigger questions of how closely the companies the city incentivizes to set up shop in Pueblo are monitored and whether there is a set process for following up with these businesses.

Pueblo’s Assistant City Manager of Finance Lara Keys, told PULP her office had not received any reporting from Dubworks and therefore could not comment on the status of Dubworks.

“In this case, we have not received any reports, so I simply don’t have any answers. My department (finance) only knows what is reported,” Keys said in an email.

Keys recommended talking to city attorney Dan Kogovsek, whose office is tasked with writing the contracts between the city and the businesses accepting half-cent sales tax funds, or the Pueblo Economic Development Corporation, which recruits businesses to Pueblo, about the status of Dubworks.

Kogovsek would not comment in person or through the city’s public information officer about the status of Dubworks lack of reporting to the city, which is required in the contract.

PULP confirmed the city’s intent to collect collateral after filing a Colorado Open Records Act request. The letter was dated March 24, 2017.

Per the contract, Dubworks was supposed to begin repaying the city for the loan on the second anniversary of the employment date — that would have been in April 2016. The employment commitment date, stated in the contract, was April 1, 2014.

Roni Kimbrel, the city’s director of finance, said the department tries to make contact with companies that have half-cent sales tax contracts with the city twice a year. The exception, she said, would be that a company is in a “ramp-up period” — the time before a company would have to begin reporting to the city their employment numbers to be in compliance with the contract.

It does not appear that Dubworks would still be in a ramp-up period, according to the city contract, which says the repayment period would be from the “second anniversary of the employment commitment date and and ending 84 months thereafter.”

But, upon being asked, Kogovsek would not confirm whether Dubworks was still in ramp-up period — which isn’t defined in the contract — or even hypothetically when and how the city would begin checking in on companies that have received half-cent sales tax loans.

The contract adds that Dubworks was to submit to the city’s Director of Finance company statements showing quarterly employment and their annual salary. The contract dictated that the 25 employees were to make approximately $57,000 each year.

Little is known about where Dubworks stood with the city when the company closed, as the city reports there are no reports and nobody to answer questions of the company’s relationship with the city.

An employee of the city clerk’s office said if PULP requested any kind of report through the Colorado Open Records act it would be of little help as there were no reports to request.

PEDCO, which works closely with the city to recruit and recommend an incentive package, has next to no involvement in the reporting or repayment stages.

But the economic development corporation does have a number of companies that benefit from the half-cent sales tax that get involved in the organization. Many of the board members are employed by those recruited companies.

“We do try and stay engaged with any company we recruit. We focus a lot of our efforts on retention regardless if it is a company we were involved in recruiting or expanding,” said PEDCO CEO and President Jeff Shaw in a statement to PULP about Dubworks and the engagement PEDCO has with companies after receiving an incentive package from the city.

“Most companies welcome any assistance. It is frustrating when any company in Pueblo does not make it. We have considerable amount of talent and expertise that can help a company be successful. Some companies take advantage of this and some unfortunately do not.”

This is not the first time questions have surrounded Dubworks and the half-million dollars it was loaned from the city.

After Dubworks received the loan, Quality Custom Woodwork owner Cheri Bucciarelli claimed the city and PEDCO had under-vetted Dubworks. The half-cent sales tax fund is not to be spent on companies that compete with existing companies located in the City of Pueblo.

But Bucciarelli told PULP she lost at least two jobs in the few months after Dubworks opened in Pueblo, one a $60,000 job.

Then, PEDCO wouldn’t comment on its vetting process, but Pueblo City Council President Steve Nawrocki did say it was the first time something of that nature — loaning money to a competing business — had ever happened that he was aware of.

Bucciarelli always anticipated competition, but not from a company that got a boost with her own tax money, she said.

Since November Bucciarelli has heard the murmurings of Dubworks weakening fiscal health, but couldn’t confirm anything of her competitor.

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