What to do with a Half-Cent

Pueblo City Council President Sandy Daff is tired of telling constituents who call her office no. No, the city doesn’t have money to fix the pothole on his or her street. No, there isn’t any money to make any kind of improvement in the bathrooms at any given park. No, there isn’t a way to allocate money to fix the playground equipment.

Councilman Chris Kaufman and Councilwoman Ami Nawrocki said they get the same kinds of calls everyday, and this, they say, is what prompted the conversation about possibly using a portion of the money used to recruit businesses to Pueblo that create primary jobs to improve infrastructure and quality of life in Pueblo.

The half-cent sales tax was established in 1984 in part as a response to the downturn of the economy and Pueblo’s heavy reliance on CF&I as its main employer. Before the downturn, large factories and heavy industry could employ an entire city or region, but in the ‘80s steel from Asia was being produced at a cheaper rate than it was in the U.S. Demand for U.S. steel waned taking with it CF&I and Pueblo’s economy.

“We can’t expect that a philosophy developed in the 1980s is going to work in today’s world economy.” — Amy Nawrocki, Pueblo City Council

The half-cent tax was constructed to achieve three major goals, according to the most recent ordnance passed in 2010. One, the tax is meant to “Create employment opportunities for the citizens of the City of Pueblo thereby reducing unemployment and social evils associated there with.”

Second, it’s supposed to enhance economic development. And third, promote peace, health, safety and welfare.

The half-cent fund and the Pueblo Economic Development Corporation are commonly lumped together when referenced because PEDCO recruits businesses that supply primary jobs, but the two remain separate in many areas.

PECDO is a private organization that was set-up to recruit businesses using the half-cent sales tax which goes into a fund for incentives for those businesses to relocate within city limits. PEDCO’s staff and much of its operating budget comes from its membership dues. PEDCO itself cannot spend half-cent money unless it is approved by city council. The organization is not limited to only working with businesses who use the half-cent money as PEDCO does but its mission is to recruit business to the city.

Mostly, Pueblo citizens know it as the tax that helps recruit primary jobs, which are manufacturing jobs that create a service or product that are purchased outside of the geographic area where they are produced.

Even with the tax, unemployment is still high at 7.2 percent in March of this year, according to the Bureau of Labor Statistics, and worry exists in city council that the half-cent sales tax isn’t enough to attract employers with good-paying jobs to the community.

“Listen, we’ve had a few success stories with the recruitment of jobs with the half-cent sales tax. No doubt. But clearly, Pueblo’s economics need to evolve. We can’t expect that a philosophy developed in the 1980s is going to work in today’s world economy,” said Ami Nawrocki in an email to PULP.

For city council, the city’s failing infrastructure and lack of evidence in massive job creation point to one obvious conclusion. People don’t seem to want to live in Pueblo, especially the people bringing large employment opportunities.

“If you’re going to go after a company, you’ve got to make quality of life an important enough part because employees don’t have much say.”

— Chris Kaufman, Pueblo City Council

“We’re trying to recruit businesses to a city that doesn’t show itself very well,” Kaufman said. “I think the principle is this: if you’re going to go after a company, you’ve got to make quality of life an important enough part because employees don’t have much say.”

Improving quality of life requires money. Money city council doesn’t have. Around $110 million, according to Daff. The half-cent sales tax is currently the only pool of money city council has that could make improvements possible, if voters allowed it to. So, they’re looking into putting a question on the ballot that would alter the bill and allow the money to be used for infrastructure purposes.

Stephen Wright, chairman of the board at PEDCO, agrees that Pueblo could have better curb appeal.

In fact, PEDCO has lost companies because of it. “You want to know how weird economic development gets?” he said. “One company wouldn’t come because the CEO’s wife didn’t like the shopping here.”

“One company wouldn’t come because the CEO’s wife didn’t like the shopping here.”

— Steven Wright, PEDCO

This happened again at the end of 2012 when another prospective employer thought the incentives to relocate looked good, but Pueblo didn’t.

If city council could find a way to clean up the industrial park, Wright said it would be good for economic development, but using money from the half-cent fund is out of the question.

City council is considering asking voters to allow use of half of the money currently in the fund, around $40 million, and half of the $7 million that is collected annually.

Daff and Kaufman both said that the price they’re naming isn’t unreasonable.

“The most (PEDCO) has used in the last five years is $3 million . . . strictly for job purposes,” Kauffman said.

Wright couldn’t give a definite number of how much is spent each year. Kaufman said about $600,000. Most of this is in maintaining and paying utilities for spec buildings, which are built in order to try and attract businesses. If Pueblo already has a building, it looks more appealing.

Rarely does PEDCO buy a used building, Wright said. They’re usually constructed, but they keep in mind what size and resources a certain kind of business they’re trying to attract might need, he added.

PEDCO is always on the lookout for prospects, thus, wanting to keep as much money on hand as possible. Currently, Wright said the corporation is looking at businesses that could bring around 1,100 jobs to Pueblo.

Whether or not they commit is council’s worry.

Wright sees economic development from the inside. At the end of 2012, two companies had an interest in relocating to Pueblo. If both deals would have gone through, he said, it would have depleted nearly the entire $40 million.

He worries that if the fund is reduced to $20 million for job recruitment, Pueblo will no longer be able to play at the same level.

Many city council members see economic development in the details, and an improved infrastructure would take Pueblo to a whole new level.

Really, both entities know the importance of primary jobs and they realize good infrastructure is vital, but the two have yet to come together to figure out how to get both.

Besides what’s been done at public work meetings, there has been no communication of the plan between council and PEDCO, according to councilman Steve Nawrocki. Wright said he believes it is necessity for PEDCO to be part of the discussion.

For Steve Nawrocki, arranging to put the question on the ballot is premature. There needs to be a combination of both primary job recruitment and improved quality of life to enhance economic viability, he said.

He believes the city needs more marketing, and the amount of money council is asking for needs to be discussed in-depth.

Wright, again, agrees. Making city improvements in Pueblo can’t be a 90-day conversation, and throwing $20 million at an infrastructure problem is a mistake, he said. Wright believes there are other ways to improve roads and parks without using PEDCO money.

“Those issues are separate from economic development,” Wright said.

Chris Markuson, director of economic development in Pueblo County, lies somewhere in the middle of the equation. He said in an email to PULP that he’s researched extensively what works in other communities around the country.

What Markuson has found is that the most successful economies focus on existing businesses, a major point for Kaufman and Daff. They also focus on second-stage businesses, which are seasoned small businesses that create unique products and are likely to grow into other market areas.

Successful economies place recruited businesses in established areas. Installing and maintaining infrastructure on the outskirts of town is more expensive, and it costs more to provide public safety, he said.

Also, “The majority of job growth occurs within small businesses that are supported by their community, and who use advanced market data to make informed, strategic decisions to expand into new markets. Geographic Information Systems is a primary tool used by savvy, growing businesses to analyze new markets,” he said. Markuson works with GIS.

But improving infrastructure to create jobs?

“Any argument that begins with ‘Our community is ugly to outsiders who are looking to relocate to Pueblo’ is unfounded and inaccurate. Use of half-cent funds that purport to beautify the city, on the promise that it’ll make recruiting efforts more fruitful can easily be proven with multiple precedents to be misguided,” Markuson said.

And he may be right. Wright said the businesses PEDCO is working with currently are all familiar with the city. “They’ve driven on our streets; they’ve seen our parks. And they’re still willing to sit down and talk to us,” he added.

City council members have made the argument that the half-cent sales tax is unique to Pueblo. No other community in Colorado is using it, making it outdated. But Jeff Kraft, director of business funding and incentives with the Colorado Office of Economic Development, said economic development is as different as each community. To his knowledge there isn’t another community in Colorado utilizing a tax similar to Pueblo’s, but that doesn’t necessarily mean it’s a bad way to go either.

“Any argument that begins with ‘Our community is ugly to outsiders who are looking to relocate to Pueblo’ is unfounded and inaccurate.”

— Chris Markuson, Pueblo County Economic Development

At the May 20th town hall meeting, the general consensus of citizens in attendance was to keep the half-cent money for primary jobs but put a question on the ballot asking for money that would pay for roads and other capital maintenance projects. That kind of tax hasn’t been voted on in Pueblo in recent history. So, it’s hard to tell what the outcome would be for that kind of initiative.

Last November Puebloans did vote on a half-cent sales tax that would have benefited six local non-profits with $7 million per year for five years, but that failed. Improvements that would have been included under that tax were reopening Monkey Mountain at the Pueblo Zoo and installing air conditioning at the state fair’s ag palace. Arguably, upgrades that could have made Pueblo a more attractive community.

After the town hall meeting Kaufman said using PEDCO money still seems the most logical.

“Look at it this way, you are in financial straits; wouldn’t you first ask yourself, ‘Do I have available money?’ BEFORE you take out a credit card, or sought another job to pay for the straits?” Kaufman said in an email.

But Wright doesn’t see the analogy that way.

“You wouldn’t take money out of your retirement to pay for a kitchen renovation,” he said.

For now, the split on the issue isn’t if Pueblo should choose roads over jobs or park irrigation systems over PEDCO recruitment. It’s how to get a community that has all of those things; and all have said it requires a discussion between council and PEDCO, perhaps even a long one, but it has yet to happen.

Between city council, PEDCO and the community there is a lot of agreement. Pueblo needs primary jobs, and the community could use a facelift, but the road to economic recovery remains a bumpy one because it relies on both communication between PEDCO and council and on a vote from Pueblo citizens.

“If we can’t come together and figure out how to maximize economic viability, that’s unfortunate,” Steve Nawrocki told the PULP.

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