Thus the best case is that [economic development] incentives work about 10% of the time, and are simply a waste of money the other 90%…
— from ‘The Failures of Economic Development Incentives’ by Alan Peters and Peter Fisher in the Journal of the American Planning Association, 2004.
On May 31, as a handful of us sat and listened to the consulting experts from out of town — attorney Paul Benedetti and analyst Mike Anderson — we all understood that the “urban renewal” package they were promoting for their client, the Springs Resort, had nothing to do with urban renewal and everything to do with tourism development. Nothing would be ‘renewed’ through the tax incentives these consultants were pitching. Rather, their plan would deliver tax subsidies to a hotel developer, using a loophole in a Colorado law written for a very different purpose.
I mentioned last week in this editorial series that ‘economic development’ is a complicated issue. Once upon a time, an intelligent, enterprising young person could open a new business in Pagosa Springs by doing simply renting a commercial space and hanging a sign. Well, okay, there was a lot more involved than that, but what I mean is: the municipal government didn’t need to provide taxpayer subsidies.
Somewhere along the way, big and small corporations figured out that they could milk the local taxpayers by convincing Town Councils and Boards of County Commissioners that elected officials could be economic heroes — that government could bring about a vibrant, thriving community by directing tax revenues into selected corporate pockets.
The Town of Pagosa Springs, however, has generally maintained a policy of requiring developments to “pay their own way” over the past 30 years or so. (But not always.) Back in 2006, for example, the developers of the Aspen Village “live, work, play” subdivision were required to fund all of the subdivision infrastructure — and even some very expensive modifications to Highway 160 — out of their own private pockets. When Walmart developed a site within that same subdivision, the Town required them to jump through numerous and expensive hoops — including a direct payment to the Town government of about $400,000 in ‘impact fees.’
Comes now, the Springs Resort and developer Jack Searle, telling the Town Council — through their expert consultants — that they hope to build a new hotel adjacent to the existing Springs Resort, but “can’t afford” the necessary infrastructure (streets, sewer lines, water lines, electrical lines, etc.) unless the Town can arrange a taxpayer subsidy to reimburse the development costs. This development partnership has stated — through their expert consultants — that they have no intention of creating jobs in the community unless state and local governments can agree to funnel tax money in their direction, thus increasing the company’s profit margin at taxpayer expense.
If the Council were agree to this request, it wouldn’t be the first time the Town government has picked out a corporation for special tax treatments.
In 2015, the Town government was actively seeking a grocery store tenant for downtown Pagosa. The Kroger Corporation had closed its South 8th Street ‘City Market’ store in 2011, and some economically-challenged downtown residents where having to ride the bus to the uptown City Market to purchase groceries. The Town entered into an ‘economic incentive’ package with Colorado-based Hometown Food Markets, with a promise of tax subsidies and fee waivers valued at about $500,000.
The store lasted less than four years, but it would appear the Soward family — owners of Hometown Food Markets — may have turned a handsome profit as a result. They purchased the vacant store property in 2015 for $487,500 — and sold it four years later to Vitamin Cottage Natural Grocers for $900,000. That’s on top of the taxpayer subsidies.
Here’s another story about ‘economic incentives’ in Pagosa.
Back in 2005, an exciting and innovative company called Parelli Natural Horsemanship approached the Town of Pagosa Springs, looking for business incentives. The head of the company, Pat Parelli, had established a previous friendship with then-Mayor Ross Aragon. (Both men are horse lovers.) The Parelli company was proposing to build its international headquarters in little old Pagosa Springs — but was looking for $500,000 in government subsidies to make it happen.
Working with the Colorado Department of Local Affairs, Mayor Aragon was able to arrange that tax donation. In exchange, the Parelli company promised to create a fairly significant number of “above-average-wage” jobs. (That’s not such a hard thing to do in Pagosa Springs, because the average wage here is frighteningly close to Colorado’s minimum wage.)
By 2017, however, the Parelli business model had utterly changed, thanks largely to the Internet Economy. Gone was the international headquarters. Gone were nearly all of the subsidized “above-average-wage” jobs. The Parelli building is for sale… and currently houses the Pagosa Peak Open School, a district-authorized charter school. (Disclosure: I serve on the Pagosa Peak Open School Board of Directors, and our charter school has benefited greatly from the generosity of the Parelli corporation.)
I can understand the Town government wanting to be the economic heroes of the community. And there’s little doubt that yet another luxury hotel (assuming it will be a luxury hotel?) would create a few more jobs in Archuleta County. The hotel will need maids, and desk clerks, and janitors. Nearby restaurants and gift shops will benefit from the additional tourists booking rooms there. The consultants hired by the Springs Resort will no doubt create some impressive documents that prove how many new direct and indirect jobs would be generated by a new hotel.
And aren’t jobs a good thing to have?
We do, in fact, have a full-blown economic crisis unfolding in Archuleta County in 2019. But the crisis is not a ‘lack of jobs.’ The crisis is a lack of employees to fill the jobs we already have. Nearly every day, I hear someone from a local government agency or from a local business complaining that they cannot find qualified workers.
And even when a suitable employee can be found, the employee often cannot find a place to live in Archuleta County. The employee can’t find a place to live, partly because the only homes being built in our community are intended for tourists and wealthy second-home owners.
Another hotel, subsidized by the taxpayers and paying Pagosa wages — frighteningly close to minimum wage — will definitely make the problem worse.