The governor’s office announced two weeks ago that Sierra Nevada plans to add 200 jobs in Colorado, noting that a new tax-incentive program played a central role in the expansion.
What wasn’t noted was that the Nevada-based aerospace company laid off about a half-dozen employees in the Denver area this year, raising questions about whether the tax credit can appropriately be given to a company that recently cut jobs.
Sierra Nevada said recently the job cuts were due to its 2008 acquisition of SpaceDev, which had operations in Louisville, and not connected to the expansion, expected to occur at its aviation operations in the Centennial area.
“While there were layoffs as a result of our acquisition of SpaceDev last year, that is unrelated to (the expansion) and they were simply due to redundancies in capabilities,” said Renee Velasco, Sierra’s corporate director of human resources.
Sierra employs about 2,000, including 550 in Colorado.
State Rep. Joe Rice, D-Littleton, co-sponsor of the House bill that created the incentive program, said he has no qualms about a company receiving tax credits for creating jobs even if it recently went through a round of layoffs because of a merger.
“It seems like it was an appropriate use of the tool,” Rice said. “Jobs were laid off six months or so ago, now some jobs are coming back. Those jobs could’ve gone anywhere. These tax credits tilted things in our favor so they could come here.”
The Job Growth Incentive Tax Credit program gives firms a credit on state payroll taxes if they choose Colorado over competing states for an expansion of at least 20 new jobs. The credit is equivalent to 3.8 percent of an employee’s salary and is valid for up to five years.
The only other firms that have been authorized to receive the tax credits are wind-turbine maker RePower USA and kidney-care provider DaVita, said Alice Kotrlik, an official with the Colorado Office of Economic Development and International Trade.
RePower plans to add 82 jobs and DaVita 500 jobs, she said.
As part of the approval process, state economic-development officials have to determine that the new jobs would not come to Colorado if not for the tax credits.
When DaVita first disclosed plans in late May to move its headquarters from California to the Denver area, the tax incentives appeared to be an afterthought.
DaVita chief executive Kent Thiry told The Denver Post that the company picked Colorado over four other states because of its central location and lower cost of living and operating expenses.
“We are a nationwide service company with a lot of teammates (employees) and dialysis centers in the eastern part of the United States, and it will be much easier for us to get people together in Colorado,” Thiry said in an interview on May 26. “The secondary reasons are lower expenses both for our teammates who chose to move there and for the company itself.”
The next day, Thiry said publicly that the tax incentives were the “necessary lubricant” to assist the company with the relocation.
DaVita’s situation may underscore a concern raised by legislative staff in a report issued in February prior to the passage of the bill.
“Most studies indicate that taxes are but one factor of many, rather than the determining factor, that businesses use when making their relocation or expansion decisions,” the report states. It cites a study that says taxes “seem to enter decisions at the very last stage, if at all.”
DaVita spokesman Brad Chase said the incentives were key.
“The tax incentives certainly did play a very large role,” he said. “I can’t say that they are the one-and-only or central-most role, but certainly were a critical element as to why Denver was the selected location.”
Andy Vuong: 303-954-1209 or avuong@denverpost.com
