Press Release: Economic Development Options in Colorado

by Bill Kirton

70 billion taxpayer dollars are being spent each year to entice businesses to relocate or expand in order to “create jobs” through state-funded economic development programs. These expenditures include cash grants, subsidies, tax credits and other enticements, which may or may not involve actual job creation, nor do they necessarily adhere to “good job” pay and benefit standards. According to the Good Jobs First report, the State of Colorado spends approximately $72,500,000 annually in economic development endeavors. Are these outlays actually creating employment opportunities and at what cost per job? The report gives Colorado a C grade in terms of the effectiveness of these programs.

In contrast, only $2 million is spent nationally to encourage the continuation of existing companies and the option of selling to employees when an owner wants to retire or otherwise dispose of his or her business (National Center For Employee Ownership Report, March-April 2012 issue). What is not evident in state-sponsored programs is awareness that it is significantly less costly and more rewarding to sustain a business by selling it to the employees rather than closing and starting anew. Preserving existing businesses and jobs is considerably more financially advantageous than creating new ones. Employee-owned companies grow in jobs and revenue 2.5% faster than traditional ownership. In addition, when employees own the company, profits are distributed to employees, and the money stays in local communities, supporting other businesses and growing the local economy. And there are definite tax advantages in selling a company to its employees!

At this point in time, only three states have organizations that encourage employee-ownership: The Ohio Employee Ownership Center, The Vermont Employee Ownership Center, and, in Colorado, The Rocky Mountain Employee Ownership Center.  All three of these are non-profits and not part of state government. The state of Indiana has a program that encourages banks to make loans that support employee-owned enterprise development. In Iowa, local ESOP company leaders are working with Gov. Branstad’s economic development officials to encourage employee-ownership.

At the federal level, Senator Bernard Sanders of Vermont has introduced The Worker Ownership, Readiness and Knowledge (WORK) Act (S.2909) to create an Office of Employee Ownership and Participation within the Department of Labor to support state programs and other employee-ownership activities. Congressman Fattah of Pennsylvania is introducing the National Cooperative Development Act in the House of Representatives.

In these difficult economic times, when state budgets are being cut, it is time for state and city agencies to give attention to more promising strategies that support business continuation and the employee-ownership option.

Bill Kirton is the Director of Communications of the Rocky Mountain Employee Ownership Center. He can be reached at 303-916-3128, or bkirton@rmeoc.org.