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Gazette Premium Content Economic development: Colorado Springs faces challenges regaining mojo

By Wayne Heilman Updated: March 31, 2014 at 3:35 pm

There's a story to tell about the Colorado Springs economy, based on a decade or more of data on job growth, retail sales and other indicators, and here's the synopsis: Colorado Springs has lost its "mojo."

That's the term used by Les Gruen, a 30-year Colorado Springs resident and president of Urban Strategies Inc., a local development consulting firm. But during the past few years, it has been said in various ways by many other residents who bemoan the city's sluggish economy and ponder what it will take to bring it back to life.

"When I first moved here, I and many others viewed Colorado Springs as the land of opportunity," Gruen said. "There was a huge growth surge in the 1970s, 1980s and 1990s. People all over the country were picking Colorado Springs and the Pikes Peak region because of all our perceived assets."

What happened? A pair of deep recessions, for one - each triggering job losses of more than 1,000 among Springs-area employers.

The area has also been hit by the high-tech bust, cuts in defense spending and other easily identifiable economic bombs.

But other Colorado cities have rebounded from the last recession and their own economic gut punches to a far greater degree, and some local residents point to other, less tangible causes for the economic malaise - a lack of vision, a risk-averse population and a community prone to in-fighting, for example.

Whatever the reason, city officials and business leaders are taking notice and trying to undertake a more collaborative, comprehensive approach to address the problems.

The data show they have their work cut out for them, especially when compared with the rest of Colorado and the U.S. Some examples:

- After adding nearly 100,000 jobs in the 1990s, Colorado Springs had only 3,400 more jobs at the end of 2013 than it did at the end of 2000 - the fewest of any of the state's metropolitan areas and just 1.5 percent of the state's job growth during the 13-year period. Subtract nearly 10,000 government jobs added during the past 13 years and the picture becomes even more bleak: The area has shed nearly 5 percent of its private-sector payroll jobs since 2000.

- Colorado has recovered all 154,800 payroll jobs lost in the recession and added 16,200 more, while the nation has recovered more than 90 percent of the 8.7 million jobs lost during the downturn. The Colorado Springs area has recovered 74 percent of the 16,600 lost during the last recession.

- Colorado's unemployment rate declined to 6.1 percent in January from a high of 9 percent in 2010, and the U.S. jobless rate fell to 6.6 percent in January from a peak of 10 percent. In Colorado Springs, the unemployment rate dropped to 7.5 percent in January from a peak of 10 percent.

- Retail sales in Colorado increased nearly 65 percent from 2000 to 2013 but were up only 42.7 percent in El Paso County during the same period.

- Since the 2008 financial crisis, the Springs area has attracted just 1.6 percent of the nearly $3.5 billion in venture capital invested in the state. That's about a third of the share it received from 2000 to 2008.

"We are no better off or farther ahead than we were 13 years ago," Colorado Springs Mayor Steve Bach said in a recent interview. "During the same period, the population of the metro area has increased by 130,000 people, or 22 percent, yet we created no net new jobs."

A mismatch in workforce

Bach's statement might be a slight exaggeration: Colorado Springs has certainly gained new jobs over the years.

But as the mayor pointed out in an email to the Colorado Springs City Council this month, the area has traded high-paying manufacturing jobs for positions in other sectors that generally pay lower wages.

The data show that since 2000, the Springs economy has shifted from high-technology manufacturing and information technology development to service providers - call centers, nonprofits, retailers and restaurants. Garden of the Gods Road, once home to dozens of technology operations, including an Intel Corp. semiconductor plant, now is dominated by El Paso County's offices and dozens of retailers and restaurants.

The Colorado Springs Regional Business Alliance has been trying to bring in more high-paying jobs.

The organization worked with eight companies last year that planned to hire 934 people after opening or expanding operations in the area. That's up from the five companies that announced plans to hire 240 in 2012 but still less than half of its goal of 2,000 jobs for the year, alliance CEO Joe Raso said. And three-fourths of the jobs announced in 2013 were in four call centers.

A recent survey of more than 300 local companies has given Raso a reason to be optimistic that the group will come closer to its goal in coming years; those companies told the alliance they plan to expand their workforce by nearly 3,000 during the next three years.

"We are seeing good activity in the medical device, health care services and manufacturing industries as well as customer service and back-office operations. There are at least 10 to 12 projects that we have been active with in recent months," Raso said.

"The question is, what is keeping these companies from making a decision or deciding to locate somewhere else? Our survey is finding that the primary issues are in workforce development and incentives to offset upfront capital costs," he said.

While more than 20,000 area residents were looking for work at the end of last year, about 5,000 jobs still went unfilled, including 1,000 in manufacturing. Why? Employers can't find people with the right qualifications, Raso said. Local companies "see a mismatch between the skills of the applicant and requirements of the position they are trying to fill."

Tom Neppl, owner and CEO of Springs Fabrication Inc. and chairman of the business alliance, has experienced the issues caused by a workforce mismatch. He said his company could hire up to 10 skilled welders if he could find qualified applicants. Instead, Springs Fabrication is turning away work.

Some urge incentives

Another factor that's stunting economic growth is the area's lower-than-average wages and lack of incentives, some business leaders say.

"We rely on the weather and the natural beauty of the area to attract people and business. We are lucky to have them," said Lisa Tessarowicz, co-founder of Epicentral Coworking, a downtown space where entrepreneurs can share offices. "But if we want people to move here, we have to offer them financial incentives because every other place is offering a variety of incentives to early-stage companies. We are not supportive enough of entrepreneurs, small business, startups and people taking risks. There are some great things going on here, but entrepreneurs are not taken seriously here."

Entrepreneurs struggle to find financing in Colorado Springs, likely because available resources are spread across several organizations that have few links among them, said Patrick Bultema, a former technology startup executive who heads the innovation and entrepreneurship program at Colorado College.

The area has many of the elements needed to foster technology startup businesses, but few of those elements are connected into an overall framework, he said.

"It is much easier in Colorado Springs than most other places in the state to have a startup going on here that nobody knows about," Bultema said. "Entrepreneurs are not connected to resources or advisers. Everything is fragmented and not connected."

Most attempts to raise local venture funds have failed, in part because few local technology startups have generated huge profits for their investors, Bultema said. As a result, entrepreneurs leave the area and take their ideas where they can attract financing, he added.

Technology startups are generating most of the nation's job growth, Bultema said. But creating a thriving nucleus of local startups that will attract investment from wealthy individuals - "angel investors" - and venture capital funds won't happen overnight, said John Street, a Springs entrepreneur who heads a Denver-based startup that creates online platforms for electronic commerce.

Building a strong engineering school at the University of Colorado at Colorado Springs has been underway for years, but he said reaching a critical mass that attracts students from across the nation who later become entrepreneurs and start technology companies may be a generation away.

"Entrepreneurship here is scattered in its approach," Street said. "There is a lot of grass-roots activity, but it is not particularly effective. When you compare the startups here to other deals nationally that get funded, there isn't that much interesting going on here."

Young people leaving

A lack of adequately trained or incompatible job candidates is a tangible issue.

So are shortfalls in incentives and a dearth of venture capital.

But some business and community leaders see something less concrete at play in the city: an attitude that's hard to quantify but often palpable. It sometimes manifests itself as a distrust of government or a reluctance to approve public funding for projects and programs or an unwillingness to take chances, they say.

Gruen, the consultant, said what Colorado Springs lacks is vision.

"In Denver, there was a combination of vision and public and private investment over the course of a generation that made it one of the most dynamic cities in the country by almost any measure," Gruen said.

Hannah Parsons, a partner with Tessarowicz in Epicentral, sees attitudes in Colorado Springs as a stumbling block to economic vitality.

Parsons believes the U.S. is moving toward a new economic model, one in which young people start new ventures, working, perhaps, from home, or coffee shops or shared locations like Epicentral.

"I call them the choice workforce," Parsons said. "They aren't here because some company moved them here."

The type of person who starts such new ventures typically is a young professionals between their late 20s and mid 40s who are earning a higher-than-average wage, which the area is trying to attract.

But luring them to the Springs is an uphill battle, Parsons said.

"We frequently hear the perception of Colorado Springs is conservative, military and strong opinions about religion," Parsons said. "The community talks about wanting to be business-friendly, but you can't be business-friendly if you can't be kind and demonstrate respect. It appears (to others) that we assume the worst in people instead of engaging in conversation. We resort to name-calling on every side . and categorically write people off. When people have ideas, we publicly tear them apart.

"That kind of behavior gets attention, and it isn't good attention. Cities like Denver and Boulder have a reputation for collaboration both internally and externally," Parsons added.

U.S. Census Bureau statistics confirm that young people are leaving Colorado Springs, and the area's population growth has been weighted toward retirees. The two fastest-growing age groups from 2000 to 2012 were those ages 60-64 and 55-59.

"At the same time, Colorado Springs struggles to keep its best and brightest young people," Gruen said. "The state has attracted more people in the 20-34 age group than almost any other, but we capture such a small proportion of that group it should be a cause for self-reflection."

The declining number of young professionals in Colorado Springs begins when high school students leave the area to attend college; most never return to the area, Neppl said.

"They don't come back to launch a business or career because they don't believe there are career opportunities here, and most of their friends have left. The environment (here) is not centered around young people," Neppl said. "If we don't get something changed in this region, we will lose an entire generation of professional and career-minded young people, if we haven't already."

The exodus of young professionals could be related to local attitudes, said Neppl, whose company also has operations in Broomfield and Loveland, where he sees a much different culture among his workers than he sees with those in the company's Colorado Springs headquarters.

"People are less risk-averse in northern Colorado. They are more accepting of and supportive of taking chances," Neppl said.

Colorado's fastest-growing communities - Boulder, Denver and Durango, for example - also have a unique draw that has attracted young adults such as a thriving downtown, a college campus or entertainment hub, Gruen said. By contrast, the hub of activity in the Springs is not downtown but along Powers Boulevard.

"As successful as that corridor has been, it doesn't make people want to come to Colorado Springs, and it isn't something you want to show off to visitors," Gruen said. "We need to find something that makes visitors never want to leave or want to find a way to come back quickly."

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Contact Wayne Heilman: 636-0234

Twitter @wayneheilman

Facebook Wayne Heilman

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