Colorado Springs News, Sports & Business

Gazette Premium Content Economic efforts have long roots

2 photos photo - Undated photo of Hewlett Packard's first building in Colorado Springs at 4637 Winters Drive. + caption
Undated photo of Hewlett Packard's first building in Colorado Springs at 4637 Winters Drive.
by WAYNE HEILMAN wayneh@gazette.com - Published: January 19, 2014

The history of Colorado Springs and economic development have been intertwined since the founding of the city by railroad baron and Civil War hero Gen. William Jackson Palmer in 1871.

Palmer founded the city as a stop for his Denver Rio Grande Railway and a summer resort at the junction of Fountain and Monument creeks for his wealthy East Coast friends. After seeing the area for the first time two years earlier, Palmer and his friends acquired 10,000 acres in the area that would become Colorado Springs. They wanted to attract affluent residents and visitors to an inviting place with streets lined with cottonwood trees transplanted from the banks of the Arkansas River.

The city, marketed as "Little London," attracted thousands of tourists annually and grew to more than 21,000 residents by 1900, boosted by the discovery of gold in Cripple Creek in 1890 and an influx of tuberculosis patients to the area's many sanatoriums. Palmer died in 1909, but less than a decade later mining millionaire Spencer Penrose built the opulent Broadmoor hotel.

The beginning of World War II brought a new type of economic engine to Colorado Springs that would become the foundation of its economy. After the Japanese attack on Pearl Harbor, the city bought land south of its borders and donated it to the War Department for construction of what would become Fort Carson. A few months later, the Army opened a small air base near the city's airport to train pilots and crews for photo reconnaissance, later for heavy bomber combat pilots and eventually as fighter pilots.

After the war ended, both bases were deactivated, but didn't stay that way for long. The Air Force opened what would later become the North American Aerospace Defense Command (NORAD) in 1951 at a base near Memorial Hospital that later became the Olympic Training Center, reopening Peterson Field at the same time. Fort Carson reopened in 1954, the same year a group of civic boosters persuaded a commission that included aviation giant Charles Lindbergh to build the Air Force Academy just north of Colorado Springs.

The first large-scale attempt to attract industry began in the 1950s, when local business leaders set up the Colorado Springs Industrial Foundation to sell low-cost land on Garden of the Gods Road to companies that would open plants there. They landed Kaman Nuclear in 1959 after the company couldn't find affordable buildings in Albuquerque.

Test-and-measurement giant Hewlett-Packard followed in the early 1960s, triggering the opening of University of Colorado at Colorado Springs in 1965.

By the early 1970s, the local economy was booming and Colorado Springs was one of the nation's fastest-growing cities. Concerned about the local economy's heavy reliance on the military, a group of three developers - Steve Schuck, Bruce Shepard and David Sunderland - created a blueprint in 1971 to attract more technology firms and other high-paying employers to the Springs area. That blueprint said the military generated well over 50 percent of local payroll, which constituted "a major economic risk" for the city.

Two years later, the Colorado Springs City Council imposed a moratorium on new natural gas connections, halting local growth and plunging the local economy into a deep downturn that lasted into the mid-1970s. The new economic development initiative, called the Quality Economic Development program, got its first major win in 1974, when Honeywell announced plans for a computer chip plant in southern Colorado Springs that would be sold a decade later to Atmel and still operates today.

During the next few years, NCR, Litton Industries, Schlage Lock and Digital Equipment announced plans to open plants in the Springs. Digital would eventually grow to become the area's largest private employer for a time on a campus that included buildings totaling more than 1 million square feet - just smaller than The Citadel mall.

In 1977, local boosters scored perhaps their biggest coup, bringing the headquarters and an athlete training center of the U.S. Olympic Committee to the former Ent Air Force Base.

By the late 1970s, the economic development effort had landed four semiconductor plants - Honeywell, NCR, Inmos and Mostek - prompting boosters to launch an effort to brand the city as the home to "Silicon Mountain." The economic development group, part of the local Chamber of Commerce at the time, in the early 1980s also attracted two computer disk drive manufacturers; major aerospace operations for Ford, Texas Instruments and TRW; and a telephone switchboard plant that would later be acquired by IBM.

The last of four local military bases, which is now called Schriever Air Force Base, opened in 1983 to house satellite operations for the Air Force and a mission control room for military space flights. Though the mission control room was never built, the base now also houses missile defense operations.

Layoffs hit the Springs with a vengeance in the mid-1980s, but a housing and commercial construction boom continued and eventually resulted in a glut of unsold speculative homes, land, apartments, shopping centers and office buildings that made the Springs what the national media called the nation's "foreclosure capital." Swamped with defaulted loans on real estate, all but one local savings and loan association and four banks failed and thousands of homes, empty building lots and other real estate ended up with a government agency created to clean up the mess.

Local economic development officials turned to nonprofits and religious organizations, including the national headquarters of Christian ministry Focus on the Family and the Christian and Missionary Alliance denomination, to put local residents back to work in the late 1980s and early 1990s.

The glut of real estate would prove attractive to Apple Computer and MCI Telecommunications, which announced plans a week apart in 1991 to expand into a pair of shuttered manufacturing plants and eventually employ thousands. The local economy turned from bust to boom almost immediately and another string of economic development wins followed during the next few years with the arrival of Rockwell Semiconductor, Oracle and computer chip giant Intel. By the end of 2000, local manufacturing employment peaked at nearly 27,000.

The technology industry meltdown that began in late 2000 hit Colorado Springs hard as WorldCom, which acquired MCI, laid off thousands from its local software hub and dozens of other manufacturers such as Agilent Technologies and Quantum shifted production to less expensive overseas locations. The area lost more than half of its manufacturing jobs during the next nine years, and few returned to the area even when the nation's manufacturing sector began expanding again.

The area's economy began to recover by 2004 as the Colorado Springs Economic Development Corp. attracted a series of call centers and data centers to the area, providing thousands of needed jobs but at far lower wages than the manufacturers that they replaced.

As a result, recovery from the 2001-03 recession was slow - the area wouldn't recover the jobs lost in that downturn for five years and local incomes failed to keep up with inflation or the rest of the nation even as the local economy improved.

Another recession hit as the nation's overheated housing market tanked amid a financial crisis in 2008, eliminating more than 20,000 jobs amid widespread layoffs and plant closings, including Intel shutting down its chip manufacturing plant and shifting the work to Taiwan. The area's economy has yet to fully recover from that downturn, with the unemployment rate stuck above 8 percent even as the rest of the state recaptured the jobs lost in the most recent recession by early last year.

As part of a strategy to refocus the area's economic development efforts, the Greater Colorado Springs Chamber of Commerce and the Colorado Springs Regional Economic Development Corp., which had once been part of the same organization, merged recently to form the Colorado Springs Regional Business Alliance.

In an effort to jump-start local economic growth, a coalition of groups led by the city of Colorado Springs sought and received approval in December for $120 million in state sales tax rebates to develop four new projects, together called the City for Champions. The projects would be built over the next few years and are designed to attract out-of-state tourists. The projects constitute an Olympic museum, a multipurpose stadium and arena complex, a sports medicine complex at the University of Colorado at Colorado Springs and a new visitors center for the Air Force Academy.

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