Colorado ended 2022 scoring a sizable economic coup: A semiconductor materials manufacturer picked Colorado Springs for a major expansion. Entegris Inc., which already has a plant there as well as 500 employees in the city and nearby Pueblo, plans to invest $600 million to build a new production facility and more than double its workforce.
But it wasn’t just Entegris, which is based in Massachusetts. In the weeks prior, data analytics company HNA Live said it would ditch Delaware and move its headquarters to Denver next year. Near-Earth asteroid miner Karman+ announced it would relocate from the Netherlands in favor of Denver. And Zivaro, which is modernizing the tech for government space systems, looked outside the state to expand but settled on building up its Colorado Springs operation, where it plans to add 304 new jobs.
A waning economy? Not if you look at the number of companies that chose Colorado to expand or plop down their headquarters in 2022. While high inflation and recession fears likely caused some firms to pull back, the state’s reputation for an educated workforce and central location were cited as top reasons for the moves. But also getting credit: Incentives that helped lure companies from Blue Origin to Zoom and, of course, Entegris.
“A lot of the semiconductor industry has grown over the last 20 years in Asia. But when we looked at all the new growth, a lot of it was in North America,” said Bill Shaner, president of Entegris’ Advanced Materials Handling Division. “(Add in) some pretty aggressive economic development opportunities from different states so we said, ‘Hey, let’s look at the U.S.’”
Colorado maintained one of the nation’s stronger economies in 2022, largely due to the growing workforce. The state’s labor force participation rate has ranked in the top five states since January 2021, according to Bureau of Labor Statistics data. And since losing 374,500 jobs at the start of the pandemic, Colorado has added them all back — plus another 82,300, as of November. That ranked the state as having the 11th fastest rate of job recovery from the pandemic.
Financial incentives with an asterisk
While providing financial incentives to private companies is controversial, Colorado’s incentives are based on performance, state officials said.
The Job Growth Tax Credit Incentive is essentially a partial rebate on payroll taxes that were already paid. The state’s Strategic Fund Job Growth Incentive is a payment and requires local communities to add a matching commitment. Both require the companies to hire people first.
“All our incentives are performance-based so if a company doesn’t hire as many people as they thought they would, the incentive automatically ratchets down,” said Jeff Kraft, deputy director of Colorado’s Office of Economic Development and International Trade.
The incentives are significant enough for companies to take the time to apply for them. Blue Origin, the aerospace company owned by Amazon founder Jeff Bezos, committed to adding 400 jobs in Douglas County after getting a $7.6 million job-growth incentive. Zoom, the go-to virtual video meeting tool for students and remote workers during the pandemic, will get $5.3 million if it hires 300 more workers, plus $150,000 from the Strategic Fund. And Entegris stands to get $3.9 million from the Strategic Fund for hiring 600 people.
In 2022, the state’s Economic Development Commission approved 28 companies for the job growth tax credit. If all take the state up on the incentive, that will be a total of 6,163 new jobs and $74 million in tax credits over eight years. Another five companies were approved for money from the Strategic Fund, or a total of 1,077 net new jobs and $6.4 million in grants.
So far, 20 companies have committed to Colorado and expect to add 4,800 jobs. If they meet their hiring goals, Colorado will provide $57.5 million in tax credits to those firms over the next eight years.
“We tend to hover around 30, plus or minus, in a normal year,” Kraft said. “It’s a solid pipeline of substantial recruitments.”
For a lot of companies, expansion or a move is often months or years in the making so the ups and downs of the economy in 2022 didn’t appear to impact economic development. Kraft said his team, which does turn down unqualified companies, is not seeing any major slowdown. At least not yet.
“But we’re keeping our feelers out there (and) we work with companies,” Kraft said.
If an approved company falls under the required minimum new jobs needed for the year, OEDIT could calculate the tax credit a year later so “they wouldn’t have a clawback,” he said. “They wouldn’t have to refile taxes and change their tax credit.”
OEDIT doesn’t track companies that don’t ask for financial incentives to move to the state. But there definitely were some who moved here with no public financial incentive, according to the agency. GPS technology firm Trimble left Silicon Valley and picked Westminster for its new headquarters in October. Quantum computing startup Atom Computing committed $100 million to open a research and development facility in Boulder in September. And consumer electronics company Vizio opened an office in Denver in April with plans to hire 100 engineers.
Many companies also benefit from other local support. CoorsTek, which manufacturers ceramics for the aerospace and medical industries, has expanded its operations in Grand Junction multiple times over the past several decades. In August, Mesa County commissioners approved a tax break on $23 million in business equipment purchases as part of CoorsTek’s expansion.
“We want to work with companies to find pathways to help them navigate some of the barriers that we are seeing, whether it be inflationary hikes or workforce concerns,” said Candace Carnahan, president of the Grand Junction Area Chamber of Commerce. “They don’t take these expansions lightly.”
According to CoorsTek, the company plans to expand its manufacturing of parts used in artificial hips at the Grand Junction facility after winning a key trademark dispute over pink ceramic hip components.
More to a move than incentives
Incentives, however, aren’t usually the deciding factor. They’re just another piece to consider. PteroDynamics, which makes vertical-landing drones, moved its headquarters to Colorado Springs in 2021 after getting a job-growth incentive. But the company also wanted to be closer to its suppliers and others in the defense industry. It’s since made good on its goal to add five employees this year for a total of six who now are based in Colorado.
“The OEDIT agreement, the goals, have us adding 14 more employees in 2023 but I think that we will exceed that based on our own internal budget,” said Matthew Graczyk, its CEO. “We raised some money in 2022 and we probably will be raising a bunch more to fuel our expansion. In the meantime, we have more government contracts than we had before. We have more partnerships with some of the biggest prime defense contractors in the world. Our prospects are good. People are liking our aircraft.”
Entegris, which manufactures products for chip makers like Intel and Samsung, began hunting for a place to expand earlier in the year as Congress considered the CHIPS and Science Act of 2022, which was signed by the Biden administration in August. It sets aside $280 billion in taxpayer money to subsidize the return of semiconductor manufacturing to America.
“The CHIPS Act helps. We had to do something in the U.S. because, for example, in Texas, Samsung has a master plan to build 10 facilities in 10 years. Intel is retooling their facility in New Mexico. Taiwan Semiconductor is building in Arizona. There was a lot going on in the Southwest and we wanted to be closer to our customers,” said Shaner, with Entegris. “But because the U.S. has a higher cost for us to work in and a lot of the high tech jobs left 20 years ago, we’re having to really grow our own talent.”
Hence, Entegris picked Colorado, said Shaner, a long-time resident who got his engineering degree from Colorado State University.
☀ OUR RECOMMENDATIONS
“Compared to the others, Colorado is pretty good. It’s actually having a population increase, not a decline,” he said. “And we’ve already reached out to local universities and trade schools, and even high schools, to bring on more employees. The access to qualified employees we thought was pretty good and was an advantage over some of the other sites.”
As for the location of its future plant, which is slated to be operating by the middle of 2024? It’s going to be on the land that once housed Hewlett Packard’s old factory in Colorado Springs that once made computer disk drives. The HP facility was razed in 2011.
“It’s abandoned but all of the power is in the ground and the water and utilities so it allows us to move fairly quickly,” Shaner said. “What I like about it is that it’s not an expansion on ranch land but (we’re) taking a site that is a good urban redevelopment site and just rebuilding on top of it.”