EZ Policy Blog

Here is the June 2009 edition of the FTB’s “Tax News” newsletter.

This month’s edition includes an article called, “Enterprise Zone – Nonprofits May be Allowed Net Interest Deduction:”

California provides for special tax incentives to encourage investment in specific geographic areas targeted for economic revitalizing called Enterprise Zones within the state. One of these incentives is the net interest deduction. It is available to banks and other lenders. The requirements are simple. If a bank or lender makes a qualified loan to a qualified debtor, it is allowed to deduct the net interest received from such loan against its California taxable income. To be a qualified transaction, the loan must be made to a debtor that is engaged in a “trade or business” in an Enterprise Zone. The term “trade or business” is generally defined for tax purposes as “an activity engaged in for profit.” When a bank or lender makes an otherwise qualified loan to a nonprofit organization, the question arises as to whether a nonprofit is engaged in a trade or business, and thus considered to be a qualified debtor for the purposes of the net interest deduction.

In the past, we disallowed debts made to nonprofit organizations based on the general presumption that nonprofit organizations are not engaged in a trade or business as defined under various tax provisions in the Internal Revenue Code and the California Revenue and Taxation Code.

However, we recently revised this policy based on statutory authority in the California Corporation Code that suggests a nonprofit could be recognized as being engaged in a trade or business. The California Corporation Code which governs nonprofit entities affirms the nonprofit’s right to “carry on a business at a profit,” and use that profit for any lawful activity.” Many nonprofit organizations accept donations, conduct fundraising activities, or charge fees. This revenue is used to sustain the organization, pay salaries, interest, fund capital improvements, expansions, etc. These activities are similar to a trade or business engaged to earn a profit.

Therefore, qualified loans made to nonprofit organizations can qualify for the Enterprise Zone net interest deduction if the debtor meets all the other required qualifications.

This is clearly related to the appeal before the Board of Equalization in the matter of Farmers and Merchants Bank. See here for more details on that case.

HCD has ranked all 15 applications for the new Enterprise Zones and the results have been with the Governor’s office since sometime last month.  Presumably, they are waiting for the right moment to announce the four new zones.

One of those applicants was the City of Oxnard in Ventura County. Bruce Stenslie, president and CEO of the Economic Development Collaborative of Ventura County and Steve Kinney, president of the Economic Development Corporation of Oxnard have published an Op-Ed in the Ventura County Star directly responding to Dan Walters’ recent editorial on the PPIC report.

Walters questioned the value and effectiveness of California’s economic-development policies. He took particular aim at California’s enterprise zones, which are intended to encourage employment and economic growth. Given our economic crisis, and the tough challenges in Sacramento and locally to identify investment strategies that will aid our recovery, it is critical we consider every option and strategy. We welcome Walters’ thoughts on the state’s economy, but think his recent comments lead us in the wrong direction.

We would like to join the debate about what investments make most sense for California and its local economies. We believe that if we educate The Star’s readers about how enterprise zones work, and who benefits, there would be widespread support.

Further, we think Walters has it wrong when he characterizes California as being burdened by ineffective economic-development programs, stacking up “in ever-growing layers.” In fact, the evidence suggests the opposite is true, that California’s recovery is harmed by its lack of economic-development investment, not by some imagined growth of programs to help business.

For fair disclosure, we are advocates for securing a new enterprise-zone designation for Oxnard. This is an uphill battle, as to establish a new enterprise zone, an existing zone must be dropped from the state’s program.

To understand why cities seek an enterprise-zone designation, and to evaluate its merits, it’s important to understand how it works. Enterprise zones are tied to areas that suffer higher-than-average unemployment and poverty. Businesses within an enterprise zone may receive tax credits for hiring new workers, but only for workers who reside within the enterprise zone or who face serious barriers to employment. The benefits for Oxnard are unique. We have high levels of joblessness in neighborhoods near the city’s industrial and commercial districts, but a disconnect between employers and residents. An enterprise-zone designation will place a premium on the skills developed by workers in the city, by rewarding business with a tax incentive for training and hiring local workers.

Stories that are critical of enterprise zones conveniently leave out or downplay this point about worker opportunity. The goal of an enterprise zone is not just to increase the bottom line of business, rather it is to incentivize opportunity for local workers, creating pathways for workers to benefit from business growth.

Those gains for workers decrease tax outlays for public supports. The single most serious impact of this recession is increasing unemployment. More than ever, we should be looking for ways to promote jobs, particularly for those hardest hit by the recession, and that’s exactly what enterprise zones do.

On the subject of whether California is doing enough to promote economic development, we draw readers’ attention to another study. June 23, the Milken Institute in Santa Monica published a report that documents how California is losing high-paying manufacturing jobs to other states, precisely owing to our lack of any proactive agenda to retain them. Our problem is not layers of programs for business, it’s that Sacramento has forgotten that workers don’t have a chance to win if business doesn’t have a chance to compete.

California’s economic future rests on our ability to retain business and promote entrepreneurship. When we become truly dedicated to and effective at that, we’ll create jobs and opportunity for California’s workers.

Besides the fact that the Legislature has not managed to come up with a budget, there are some other updates.  AB 1554 has been amended.  There is also a massive, 263 page bill, ABx3 33, essentially restructuring the entire State Government.

The Sacramento Bee’s Dan Walters cites both the PPIC and USC studies and concludes that since serious people can reach different conclusions we should just forget the whole thing.

Meanwhile, in the Modesto Bee, Bill Bassitt, CEO of the Stanislaus Economic Development and Workforce Alliance, writes that the Enterprise Zone is a success in Stanislaus County.  Bassitt also points out the extrememly competitive incentives being offered by other states and, “For this state to be business competitive, incentives of a comparable nature must be offered to companies who have a choice on their operational locations. The California Enterprise Zone program is one type of incentive that businesses can use to help calculate the bottom line cost of operating in this state.”

Kathleen Robles, manager of the San Bernardino Enterprise Zone, had an Op-Ed published in The Press-Enterprise this week:

I agree that California cannot afford to waste money on programs that do not work. However, contrary to claims made in The Press-Enterprise’s editorial “Tax-break waste” (Our Views, June 17), the state’s enterprise zone program has proven to deliver measurable benefits to our state.

Enterprise zones revitalize distressed areas and provide incentives for companies to hire disadvantaged individuals and expand their operations in California.

Reducing or eliminating the enterprise zone program would be extremely shortsighted. While our state is in the midst of its worst budget deficit and cuts are inevitable, the state’s most important economic development tool should not be put on the chopping block. By prioritizing economic growth and supporting successful economic development programs that create jobs and keep businesses in California, we can get our state back on track.

Recent research by Professor Chuck Swenson from the USC Marshall School of Business shows that the enterprise zone program reduces unemployment rates, boosts household incomes, and cuts poverty rates. These findings are in stark contrast to the claims made in the report from the Public Policy Institute of California.

According to Swenson, in order to evaluate the economic impact of the enterprise zone program, you need to look at a number of different outcomes such as job growth, unemployment rates, income levels, and business retention. The PPIC study analyzed much more limited data. After looking at all of these factors, Swenson found that the enterprise zone program reduced unemployment rates and increased the wages of enterprise zone residents.

Also, contrary to The Press-Enterprise’s editorial, evaluating enterprise zones is a critical issue to those in Sacramento. That is why AB 1550, which ushered in a new era of accountability standards for the enterprise zone program, was signed into law in 2006. AB 1550 requires additional review of a zone’s administrative support and an evaluation of financial commitments made in the zone’s application and memorandum of understanding.

The law also requires each zone to submit a biennial report to the Department of Housing and Community Development regarding progress made in achieving its goals and objectives. In addition, the application process for an area to be designated an enterprise zone is very competitive and no zone operates in perpetuity.

Areas that are designated as enterprise zones are struggling communities. The state has made a commitment to help these communities rebuild themselves. Enterprise zones help the people that are hardest hit in an economic downturn, and reducing the program’s benefits will have a disproportionate impact on low-income residents.

While there are many opinions on how the state should solve its budget crisis, eliminating the enterprise zone program is not the answer. Tax credits aimed at creating jobs and boosting business should be maintained because prominent research shows that they do work.

The federal Empowerment Zones and Renewal Communities sunset at the end of this year.  HUD recently updated its website with call to extend the program:

The Renewal Community and Empowerment Zone (RC/EZ) programs are scheduled to expire at the end of 2009. However, in his unwavering efforts to seize the opportunities to create and save jobs through federal programs, such as the RC/EZ programs, President Obama requested in his Fiscal Year 2010 budget that Congress act to extend the RC and EZ designations to December 31, 2010. Extending the designations would allow tax relief to remain available to the 300,000 businesses located in the distressed RC/EZ areas, thereby helping create or retain jobs in high poverty areas, in an environment where the unemployment rate is the highest it has been in 25 years.

It is critically important to extend the provisions immediately rather than allow the RC and EZ designations and the related tax incentives to lapse. Extending retroactively would cause a drop in utilization.

Nationwide, the benefits that derive from the $11 billion tax incentive package are clear. In this regard, the most widely utilized of the Community Renewal tax incentives is the employment credit, which provides federal tax benefits to local businesses for employing residents from the designated areas. Recent years have shown a steady upward trend in utilization of this incentive. This has led to substantial increases in business development and job creation.

Based on the latest data from the Internal Revenue Service, HUD estimates that approximately 480,000 jobs for RC and EZ residents generated over $2 billion worth of employment credits for eligible employers throughout the country in 2007-2008. Businesses have also utilized a related incentive for hiring high risk youth and providing summer jobs to teens residing in RC and EZ communities, which are two categories tied to the RC and EZ designations under the Work Opportunity Tax Credit.

The Sacramento Business Journal published an article in today’s edition examining the claims of the negative PPIC study contrasted with view of program proponents.  Only an excerpt is available online:

An enterprising expansion is in the works as three local agencies team up to add 40,000 acres of industrial property to a new, joint enterprise zone.

Two of the region’s four enterprise zones expire this year, and Sacramento County and the cities of Sacramento and Rancho Cordova are applying together for an expanded zone across three jurisdictions.

Just as officials work to combine the zones, a new report says the subsidized business districts don’t do enough to generate jobs, their “primary purpose.”

But, an expanded zone would add “a substantial number of employers who could make use of the (tax) credits,” said Jim Pardun, a manager in the county’s economic development department.

Here is scan of the whole article.

I just received a press release issued by Assemblyman V. Manuel Perez addressing the PPIC study on Enterprise Zones:

(SACRAMENTO) — Assemblymember V. Manuel Pérez (D-Coachella), Chair of the Assembly Committee on Jobs, Economic Development and the Economy, made the following statement today in response to the newly released report, “Do California’s Enterprise Zones Create Jobs?,” released by the Public Policy Institute of California (PPIC):

“PPIC’s report advances what we know about the operation and impact of one of the state’s largest economic development programs. While the findings indicate that the enterprise zones have not affected business creation and job growth, the report also notes that improving community conditions by lowering poverty and unemployment are other EZ program priorities not evaluated by the study. The reforms of 2006, as noted in the report, shifted the EZ program into a more actively managed and accountable public program. I look forward to subsequent research to assess the impact of zones established under the new rules. This would be useful for community leaders and policymakers as we seek to ensure that our economic development programs are relevant and effective.

Understanding the economic dynamics of lower income communities is complicated. In the 80th district, there are three enterprise zones – the Imperial Valley Enterprise Zone, the Coachella Valley Enterprise Zone, and the Calexico Enterprise Zone. My own observation is that without the EZ program these communities would be experiencing further economic deterioration. I believe that the EZ program has provided opportunities for community leaders to work with the business sector to promote a more stable employment environment. I am aware that there are efforts seeking reform of the EZ program. Given the significance of the program to low income communities that have been hardest hit by this recession, I have called for interim hearings to thoroughly review the issues. This research from PPIC provides new information that will help my Committee with the hearings I have planned for the fall.”

Today is the day PPIC (re)releases its report critical of the Enterprise Zone Program. PPIC is presenting the report at a couple of venues today in Sacramento. Some news publications reported on their press release:

KPBS San Diego
Visalia Times-Delta
The Desert Sun

The Central Valley Business Times, published an article explaining some of the detractors’ positions, “Enterprise Zones refute PPIC report.”

This morning, one of the authors, Jed Kolko appeared with Craig Johnson, president of the California Association of Enterprise Zones, on the Forum radio program on KQED in San Francisco to discuss the study. Here is the audio from the program this morning:

Frank Luera, who has been Chief of the State Enterprise & Economic Development Section which oversees the Enterprise Zone Program has announced his retirement from HCD in an email, “After several years as Chief of the State’s Enterprise Zone Program, I have decided to pursue other interests. My last day will be June 19, 2009.”

Frank was officially appointed to lead the Program in November of 2006 replacing Mark Maldonado, but had been working with the Program for some time before that. During his tenure, Frank oversaw the most sweeping and significant changes in the Program’s twenty-plus year history including the implementation of regulations, the expiration of the majority of zones and the designation of new zones to replace them.

I would like to personally thank Frank for all of the hard work he has put in, his extraordinary patience, and openness to new ideas. I wish him all the best in his future endeavors.

The Public Policy Institute of California is getting ready to re-release a report it did last year on the Enterprise Zones which will state, “The enterprise zone program, the state’s largest economic development effort, has failed to achieve its key goal: increasing jobs.”

But how does the PPIC know that the “key goal” of the EZ Program is to increase jobs?

According to the Government Code of the State of California in “The Enterprise Zone Act” (Section 7070-7089) this is not so cut and dry:

7070. This chapter shall be known and may be cited as the Enterprise Zone Act.

7071. The Legislature finds and declares as follows:

(a) The health, safety, and welfare of the people of California depend upon the development, stability, and expansion of private business, industry, and commerce, and there are certain areas within the state that are economically depressed due to a lack of investment in the private sector. Therefore, it is declared to be the purpose of this chapter to stimulate business and industrial growth in the depressed areas of the state by relaxing regulatory controls that impede private investment.

(b) It is in the economic interest of the state to have one strong, combined, and business-friendly incentive program to help attract business and industry to the state, to help retain and expand existing state business and industry, and to create increased job opportunities for all Californians.

(c) No enterprise zone shall be designated in which any boundary thereof is drawn in a manner so as to include larger stable businesses or heavily residential areas to the detriment of areas that are truly economically depressed.

(d) Nothing in this chapter shall be construed to infringe upon regulations relating to the civil rights, equal employment rights, equal opportunity rights, or fair housing rights of any person.

I could not identify any part of their study that addresses measuring the relaxation of regulatory controls that impede private investment within Enterprise Zones.

In fact, no part of the Act explicitly states that increasing jobs is the purpose of the program. A goal of increasing job opportunities is not even necessarily the same thing as increasing job counts. But even if that is a goal, it is certainly not the only or primary goal of the program as stated in law.

The Los Angeles Times picked out an interesting idea from the Governor’s recent chat with the Sacramento Bee’s editorial board (see this post for the video):

Gov. Arnold Schwarzenegger said today that he would like to see such “radical” proposals come out of a commission now studying an overhaul of the state’s tax system. The governor told the editorial board of the Sacramento Bee that he hoped the commission would not be afraid to propose something like “a 15% straight tax.”

“That’s the kind of radical, daring kind of a proposal that I want to see on the table so we can look at it and say, ‘Oh, let’s study this, maybe that is the way to go,’ ” Schwarzenegger said during the discussion, which was webcast.

The current system, based on highly unstable income tax revenue that fluctuates with the economy, “doesn’t work,” Schwarzenegger said.

Advocates of a flat tax, which applies a single tax rate to all income, say it increases compliance with the tax codes because it is so simple and easy to understand. But opponents dislike that it taxes the wealthy at the same rates as the poor.

The Governor is talking about proposals he is expecting from his “Commission on the 21st Century Economy” which next meets on June 16.

Here is the video of the Governor speaking with the editorial board of the Sacramento Bee earlier today:

There seems to be some trouble with the audio at the beginning of the video, but it kicks in later.

A recent study, “Economic Development: The Local Perspective,” conducted by the Public Policy Institute of California (PPIC) illustrates how local governments and state programs influence the economic environment in California. The study shows that local development has increased in recent years, with varying rates of success due to social, political, and geographical factors in the respective communities. Most cities believe that their efforts to improve their local economy have worked to some extent, although most feel that there is no approach in place to addresses their individual opportunities as they arise. The PPIC believes that, although there is positive feedback from local governments on the effectiveness of economic policies, there needs to be more formal evaluation of each program’s value. In general, local officials complain that state policies encourage development in retail activity, while granting less support to employment growth and manufacturing. Local officials feel that the retention of old business is more important than fostering and creating new business and that office and retail development are much favored by the state over affordable housing developments or heavy industrial projects.

Enterprise zones were placed under the category of “Economic Support,” which is defined as “undertakings that do not involve the condemnation or purchase and direct transformation of land, but would seem to complement, inform, and even reinforce redeveloped policies.” Many state-sponsored initiatives to encourage environmentally-friendly business strategies and industrial development- such as enterprise zones- are often overlooked by local businesses, “who are unaware of their existence or find applying for them too onerous.” More transparent and widely disseminated information of state programs was a key request from local officials.

When polled on a scale of 1 to 5, with 1 being “not very important” and 5 being “very important,” local respondents ranked the establishment of enterprise zones with an average of 1.8. Unlike the other activities in the Economic Support column, enterprise zones do focus on land uses. However, the authors note that enterprise zones rarely exist in a vacuum. Usually, there is a key redevelopment strategy for the particular area such as government assembly of land and writing it down for private use.

AB 1550, enacted in 2006, requires applicants in targeted areas (i.e., enterprise zones) to set up a comprehensive development program linking various local issues such as housing, transportation, redevelopment, and workforce training. In turn, the state would grant more favorable assistance in these areas and cut through some of the red tape. This and other initiatives to improve communication between state and local government would remove obstacles that prevent cities from attaining full economic development.

The PPIC is also getting ready to re-release a study specifically about the Enterprise Zone program which has already been published by National Bureau of Economic Research last December. I wrote about that report here as well as some of the responses to it, for example, here.

Thank you to Danny Fitzgerald who pointed out this very interesting article in the New York Times about economic development along the California-Mexico border. Oh, by the way, the article mentions the Calexico Enterprise zone and quotes Danny:

In the last year, economic development officials and local elected leaders in San Diego County, Baja cities in Mexico and the sprawling Imperial Valley about 90 miles to the east have used a grant of $220,000 of government and private seed money for an initiative aimed at turning this area into a global powerhouse for commercial growth.

The idea is that a concerted effort will produce more manufacturing in Mexico, more research and development in San Diego and more alternative energy in Imperial County.

The area is formally known as the Cali Baja Bi-National Mega-Region, covering roughly 27,000 square miles. Late last month, Mayor Jerry Sanders of San Diego, Mayor Jorge Ramos of Tijuana and economic development leaders from both sides of the border announced a marketing effort that, so far, is aiming to attract companies from China and the Pacific Rim.

Central to the effort is a planned new border crossing, which may be completed as early as 2012, about two miles from the current Otay Mesa port of entry. To be known as Otay Mesa East, it is expected to become the most technologically advanced crossing in the region, with waits for commercial truck traffic of 20 minutes or less, compared with the current three or four hours.

Christina Luhn, director of the Cali Baja initiative for the San Diego Regional Economic Development Corporation, was at the border recently to meet representatives of Kyocera Mexicana in Tijuana, a unit of the Japanese company Kyocera, which manufactures solar panels and other clean-tech products that are shipped into the United States through Otay Mesa.

Dr. Luhn says she is hopeful that new cooperation between Mexico and the United States under the Obama administration will help to bring the drug cartels to heel and ease the task of convincing global companies that the region is right for them as a gateway to United States markets. “I tend to be more optimistic about this than I was even six months ago,” Dr. Luhn said.

John V. Bragg, vice president of Kearny Real Estate in the city of Otay Mesa, is also hopeful that development will help address problems that include an aging industrial base, the underuse of strategically located land, and environmental challenges.

His optimism is more than theoretical, he said. His company recently purchased 311 acres of land in the United States near where the new Otay Mesa East crossing is expected to be built.

Besides constructing the new crossing, which is now the subject of environmental impact studies, the California transportation department is preparing to build state highways to accommodate increased truck freight, Mr. Bragg noted.

That will give rise, he said, to the construction of several million square feet of warehousing and distribution facilities to handle goods made with low-cost labor in Mexico. In turn, retail stores and hotels are expected to be built nearby, as happened near the current Otay Mesa crossing.

“What we want to see now, as a developer and land owner, is infrastructure so that people can move better,” Mr. Bragg said. “We want to see the two countries get together to improve the border crossing and to build then whatever is appropriate.” He added that Kearny hoped to build two million to three million square feet of logistics-related facilities on its newly acquired property.

Mr. Bragg conceded that vacancy rates for existing warehouses in Otay Mesa were 17 to 20 percent, but he said that occupancy would increase as the transportation services are improved and more modern technology was introduced.

Ninety minutes to the east, just over the border from Calexico, Calif., at Mexicali, the capital of Baja California, infrastructure is already in place for the new 10,000-acre Silicon Border Science Park. Silicon Border announced last year that Q-Cells of Germany, a leading maker of solar panels, would build a new manufacturing facility there.

Mike Oliver, executive vice president for business development at Silicon Border, said Phase 1 infrastructure like roads, sewers, water treatment and recycling, lighting and fiber optic cables had been completed, with “tens of millions in initial financing from ING Clarion,” a division of ING, the Dutch bank. “By the time we are finished, we will have had investment of hundreds of millions of dollars,” he said. “We have room for about two dozen Q-Cells type facilities.”

Other new commercial developments are also on the drawing board in Calexico, said Danny Fitzgerald, director of the city’s enterprise zone. Projects under way include Calexico Mega Park, a 157-acre mixed-use retail, business and residential development by Westmount Properties; Calexico 111 Center, with more than 65 acres of commercial and 58 acres of industrial development; and Los Legos, some 500 acres that will include residential and commercial components.

Tim Kelley, president of the Imperial Valley Economic Development Corporation, said cooperative work between his organization, the San Diego County Economic Development Corporation and the city of Mexicali on the Silicon Border development helped the Cali Baja initiative.

Since then, the concept of Imperial Valley as a haven for alternative energy — solar collection, wind energy farms, geothermal heating and biofuels from algae — has taken off.

Despite the economy, Mr. Kelley said, “we’re getting more expressions of interest than we have ever gotten before. The phone is ringing constantly.”

Here is the June 2009 edition of the FTB’s “Tax News” newsletter.

This month’s edition includes an article called “Are You Familiar With California’s Enterprise Zones?“:

The Enterprise Zone (EZ) tax incentive program was created in 1986 to help local businesses, and encourage outside businesses to locate in economically depressed areas. The federal government does not have a comparable economic development program or business tax incentives.

The EZ program has been around for quite some time, but there have been changes to the program that could affect your clients’ businesses.

Between October 2006 and March 2009, 34 California’s enterprise zones expired. Many of these jurisdictions chose to apply again with the California Department of Housing and Community Development (HCD) for a new designation along with new jurisdictions. Today there are 42 active or conditional designated enterprise zones. For a listing of expired, active, and conditional enterprise zones, go to hcd.ca.gov and search for EDA.

The re-designated zones are treated as two zones, the “Old Zone” that expired and the “New Zone.” In some cases, the jurisdictions added new geographic areas to the “New Zone” and in other cases, the jurisdictions removed areas that were once in the “Old Zone.” The following five business-related tax incentives are potentially available to a taxpayer doing business in an enterprise zone, so you may need to see if your client is doing business within one of these new geographic areas.

Hiring credit.
Sales or use tax credit.
Business expense deduction.
Net operating loss deduction.
Net interest deduction for lenders.

Enterprise zone tax incentives apply only to business activities and investments that take place after an enterprise zone has received final designation.

For more information on the EZ Credit, please visit ftb.ca.gov.

The IRS has released a new version of the 8850 to reflect recent changes to the Work Opportunity Tax Credit Program. There are new instructions as well.

The Governor appeared on “The Tonight Show” with Jay Leno on Wed. night. Here is the clip of the Gov. discussing failed ballot measures and how the California budget works (Jay even asks about tax incentives for film production):

Governor on Jay Leno 5/27/2009 from Max Shenker on Vimeo.

From the Denver Post:

A new state law was critical in the decision by the country’s largest kidney-dialysis provider to move its corporate headquarters to Colorado.

Currently based in El Segundo, Calif., DaVita Inc. is No. 433 on the Fortune 500 with nearly $6 billion in annual revenue and more than 1,400 dialysis clinics in 43 states.

Incentives in a new law that takes effect in August “were relevant and necessary,” DaVita chief executive Kent Thiry said Wednesday at a news conference.

Thiry called the incentives the “necessary lubricant” to assist the company with the time and financial commitments of relocation.

Thiry credited Gov. Bill Ritter and Denver Mayor John Hickenlooper with “thoughtfully designing” their presentations and said he was impressed with their work on the environment, public education and light rail.

Denver’s central location, lower costs and status as a desirable place to live and work, as well as building on DaVita’s regional presence, played into the decision, Thiry said.

California and Colorado were on the list of five possible sites. Thiry declined to identify the others.

How much incentive money flows to DaVita “is yet to come,” said Don Elliman, director of the Colorado Office of Economic Development and International Trade.

Elliman said the law gives a state income-tax credit of 3.8 percent for up to five years to companies if they select Colorado over competitors and create at least 20 jobs.

DaVita will have to apply to the Colorado Economic Development Commission for the tax break. Elliman said area counties and cities will have to provide other incentives.

The Jefferson Economic Council has been working on a package to keep DaVita in Jefferson County, where it already has a building with 250 employees.

“We’re doing everything we possibly can to create a winning proposal for DaVita to stay here,” said Jefferson County Commissioner Kevin McCasky.

As for incentives, McCasky said, “You name it. If we have the authority, it will be considered.”

Thiry said no decisions on a headquarters location have been made.

About 800 of DaVita’s 32,000 employees work in Colorado. Thiry and several other senior executives will make the move. Other headquarters employees are being given the option to move.