Monday, June 18, 2012

Recently bankrupt, Blockbuster gets tax credit for growth in Colorado

Blockbuster is growing. Really?  I know I’ve seen more than one store close. But the Colorado Economic Development Commission concluded that Blockbuster is a job creator when it agreed to grant the shrinking company a jobs growth tax credit.

Blockbuster, the movie-rental company that is closing stores and laying off employees all over the country, was recently awarded  a $2.5 million “jobs growth” tax credit for relocating positions to its corporate headquarters in Colorado.

The company announced April 23 that it will move its corporate headquarters from McKinney, Texas to the campus of its parent-company, Dish Network, in Douglas County. The announcement came the same day that the EDC approved the tax credit. The move comes on the heels of the Dish Network purchasing Blockbuster out of bankruptcy last year as Blockbuster struggled to compete with relative newcomers Redbox and Netflix in the movie rental industry. Along the way, Blockbuster closed more 1,500 retail stores throughout the country, including an unknown number in Colorado. In Texas alone, the company laid off 567 people this year, according to the Texas Workforce Commission. Blockbuster now plans to relocate 150 of those Texas-based positions to Colorado.

The Jobs Growth income tax credit was the hallmark economic recovery legislation approved by the General
Assembly in 2009. That legislation said a company must prove four factors to qualify for the tax credit. First, the company could “reasonably and efficiently” locate the project in another state. Second, at least one other state is in consideration. Third, the tax credit is a “major factor” in the company’s decision. Fourth, without the tax credit the company “is not likely to commence the project” in Colorado.

It’s not clear how Blockbuster meets those four criteria. The staff for the commission, the Office of Economic Development and International Trade, made available portions of company’s tax credit application. Nowhere in the portion of the application that was available for public review did the company state that the merger of the two headquarters would not happen without assistance from the state of Colorado.

But in the May 3 edition of the Highlands Ranch Herald, a Blockbuster spokesman said the company made the move because of the tax credit as well as the opportunity to “take advantage of efficiencies” in the human resources, finance and marketing departments.

Given the limited facts made available — especially the company acknowledging that the move creates efficiency — it’s reasonable to believe that the Blockbuster decision to merge with the headquarters of its parent company, Dish Network, would have happened even without the tax break.
Regardless, this Blockbuster deal exposes the challenges associated with tax giveaways in the name of job creation.  It is hard to imagine that anyone would identify Blockbuster as the kind of growing company that deserves specialized tax treatment for its role in “creating jobs”. 

Terry Scanlon can be reached at 303-573-5669 ext 311, or by email at

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