Layers of federal, state, city incentives luring outdoor companies, including one of Colorado’s first Opportunity Zone investment projectsPUBLISHED ONJAN 30, 2019 7:50AM MSTOUTDOORSPRIMARY CATEGORY IN WHICH BLOG POST IS PUBLISHED
MONTROSE — Cynthia Lively is making $300 stainless steel pliers. She’s also buffing the burrs off freshly forged $1,500 fly-fishing reels. And she’s spinning out tiny $6 reel caps. She dances between an array of Haas automated milling, boring, cutting, drilling and tapering machines that sculpt high-end Abel and Ross Reel fly-fishing equipment with aeronautical precision.
“In April, I’ll have been doing this for 22 years,” says the machinist, inserting a block of stainless steel into truck-sized machine. “So much work, but so much fun.”
David Dragoo, the president of Mayfly Outdoors, which married California-based Abel and Montrose-based Ross Reels in 2016, calls Lively “the mayor of the machine shop.”
There are 34 employees like Lively on the Mayfly Outdoors shop floor, each playing a role in burnishing one of the world’s most respected fly-fishing brands. And it’s those workers who prodded Dragoo and his dad, Doug, chairman of the company, to weigh Montrose as the headquarters for the thriving brand. While they pondered a home in Utah, California and Arizona, it was an alignment of outdoor values on top of a flurry of federal, state and city incentives that tipped the Dragoos’ scales toward Montrose, where they are putting down big-time roots.
“It’s easy to run a business when you have people who are so hardworking and trustworthy,” Dragoo says, beaming as he shows a fly-fishing novice a fleet of his sport’s Ferrari-type gear. “So we saw Montrose as a great hub for our business because they share our work ethic and values. They already have it in their DNA.”
Mayfly to anchor massive Montrose campus
In the next couple months, Mayfly Outdoors will consolidate 16,000 square feet of leased space in Montrose and Abel’s factory in California in a new home on the Uncompahgre River, where its 41,000 square-foot factory and headquarters will anchor a 150-acre, $83 million live-work-play campus that could establish Montrose as the epicenter of Colorado’s $62.5 billion outdoor recreation economy.
Montrose’s Colorado Outdoors development is similar to outdoor-industry parks sprouting in Grand Junction and Golden. With 670,000 square feet of space, it will be the largest of the trio of new-school projects. The Dragoos’ Colorado Outdoors development defies traditional zoning, mixing houses, townhomes, apartments and live-work studios with a retail and commercial village, two of the Western Slope’s first new hotels in at least a decade and an industrial campus of manufacturers including Mayfly.
The project spoons 41-acres of open space — donated to the city by the Dragoos — along more than a mile of meandering Uncompahgre, and a new trail is under construction that will connect the development with Montrose’s growing collection of river parks and its 2-year-old, $29 million recreation center.
“You will be able to start on one end of the town and get to the other end of town without ever hitting a road,” says Sandy Head, the head of the Montrose Economic Development Corp. “With the diversity and size of this park, we think we make a pretty compelling argument for Montrose. We think we — and really Colorado — are a great destinations for businesses outside the state. Everyone claims to be a hub. Well, Montrose is the hub. We are the real hub, with ski areas in every direction, rivers, parks and the best air program between Colorado Springs, Denver and Salt Lake City. And we have 1-gig internet. We are poised.”
Outdoor business the next step for diversifying city
It all started with the Dragoos, who needed to consolidate the companies they merged in 2014. Montrose, a pro-business community that has spent decades diversifying beyond a sole reliance on traditional agriculture, establishing itself as a second-home haven with stores like Target, Home Depot and Natural Grocers and a manufacturing hotbed with Russell Stover Candies and an array of high-end technical industries. It courted Doug Dragoo with aplomb.
Head drove up and down the river with Doug Dragoo, whose career before Mayfly includes decades as a real estate investor and developer. They kept returning to the site of an old sawmill and gravel pit on a swampy section of the river north of town. Soon, Doug was quietly buying up parcels and scheming a a new headquarters and plan bigger than Mayfly.
The Montrose City Council formed the Montrose Urban Renewal Authority for the entire 150-acre project to help align taxing entities for the city’s largest project. The city laced the development with 1 gigabyte fiber internet cable — an effort by the Delta-Montrose Electric Association — as well as traditional infrastructure. Colorado Outdoors’ land donation anchors the new $3 million, 2.25-mile paved trail, which qualified for a $2 million Great Outdoors Colorado grant. The Dragoos and the city also worked with local wildlife managers to rehabilitate the neglected stretch of river.
“We started our project with the river and then the trail and then we started construction of the building,” says David Dragoo, pointing out a heron rookery near the wooded stretch of river behind the new Mayfly digs. “We kind of reversed the process.”
To lure businesses to Colorado Outdoors, the federal, state, city and county governments crafted a laundry list of payments and incentives. The state Office of Economic Development and International Trade stepped up with $10,000 cash for every new job and created, an eight-year exemption from business and employment taxes and other incentives. The state’s Rural Areas Job Tax Credit joined a host of other tax breaks for job training, equipment purchases and health insurance. The county and city offered tax breaks as well.
Trump tax plan’s Opportunity Zones “icing on the cake”
“And then came the icing on the cake,” Doug Dragoo says.
In December 2017, as plans for Colorado Outdoors were well underway, the federal tax overhaul designated Montrose as one of the country’s 8,700 Opportunity Zones, intended to spark development in rural areas and overlooked corners. Among many other things, the designation dismisses capital gains taxes for investors who put money in businesses, equipment and property in the zone for more than 10 years.
Dragoo said once businesses start stacking the layers of incentives up, “it’s a pretty powerful draw” to set up shop in his Montrose project.
“The opportunity zone will help draw investors from the outside to help companies build to suit when they don’t necessarily have the wherewithal to build the own building,” she said. “It’s another carrot to bring them into a specific area.”
Outdoor businesses tend to cluster. Just look at Ogden, Utah, where an army of outdoor businesses transformed the town in the early 2000s. Montrose already has a vibrant manufacturing landscape, with about 10 percent of its workforce in factories, making candy for Russell Stover, building outdoor homes with Colorado Yurt, engineering fly-fishing rods for Scott, aircraft engines for Western Skyways, and archery bows and more for PolyOne. Montrose County has positioned itself as a hub for the blossoming hemp industry as well, with an estimated 1,500 acres of the crop growing across the county.
“Our neighbors in Delta and Mesa counties have suffered with the energy boom and bust, but we have never been beholden to just one industry,” Head says. “Montrose has always worked to be a little more diverse.”
Doug Dragoo hired Colleen Aller to help recruit businesses for Colorado Outdoors. She did the same job as a corporate recruiter for Utah Gov. Jon Huntsman, helping lure outdoor businesses to once sleepy cities like Ogden.
Aller said Montrose is a natural draw for many businesses that have outgrown pricier locations. Homes are affordable in Montrose, where the median value is close to $250,000. Aller isn’t necessarily out there banging on doors as much as answering her own.
“It’s self-perpetuating,” she says. “The opportunity zone, the enhanced rural enterprise zone, the city incentives, the state incentives, the energy incentives. You just start to stack the equity and it becomes a no-brainer. We are not in the job of preaching to people that they need to move here. The project speaks for itself.”
Montrose not alone as smaller cities embrace outdoor economy
Businesses are already circling. But Montrose isn’t alone in its appeal as more municipalities across the country craft enticing packages of deeply layered incentives for outdoor companies.
Dan English, who founded the innovative apparel company Voormi in Pagosa Springs in 2010, is ready to expand. He remembers days where his direct-to-consumer company selling in 55 different countries was tweaking its website and fielding orders using mobile phone hotspots. He’s got manufacturing crews in California and Colorado. He’s producing his own content, meaning he needs reliable internet to engage with consumers as he displays his wool-based products shining in the wet and cold wildlands.
He loves the mountains. He loves Colorado, especially Pagosa Springs. But he’s weary of spotty internet. And, wow, are the offers from other communities appealing, including those coming from Montrose and other internet-rich, airport-anchored cities in Texas and Utah.
English hears a lot of community cheerleaders say they are “business friendly.”
“Well, Montrose walks the talk,” he says. “They truly understand what drives business success and they are willing to bet on key business leaders to help them develop their vision. I think a lot of rural communities are still trying to figure that out. The more collaborative municipalities are, the more they can accelerate business investment. That’s where I think Montrose has a lot going for it.”
As Colorado’s outdoor industry grows — employing more than 511,000 workers, up from 313,000 five years ago — new development is catering to the unique demands of the outdoor economy with amenities like trails, river access and parks. The Riverfront at Las Colonias Park in Grand Junction is a 15-acre park with commercial and retail adjacent to the Colorado River and perhaps a whitewater park and amphitheater. Anchored by zipline juggernaut Bonsai Designs, the park has already lured Boulder’s RockyMounts, which makes car racks.
Golden’s Yeti Cycles has joined Fort Collins developer The Neenan Company in proposinga 25-acre lifestyle campus, just north of Golden on the west side of Colorado 93. Anchored by the venerable bike maker in a new nine-acre headquarters, the still-in-development plan calls for outdoor businesses to occupy buildings in the other 16 acres.
The trio of outdoor business parks are part of Luis Benitez’s grand scheme to champion outdoor recreation as the answer to Colorado’s woes. Too many unhealthy kids? Tired of a sputtering economy? Weary of long metro commutes? Want to protect open spaces? Fill your town with vibrant businesses? Look to the outdoor industry, he screams from every mountain and downtown skyscraper as the state’s pioneering outdoor chief.
“You can’t sit there as a rural community with your hand out. You have to strategize and figure out how to be ready. This is kind of like the Ogden model, but we are so far beyond Ogden at this point it’s extraordinary,” Benitez says. “For years, people have been gun shy about investing in these kinds of projects because things move so slow. Now people are saying it’s not a matter of if, but when. Every rural community in Colorado needs to be gearing up and ready to take advantage of what’s coming. Because it is coming.”