Arizona Regroups for a Stronger Foundation
31 Oct, 2012
By David Hodes
Arizona is on a determined path to rebuild its economic engine, rising from the economic meltdown that claimed many jobs in the housing construction business. The state’s economic developers have had to cut their losses and regroup.
Leading the charge is the Arizona Commerce Authority (ACA), a relatively new entity that was the result of a strategic guided approach by Gov. Jan Brewer and community leaders in the state beginning in June 2010. The public/private partnership ACA is governed by a 19-member board that consists of the governor, the president and CEO of the ACA (Sandra Watson is now the interim president and CEO of the organization) and 17 private sector CEOs.
There are also ex-officio members that include the speaker of the house, the president of the senate and the presidents of each of the state’s three public universities. “So we have a 31 member board,” Watson says. “And the significance of that is we have an executive branch, a legislative branch, business, community and academia all working towards a common goal to strengthen the state’s economy through job creation.”
The ACA began its second year of operation as of July 1 and is in the process of putting an annual report together. “We are very excited about the foundation that was laid,” Watson says. “And the pro-business environment that has been created by the governor and the Legislature.”
The focus of the ACA through their five-year business plan approved in May is to create 75,000 jobs representing $6 billion in capital investments. “We are pursuing very aggressive goals,” Watson says.
One of the ACA’s competitive economic development packages includes a 33 percent reduction in corporate income tax, with an additional phasing down of the corporate income tax to 4.9 percent by January 2014. The state has one of the most aggressive research and development tax credits in the country, Watson says.
There is also a focus on an increase in personal property tax exemptions for small or large businesses. “That is really a highlight for small businesses,” Watson says. “As you increase that personal property exemption that reduces their tax liability and sometimes eliminates it completely.” There is also an angel investment tax credit, where a small business would not pay taxes on the capital gains that they received based on that investment.
Industries And Innovations
A common theme in recent projects coming to or expanding in the state is research and development, Watson says. For example, Accelr8 Technology Corp., a developer of innovative materials and instrumentation for advanced applications in medical instrumentation, basic research, drug discovery, and biodetection, will move its corporate headquarters from Denver to Tucson, bringing high-skilled, high-wage jobs to southern Arizona with plans to fill 65 positions during the next three years. The company plans to grow to 200 to 300 employees in subsequent years. “Our R&D tax credit was clearly an area of interest for this company,” Watson says.
Flagstaff has a number of targeted industries, including biosciences, which is fairly strong there, says John Saltonstall, business retention and expansion manger for the city of Flagstaff. “It spins off a number of other industries including medical devices, software development, research and development,” he says.
The city has a robust entrepreneurial environment, he says, including the 10,000-square-foot Northern Arizona Center for Entrepreneurship and Technology (NACET), a business incubator that partners with a wide variety of non-retail, service, manufacturing, high technology, science and renewable energy firms. Saltonstall says that the NACET has been growing “by leaps and bounds,” since the founding of the incubator in 2001 followed by a rebranding six years later. The NACET recently secured a United States Department of Agriculture (USDA) grant of nearly $100,000 to develop a Native American technology network.
Flagstaff is also hoping to land a data center, with officials citing the average ambient temperature of the city as considerably lower than points south in the state, Saltonstall says. “We haven’t had one land yet,” he says. “But we still keep plugging away on getting one.”
Peoria, a relatively built-out bedroom community, is attempting to turn to a more diversified economy with the land it has available. “We are looking to go after a number of target industries,” Scott Whyte, director of economic development services for Peoria says. “Those industries that have grown through the recession and are likely to grow once the recession is fully over.”
Top of the list in Peoria is health care and biosciences, renewable energy and any corporate headquarters or centers of excellence, Whyte says.
The city recently landed Maxwell Technologies, based out of San Diego, a manufacturing and marketing energy storage and power delivery solutions for automotive, heavy transportation, renewable energy backup power. The company will be expanding into the city occupying approximately 120,000 square feet and bringing 350 jobs. “It is really of interest to us because it’s a targeted industry with a workforce that is highly educated,” Whyte says. “We look at the quality of jobs, not just the quantity of jobs. We are more interested in higher education, higher wage jobs even if means fewer of them.”
Talent And Education
The state boasts three public universities: Arizona State University in Phoenix, Northern Arizona University in Flagstaff and the University of Arizona in Tucson.
Maricopa, a growing community affected like most of the state by an economic downturn in housing construction, is rebounding. One highlight of the area and an attraction for future business growth is the cluster of local industries and research facilities in the agritech sector.
These include state universities, federal research centers and emerging companies utilizing intelligent crop science to produce clean technology. For example, the University of Arizona Maricopa Agricultural Center works to develop, deliver and service the best integrated agricultural technologies for problems faced by crop consumers and producers. Research focuses on cotton, grains, alfalfa, specialty crops and entomology.
“They do a lot of research on crop hybridization for maximum production on land, with a focus on water management,” says Micah Miranda, economic development director for the city of Maricopa.
One unique educational asset for Flagstaff is the astronomical sector represented by the Lowell Observatory, a private non-profit research institution that just added a new 4.3-meter telescope. “There is an astronomical incubator here that is home to astronomers from all around the world who are able to write their own grants and then come and house themselves here in Flagstaff,” Saltonstall says.
The Salt River Project (SRP), the third-largest public power utility in the country and the largest provider of water and power to the Phoenix metro area, is an asset that’s at the heart of economic development in the greater Phoenix area. SRP is actually two entities: the Salt River Project Agricultural Improvement and Power District; and the Salt River Valley Water Users’ Association, a private corporation.
The district provides electricity to nearly 950,000 retail customers in the Phoenix area. It operates or participates in 11 major power plants and numerous other generating stations, including thermal, nuclear, natural gas and hydroelectric sources.
“We are constantly looking at our grid,” says Ed Grant, the economic development project manager for SRP. “And the idea there is once a company has identified either a parcel or set of parcels, we are engaged with them early on in the process conducting transmission and distribution planning groups to advise them and maintain the thresholds that we need to reliably service them.”
Grant says that there has been a marked increase in folks that are interested in green technologies — solar and wind power. “We feel like one of our better programs is solar, where they can essentially buy shares in a photovoltaic plant that we have,” Grant says. “That allows them to better articulate to their customers and their shareholder members that at least a portion of what they are generating is occurring through these green technologies.”
One example of solar energy produced in the area is the Copper Crossing Solar Ranch in Florence. It’s been online since September 2011 producing solar energy using 66,000 solar panels. This 20-megawatt facility is expected to produce approximately 54 million kilowatt-hours annually — enough energy to meet the needs of about 3,700 SRP customers’ homes each year.
Ready with land and infrastructure is Prescott Valley, a relatively new community (just shy of 40 years old) of 40,000 people nestled between the Mingus and Bradshaw mountain ranges in central Arizona between Flagstaff and Phoenix. “All the infrastructure is new, it’s all in place,” says Gary Marks, executive director, Prescott Valley Economic Development Foundation. He says the community has the ability of greenfield site development, with in excess of 150 acres of shovel ready sites. “We have an abundance of up to 20,000-square-foot facilities for that quick startup company to grow up,” Marks says. “I can easily see adding aerospace manufacturing services there, plus we have the backbone for call centers.”
The lifestyle amenities of the state have made it a favorite of families and businesses alike. Prescott Valley, at an elevation of 51,000 feet, is high enough to stay out of the heat and low enough to stay out of the cold, with direct access to diverse amenities. “You can ski in the morning then play golf in the afternoon,” Marks says.
Living in Flagstaff is “like a dream come true,” Saltonstall says. “We live in the largest ponderosa forest in the nation. So we have extremely clean air here.”
That city, though somewhat isolated and less impacted by economic downturns mostly occurring in the southern part of the state, nevertheless echoes what many cities in the state say: the recession is over but the pain of recovery from the woes of the housing construction industry are still hard to overcome. “Words that come to mind are I would hope we would be more vibrant,” Saltonstall says. “I hope that we would have some of those companies that are graduating from our business incubator that would be a publicly traded company here in town in the next three to five years.”