Cover Story

Greater Expectations: The Spotlight is On Arizona. Can We Perform?

Appraising our prospects as we emerge from the pandemic

by RaeAnne Marsh

There is tremendous opportunity in Greater Phoenix to grow business and continue diversifying our economic and employment base that will bring opportunity for our residents and move our innovationcentered economy forward. Supporting this assessment, Chris Camacho, president and CEO of Greater Phoenix Economic Council, says, “To meet the increasing demand, buildings continue to go vertical in every corner of the region. From class A office to industrial space, investors and construction leaders know the opportunity in Greater Phoenix is abundant.”

THE MARKET NOW – SURGING

Business growth and population growth go hand in hand, observes Micah Miranda, economic director for the City of Chandler, and notes, “People are moving here because of great job opportunities that promise a better quality of life.” On the business side, he notes access to talent is one of the top factors in most corporate location decisions, and “businesses choose Metropolitan Phoenix knowing they can draw from a large labor pool that will grow with them.”

“While the pandemic augmented inequities in our communities, it also brought new opportunities as industries needing skilled labor continued to move into Arizona,” says Steve Seleznow, president and CEO of Arizona Community Foundation. With global corporations announcing new facilities in our region every day, from the expansion of Intel to CIS Global, along with immense growth for businesses with local roots like Carvana and Banner Health, “opportunity is around every corner,” he observes, noting, “While small, service-oriented business across our state had an extremely challenging year, they, too, are beginning to see signs of recovery, since more people means more services will be needed.”

Camacho cites figures that support this view: In Fiscal Year 2021 alone, GPEC and its partners led the attraction of 34 companies, resulting in the creation of nearly 8,000 jobs and $12.8 billion in capital investment. There are currently more than 253 companies from around the world in GPEC’s pipeline that are actively evaluating the region for expansion or relocation. These projects represent more than 40,000 jobs and $30.7 billion in capital investment potential. Of those projects, more than 20 have job totals exceeding 500 and $100 million in capital expenditures. “COVID shined a light on the shortcomings of high-cost, coastal markets like California and that’s why GPEC launched the #AZFreeToBe campaign as part of our larger omni-channel business and talent attraction strategy,” he says. “Our emphasis is on the attraction of California manufacturing and tech companies and knowledge-workers with increased professional mobility as a result of the pandemic. At its core, the hashtag and campaign encapsulate the region’s advantageous business climate and the quality-of-life attributes that make Greater Phoenix, and the state as a whole, the best place to live, work and explore.”

Lori Collins, president-elect of the Arizona Association for Economic Development and deputy director of economic development at the City of Mesa, notes that, while companies relocating to Arizona get a lot of attention, some of the most exciting economic development news this year has come from the expansion of businesses that have operated here for quite some time — a change from a decade ago. “Greater Phoenix is seeing growth in every industry sector from semiconductors to life sciences to logistics and distribution,” she says. “That is happening because the labor pool is strong, our infrastructure is modern and expanding, and the stable operating environment encourages investment.”

“Having lived in Arizona through the deep recession of 2007–2008, there are two main things I see that are different for the better,” says Doug Bruhnke, founder and CEO of Global Chamber. “First there are many more global businesses operating in Phoenix and the region now, and that has several advantages, including stable funding and management, diversity of businesses and strength of a portfolio of companies. Second the cities and GPEC have done a good job of collaborating and focusing on attracting solid companies in tech, manufacturing and more to avoid what happened last time when the economy dropped like a rock when construction fell. We learned and got balanced.”

WHAT THE OPPORTUNITY IS FOR BUSINESS

“For me one of the most encouraging signs is the ‘Phoenix Global Rising’ initiative which dares to claim Phoenix as a leading global city,” Bruhnke says, contrasting now to the last deep recession and sharing that Global Chamber recently prepared an “Invest in Arizona” presentation for Japanese companies that highlights the dynamics in economics, logistics and technology that are making Phoenix a global place to be.

And Mignonne Hollis, president of AAED and executive director of the Arizona Regional Economic Development Foundation, points to Arizona’s low cost of entry for entrepreneurs wanting to start a business. “The regulations and red tape are minimum, and many barriers have been removed,” she says.

Speaking for Chandler, for instance, Miranda says, “Locally, our Chandler City Council is committed to a vision of long-term, sustainable economic development. City Council recently adopted a Strategic Framework to guide growth in Chandler over the next few years.” Economic Vitality is one of five focus areas, which, according to Miranda, calls for the city to offer “a supportive business environment for global industry leaders, exciting startups and entrepreneurs through every stage of business development.” Noting that having a consistent “pro-business” message from the state level on down is critical to economic development, he says, “Businesses feel secure investing in Chandler because they know there is political support and stability.”

Mesa has also seen noteworthy economic activity throughout the city this past year. Companies such as Amazon, Boeing, Banner Health, Dexcom, ElectraMeccanica, CMC Steel, NTT, Comarch, Bonelli Doors & Windows, Rosendin Electric, Mechnano and many others are locating or expanding significant operations in Mesa. “This activity,” says Mayor John Giles, “is creating myriad jobs and large capital investments in our community.”

To make room for these and other forthcoming employers, commercial development is booming. “Today, we estimate more than nine million square feet of Class A industrial space is planned or under construction in Mesa,” says Mesa economic development director Bill Jabjiniak. “Furthermore, hundreds of thousands of square feet of new industrial aviation and hangar space is under construction at both Falcon Field Airport and Phoenix-Mesa Gateway Airport.”

In the City of Phoenix, Mayor Kate Gallego points to the Taiwan Semiconductor Manufacturing Company that recently announced

it will open a fabrication plant in north Phoenix. TSMC will create thousands of jobs, with thousands more to come as their suppliers begin to co-locate near the facility. “With the arrival of TSMC, Phoenix and Arizona are positioned to become global leaders in this sector,” she says.

Along with this, Phoenix is also demonstrating business and economic development leadership in bioscience R & D, advanced manufacturing, and electric vehicles and infrastructure. “Our portfolio continues to expand because these businesses appreciate Phoenix for its highly trained workforce, its livability, and its affordability,” says Mayor Gallego, pointing out that even with the recent explosion of residential real estate activity, it is still less expensive to live here than in many other large American cities.

HOW WE GOT HERE

With more than two decades’ experience in her field, Phoenix’s community and economic development director Christine Mackay says, “I’ve never seen a market like today.

“We’re reaping the benefit of all the work our development community put in, in the time that was the Great Recession,” she adds, explaining that universities, community colleges and the development community partnered together to create a sustainable economy.

Previously, the economy had been built on growth — resulting in a very cyclical economy. “We’d build things — houses, buildings, industrial buildings. Government made money and they could supply their parks and their streets. We’d have a recession and go down a little bit, then we’d hockey stick back out again and then go right back to growth. And everything was fine.

“Except our graduates our of our community colleges and universities were leaving the market because they couldn’t find the jobs they wanted in this market.”

Mackay acknowledges that we did have some great industries in semiconductors, aerospace, and aviation and defense. But she notes they were legacy sectors from ‘40s through the ‘70s, and the new sectors from the ‘90s and early 2000s had not followed that earlier manufacturing trend. “So in the Great Recession, we all got together and said we can’t do this anymore. We have to create Arizona, the Metropolitan Phoenix area, as a place where the knowledge economy wants to come. We have to be competitive.”

She credits the universities and community colleges for taking the lead in that effort by ensuring their educational programs, graduate programs and undergrad, matched the needs of these new, leadingedge sectors.

“Beyond talent,” Mackay says, “companies know that we offer a very supportive business climate. Our state and local leadership understand the importance of economic development. Unlike some other states, Arizona looks to remove unnecessary regulatory barriers to business growth. The state has also established programs to encourage capital investment and job creation, like the Qualified Facility and Quality Jobs programs. These things signal that here in Arizona, we value the investments businesses make in our communities.”

And in 2014, she says, we really started to move forward, reaping the rewards of the collaborative efforts. “What you see today in these great manufacturing companies, in these great knowledge economy companies, in these electric vehicle companies, autonomous vehicle companies, cybersecurity and info tech — it’s the outcome of all the work that we did together. And we are not going back.”

Says Carrie Kelly, executive director of the Arizona Association for Economic Development, “You can’t throw a stick and not hit a new development or business opening in Greater Phoenix.” She points out economic developers have been working overtime, especially over the past year, as Greater Phoenix has attracted many new businesses, but also notes, “What is often missed is the work that was done this past year to retain businesses.” While many states have experienced vacancies and loss, Arizona businesses have been able to sustain themselves with federal, state and local support.

Kelly also points out, “Outside of Greater Phoenix, Arizona has a lot of land and many wonderful communities to welcome businesses.” For example, Mohave County has experienced new industries like Progressive Pipe Fabricators locating in the area and other companies expanding. “One of the strengths of Arizona’s rural communities is our community college system.” She credits Mohave Community College for working hand-in-hand with the community to create a workforce development plan and educational programs to address workforce pipeline deficiencies. Additionally, the recent legislation allowing community colleges to offer four-year degrees to address workforce shortages will have a lasting impact on rural communities in attracting and retaining a workforce.

HOW WE MAKE THE MOST OF OUR POTENTIAL — WHAT WE’RE DOING NOW

“We are making the most of our potential by continuing to court, in a systematic way, the organizations that fit best with the business ecosystems that are thriving in Phoenix,” says Mayor Gallego, naming semiconductors, advanced manufacturing, biosciences, electric vehicles, healthcare professions, financial services and construction.

“Phoenix is the fifth largest city in the nation; we are also the fastest growing,” Mayor Gallego says. “By continuing smart management of that growth, we are making Phoenix even more attractive.” One example is the way we Phoenix investing in workforce development, helping its residents upskill into the jobs that are most in demand. Another is support of education, including early childhood programs, as well as programs that support lifelong learning and the ability to gain new skills.

“We are constantly finding new ways to enhance the quality of life in Phoenix, something that is quite attractive to businesses interested in developing a presence here,” Mayor Gallego continues. This year, Phoenix will create the nation’s first-of-its-kind Heat Mitigation Office, charged with finding and implementing innovative programs like its Cool Pavement pilot that is expected to show temperature reductions of 5 to 10 degrees in the areas that have been treated with this special street surface.

She further notes, “Because we live in a desert environment, we’ve spent decades carefully planning for a secure water future.” Noting that Phoenix has a robust and diverse water portfolio that employs dozens of strategies that keep us in good shape even during an extended drought, she says, “The city, its businesses and residents have embraced a culture of water conservation.” Evidence of its effectiveness is the fact that residential homes in Phoenix use less water today than they did in 1990. “We also work to bring businesses that use water carefully, with an emphasis on re-use and recycling.”

Emphasizing the need to prioritize economic development and target the right type of growth, Miranda shares, “Here in Chandler, our city council is looking to maintain the viability of employment corridors and plan for the use of remaining unbuilt properties.” With the population surging, he says there is pressure from the housing industry to rezone land designated for employment. “Communities should be strategic regarding which properties they are willing to rezone to residential and which should be preserved for employment.

“Because talent is so important to business growth, we also must communicate with our higher education and workforce development partners,” Miranda continues. Chandler has, therefore, facilitated conversations with human resources representatives from area businesses. “This helps ensure that Arizona students and residents have opportunities to develop the skills needed for the types of jobs we hope to attract.”

Mesa’s efforts were recognized in a Small Business Recovery Report released by QuickBooks, where the City of Mesa was ranked No. 4 for post-pandemic small-business recovery in the U.S. The city’s Mesa CARES programs provided businesses with strong support through rent and utility assistance grants, technical training and education, personal protective equipment and marketing programs. Jabjiniak and Mayor Giles point to new businesses filling long-vacant spaces, especially in Downtown Mesa. “Our investment in infrastructure such as light rail and the attraction of ASU to Downtown Mesa has been pivotal in our recovery efforts,” says Jabjiniak. “And we are seeing large mixed-use and market-rate residential development projects under construction or in the planning process for Downtown.”

The City of Phoenix is also cultivating its transportation and transit options. Phoenix Sky Harbor Airport is a city-owned major airport — Mayor Gallego points out that it is, essentially, Arizona’s airport — and a huge asset to companies that do business here. “We are committing to ensuring this economic engine has the resources it needs to support our business community,” says Mayor Gallego, noting that there is support from the federal government for transit and transportation as the city continues to expand light rail; improve its streets and bus systems; and make the streets safer for vehicles, pedestrians and cyclists. “You can enjoy our city best when it is easy to get around. We are creating that reality right now, throughout Phoenix.”

The city is also working with small businesses to not only ensure their post-pandemic survival but to help them thrive in the new business environment. For instance, the Phoenix Small Business Toolbox is a suite of services specifically aimed at helping small business owners find everything from human resources support to networking resources to employee training. And the city has simplified and streamlined the permitting process to make small business success even more attainable. Additionally, says Mayor Gallego, “Since access to capital is critical, especially to small and micro businesses, we created the Kiva Hub in partnership with the BBB and Go Daddy. Through Kiva, owners can obtain loans of $1,000 to $15,000 with no interest.”

And Bruhnke notes the City of Phoenix is sponsoring the Global Chamber “Export League” — which will soon start its second cohort - to help regional firms reach ideal clients in foreign markets, bringing back export dollars to support more growth.

Looking beyond Greater Phoenix, Kelly credits the ACA for taking the lead on broadband investment, holding workshops for rural and tribal communities. “There have been funds allocated through the CARES Act for broadband funding, and it is anticipated the state legislature will allocate more funds for broadband.” She emphasized, however, that even if funds are available, infrastructure planning is a critical piece to funding.

And Hollis points to economic development activity in Cochise County, where the Arizona Economic Development Foundation operates two business incubators and just finished the first cohort of Co-Starters. In conjunction with the Small Business Development Center, regular business hours are held for counselling. “Communities of all sizes — rural and urban — must work together to strengthen the Arizona economy,” she says.

This is, in fact, what is happening. Says Camacho, “GPEC, our 22 member communities and Maricopa County, more than 180 private investors, and through our work with state leadership, are all working toward a common goal: to make Arizona and Greater Phoenix the best place to live and work.”

But it’s a complex set of initiatives that will be critical to our long-term growth and ability to compete for what Camacho dubs “mega projects” and those within advanced technology-focused sectors. He adds, “We also have to ensure that we’re investing in the entrepreneurial ecosystem and providing the requisite level of support to the companies and founders here in Greater Phoenix.”

Camacho reports an influx in venture capital activity to the tune of $1.6 billion in funds was raised by local companies in the last decade, with 33% of it ($546.5 million) raised in 2020 alone. He believes the region’s collaborative and innovation-centered approach coupled with recent policy initiatives enacted at the state level to support Fintech and Proptech — where startups and entrepreneurs can develop, test and deploy innovations without overregulation - are

helping grow business locally. Recently, Sonoran Founders Fund announced they will invest $10 million in venture capital in Arizona and regional startups. “This type of support and funds choosing to setup shop locally is important as we move our modern economy forward with the vision of cultivating IP, building homegrown companies that turn into name brands, and reinvesting in the ecosystem to foster long-term growth,” he says.

Referring to the adage, “It takes a village to raise a child,” Mackay says it took an entire state — at the state level and all the cities - to really birth a solid economic development strategy for the State of Arizona. She makes a distinction between cities competing with each other for locates — “That’s our job,” she says — and fighting each other. “We’re fighting against Asia, Texas, Salt Lake City …”

She explains, “There’s a bird on my paycheck, so it’s my job to win the project for the City of Phoenix. But if I can’t win it for Phoenix, my next job is to win it for the region. And if I can’t win it for the region, my next job is to win it for the State of Arizona.” After all, she points out, even if Phoenix loses the project, its citizens are getting jobs. And the business’s employees will shop in Phoenix. It’s an economic development ecosystem that’s created. Says Mackay, “All economic development directors are always working in close collaboration to build the Arizona we know it can be.”

HOW WE MAKE THE MOST OF OUR POTENTIAL — WHAT’S NEXT

“Statewide, we have many opportunities and momentum, but we need to come together to plan for the future,” says Kelly, emphasizing the need for collaboration on a united, long-term economic development vision and goals. “We need all Arizona residents to be covered by regional visioning processes, and we need regional economic development plans to be aligned with statewide goals.” These long-term visioning processes need to include economic development, land use, infrastructure and broadband, community planning, and sustainability.

Focused on Greater Phoenix meeting the demands of current and future industry, Camacho says, “As business leaders place higher emphasis on talent and labor availability, cost containment, grid stability, pro-business policies and the advancement of diversity, equity and inclusion strategies, the region must continue to lead in these areas and make the requisite decisions that positively impact our regional competitive position and brand.” He sees long-term, equitable growth being achieved through advantageous tax and economic development polices as well as significant investment in our region’s education system, infrastructure, and use of clean and renewable energy.

Actions he feels will be critical are advancing pro-business tax and regulatory policies, strategic investment in statewide infrastructure and transportation networks, promoting policies that encourage the use of clean and renewable energy, supporting the growth of univ research programs and grads through efforts like the New Economy Initiative, and aiding the alignment of Maricopa Community Colleges and local school districts with industries of the future.

“Cities also should make sure that business attraction efforts are aligned with their economic development goals,” Miranda says. Sharing that Chandler has a number of target industries it focuses on because they fit the city’s workforce, create quality jobs and will continue to be relevant in an increasingly technology-based economy, he says, “We want the development of our remaining land to support the growth of these target industries.”

Being resource-conscious is also important, Miranda notes, observing that land and water are finite resources, and water especially has been getting a lot of attention lately. “In Chandler, we look to our Council-adopted water allocation policy when considering business projects,” he says. For example, a high-volume user is expected to generate an economic impact that justifies its resource use. “Adhering to this policy allows Chandler to grow while maintaining a sustainable water supply for existing and future users.” He believes water supply is a key issue for every community throughout Arizona.

Don Henninger, executive director of SCOTT, puts it more bluntly: “We also need to get our collective heads out of the sand and get serious about dealing with potential water shortages, as we are in a long-term drought that may continue for years to come.” He believes we have become complacent over this issue due to having been lucky up to now in not having to deal with the negative effects. “We like to promote that fact that we don’t get earthquakes or tornadoes in Arizona,” he says. “That’s nice, but I sure wouldn’t want to say in 10 years that we don’t have enough water to sustain our economic growth.”

Water is one of five types of infrastructure Mackay names as most important — the others being streets, sewer, telecommunications and gas. Investing in infrastructure is key to making the most of our potential, she emphasizes, noting that infrastructure and sites have to be shovel-ready “because we’re competing in a global economy now, and that global economy has the infrastructure.”

“Businesses in Arizona’s rural communities also play a vital role in the economic development ecosystem,” says Hollis. Many of these rural communities operate incubators, hold classes and offer counselling for business owners and entrepreneurs.

But Kelly notes that investment in broadband and education will be critical for future rural success. “Arizona can have the lowest tax rate and the best incentives or tax credits, but if Arizona does not have the infrastructure or a qualified workforce to sustain growth and investment, companies will look elsewhere,” she says. Also coming to the forefront of economic development issues for cities and town is affordable workforce housing, especially as construction supply chains have been disrupted and costs are increasing for development. Says Kelly, “Affordable housing is an issue that all Arizona communities will need to address to sustain growth, and it will likely take policy intervention to solve, like an affordable housing tax credit.”

Past or even current success cannot be the end of the story. Says Collins, “We must continually evaluate Arizona’s competitiveness and not grow complacent with the successes we have had.” Priorities for which AAED advocates are a tool kit to advance Arizona’s strong business climate that is modern and flexible, enabling legislation that encourages the creation and testing of new products as well as the scalable growth of innovative companies, and policies that aim to increase small business creation and ownership. “Finally,” she says, “we need to recognize that sustainable spending on education is an investment, not a cost.”

Mackay also emphasizes the importance of continued support of universities and colleges. “Because they’re spinning out the thing that a city can’t create: the workforce,” she says, observing that cities can create a place where the workforce wants to live, create a great place for their families, but can’t create the workforce. “That’s the job of our educational institutions.” And they do, in fact, work very closely with the business community on a daily basis, according to Mackay, getting guidance and feedback. “For instance, for TSMC, ASU went with me to Taiwan to hear first-hand what they were looking for.”

Seleznow believes that investing in talent within our communities is critical for us to live up to our full economic potential, no longer relying on bringing in talent from elsewhere but investing in education for students from Pre-K through postsecondary in every Arizona community. “An educated workforce brings in businesses that provide living wages and flexibility to those who need it,” he says, “and that talent pool attracts more businesses in a self-perpetuating cycle.”

To that end, ACF provides more than $5 million annually in scholarships for college and technical training to Arizona students, and invests in Arizona’s future through grants to nonprofits that support P-12 education in communities across our state. But he notes that, as with any big challenge, the philanthropic sector can only do so much on its own. “Public-private partnerships and policy changes are needed to keep momentum going in a big way,” he says. “If Arizona hopes to continue growing the business sector, it needs to show a commitment to local talent and promote inclusion for all who contribute to our collective success.”

Henninger points also to the need for more creative partnerships at all levels of education, from universities and community colleges to K-12 schools, as he notes, “Right now, the state, and Metro Phoenix in particular, is creating more jobs than there is talent to fill them.” He believes the state’s community colleges, especially, can be effective life-long learning centers for the technology and manufacturing jobs that will be the foundation of the state’s economic growth. But first, the state needs to get serious about funding all levels of education. Says Henninger, “If Arizona is to fill the talent pipeline then it better start investing more to develop it, and that’s all about the educational system. The state has yet to face up to that.”

Affirming the need for long-term economic development strategies at the state, regional and local levels to guide policy decisions, how we invest in human capital to drive economic growth and how we allocate our finite natural resources, Miranda says, “Vision and cooperation are needed to achieve our potential.”

Cooperation may, in fact, be our greatest strength, at least as Mackay describes our business environment. She credits the business community overall with being helpful to economic developers by providing an accurate overview of what’s going on in the market; what it’s like to be in the market; and being really welcoming to new business coming in, to help them get the lay of the land. Regarding new businesses locating in this market, she says, “It’s hard to be the last one in the door. But there’s not anyone in our business community that I don’t call and say, ‘Can you go grab a beer with this company and tell them what it’s really like to be here, or could they come pick your brain on what it was like to hire your work force,’ who won’t take my call and take my request immediately.”

She acknowledges that outsiders might expect established business to shut out new ones because, for example, they would be fighting for the same workforce. “But Arizona is just different,” she says. “We have a different mentality. I think it goes back to our DNA. We built a city where a city should never have been able to be built in the middle of a desert. So we had to work together to survive.” She points also to the overwhelming sense that everybody comes from someplace else, so there’s none of the exclusionary “we’ll lock you out if you don’t have roots here” or legacy companies that have been here for 200 years and tell everybody what to do.

“Our secret weapon in Arizona is how easy it is for companies to be new,” Mackay says. Other places can’t copy it in any sustainable way; it’s not in their nature. “For us, it works organically.”

Says Camacho, “By making the right policy and investment decisions, we’ll continue to bolster our position and remain the most attractive place for businesses and residents to operate and live, while ensuring equity is at the forefront of everything we do from an economic standpoint.”

Mesa’s Jabjiniak shares figures that support optimistic expectations:

The 2020 Census population count for Arizona was 7,151,502, an 11.9% increase over the previous decade, landing Arizona among the 10 fastest-growing states. “Although the pandemic is still influencing Arizona’s economic recovery, we expect to see continued recovery and growth,” he says. According to a University of Arizona report, Arizona has generated 236,700 new jobs over the last year, seeing a 71.4% replacement rate of jobs in our labor market compared to the U.S. replacement rate of 63.3%. The report goes on to say we will reach pre-pandemic numbers sometime around Q4 of 2021 and then create as many as 778,000 new jobs over the next decade.

Arizona Association for Economic Development aaed.com Arizona Community Foundation azfoundation.org City of Chandler chandleraz.gov Global Chamber globalchamber.org Greater Phoenix Economic Council gpec.org City of Mesa mesaaz.gov City of Phoenix phoenix.gov SCOTT scottnow.com