Corporate site selectors like Arizona, but other measures show Utah doing something better to close deals.
What can Arizona economic development officials learn from Utah?
We at Commercial Real Estate Group of Tucson ask because a commercial real estate industry magazine recently put the two states close together in an important ranking. Yet Utah is tops in other studies that measure business-friendly states.
If Arizona leaders can find out what makes us different from Utah, maybe we can pump up our economic development, too. That can only help in attracting site selectors looking for Arizona and, especially, Tucson industrial, retail and office space.
Site Selection magazine puts Arizona 17th in its 2014 rankings of the best business climates among states. That pretty much matches other recent rankings, including the Pollina Corporate Top 10 Pro-Business States for 2014 (19th) and Forbes magazine’s “Best States for Business” list for 2014 (22nd).
Utah, in comparison, is at the top of both the Pollina and Forbes lists. Yet it ranks 14th in the Site Selection poll, a mere three spots ahead of Arizona.
We like the Site Selection rankings because it includes a survey of corporate site selectors, the people who actually deal with government officials when considering where to expand, move or open their companies. Their opinions make up 50 percent of the points awarded for the rankings.
In that survey, Arizona was ranked 16th, right with Utah.
So if site selectors have equal experiences dealing with Arizona and Utah, what is Utah doing to rank higher overall
According to the magazine’s “2015 State of the States” report, it could be about taxes and incentives.
In that report’s rankings, Utah places 9th in the Tax Foundation’s 2015 State Business Tax Climate Index, while Arizona sits at 23rd.
Utah comes in at 18th for the Incentives Transparency Index, which, for this report, measured incentive deals between January 2010 and November 2014. Arizona ranked 31st.
In four other measures, Arizona actually did better than or about equal to Utah.
Why Utah Excels
Obviously, Utah officials know how to close deals, backed by a tax system that, according to the Tax Foundation, is levied “with low rates on broad bases.”
The Pollina report credits Utah with having strong state government leadership that “understands the challenge of global competition and has developed and implemented a plan to meet that challenge.” The state has remained in the report’s top spot for three straight years.
Forbes was equally impressed with Utah’s economic development efforts when it put it back in its top spot, the fourth time since 2010. “A pro-business regulatory climate, low energy costs and robust employment outlook returns Utah to the No. 1 ranking,” heralds Forbes.
Can Arizona Catch Up?
Forbes had hopeful things to say about Arizona, saying the state’s “job and economic growth forecasts over the next five years are among the best in the United States.”
State officials are helping that along with more business tax breaks. It’s in the process of dropping its corporate income tax from 6.5 percent to 4.9 percent by 2018. “Once implemented, these reductions will improve Arizona’s score on corporate income tax,” according to the Tax Foundation.
Two tax-friendly incentives went into effect last year:
- a new tax credit for renewable energy investment if the power will be used for manufacturing
- a state sales tax exemption on electricity and natural gas purchased by manufacturers and smelters.
Site selectors already think well of Arizona when they start considering places in which to locate or expand. We can hope that, armed with additional business-friendly incentives, the state can close deals that will result in good jobs and a strong economy.
Commercial Real Estate Group of Tucson specializes in representing tenants and corporate users across the United States. For more information, call 520-299-3400.