Despite high-profile announcements in the Tucson and Phoenix areas, the state’s reputation as a business-friendly place continues to sink.
Two recent announcements that boosted the Arizona commercial real estate market and the state’s economy provided some good news.
Pharmaceutical giant Roche Group will expand operations at its Oro Valley division, Ventana Medical Systems Inc., and create 500 new jobs focusing on biomedical research.
A few days later, Intel Corp. said it would upgrade its Chandler facilities to produce its next generation of computer chips. While it may not generate many jobs, Intel’s actions show a commitment to stay in Arizona.
Both of these companies earned a number of government incentives for their actions. State laws allow manufacturers to significantly reduce their property and income taxes. Roche also accepted other tax and job-training incentives from state, local and county governments.
Arizona in bottom half in business-friendly rankings
As good as these announcements might be, they hide the fact that Arizona isn’t on the radar of most company site selectors looking for a friendly place to lease or buy industrial, office or retail commercial real estate. The highly regarded Pollina Corporate Top 10 Pro-Business States for 2010 ranks Arizona the 27th friendliest state for business. That’s not very friendly.
Even worse, the state continues to sink in the rankings. It ranked 15th in 2004, 20th in 2005 and 25th in 2006. It fell off the Top-25 list in 2007 and hasn’t been seen there since. We at Commercial Real Estate of Tucson are very concerned that opportunities for real job and economic growth in Arizona are slipping away.
State activity matters. Strong regional economic development organizations can’t do the job alone. When site selectors search for potential commercial real estate locations, they look at the state level first. Then, if they like what they see, they’ll investigate regions or communities in that state. If that first picture isn’t inviting, the local communities don’t get a shot at enticing companies.
By the numbers
The report showed that Arizona
- ranked 34th in the Labor, Taxes and Other Factors categories known as Stage 1 Analysis that the report used to rank the states
- ranked 26th in Incentives and Economic Development Agency Factors, Stage 2 Analysis that helped rank the states
- ranked 35th for high school completion and 33rd of college completion
- received a “D” grade for average teacher compensation
- ranked 33rd in the unemployment rate index with first having the lowest rate
- ranked 46th in the sales and gross receipts tax ranking
- ranked 28th in average cost of electricity per KWH for industrial user
- received an “F” for crime rate.
All the information wasn’t disastrous. Arizona
- ranked 2nd lowest in unemployment insurance taxes paid by employers
- ranked 44th highest in workers’ compensation comparative cost
- ranked 22nd best corporate tax index and ranking
- ranked 23rd best individual income tax
- ranked 13th best in litigation environment
- ranked 24th best in transportation infrastructure
- received a “B” for broadband access.
State must help spur the economy
Intel is taking full advantage of state laws that are in place, but apparently got no other incentives. For the $13 million in additional government incentives to Roche, the state kicked in just $2 million for job training that came from federal stimulus funds.
Luckily, Arizona has some hard-working economic development groups that can have an impact. But as the report shows, the state needs to step up and do its part.
Commercial Real Estate Group of Tucsonspecializes in representing tenants and corporate users across the United States. For more information call 520-299-3400.