February 2, 2012 The Simple Truths of Economic Development CB RICHARD ELLIS Presented to: 2012 ACMA Winter Conference Presented by: John Lenio, Economist & Managing Director Economic Incentives Group (EIG)

CB Richard Ellis | Page 2 Creating Public/Private Partnerships Global Research and Consulting

CB Richard Ellis | Page 3 The goal of Economic Development Finding the pot of gold Global Research and Consulting

CB Richard Ellis | Page 4 Jobs Capital Investment Tourism / Retirement What Drives Tax Revenue Growth?

CB Richard Ellis | Page 5 Company ABC

CB Richard Ellis | Page 6 The Ripple Effect 100 new jobs in Chemical Manufacturing 456 spinoff jobs created 4.56 employment multiplier 41 jobs => Healthcare 32 jobs => Wholesale trade 31 jobs => Admin support services 28 jobs => Restaurant & bars 26 jobs => Government

CB Richard Ellis | Page 7 Corporate Site Selection

CB Richard Ellis | Page 8 Business Climate Rankings

CB Richard Ellis | Page 9

CB Richard Ellis | Page 10 Sold by the Sizzle Follow the Herd Sophisticated Three Approaches to Site Selection

CB Richard Ellis | Page 11 INCENTIVES = TIE BREAKER REAL ESTATE = ENABLER LABOR / TRANSPORTATION = DRIVER The Site Selection Equation = Best Economic Opportunity

CB Richard Ellis | Page 12 Actual Business Case

CB Richard Ellis | Page 13 Global Research and Consulting It’s all about Getting in the Game and Closing the Deal.

CB Richard Ellis | Page 14 Tax & Incentives Policies

CB Richard Ellis | Page 15 What Can’t You Control?

CB Richard Ellis | Page 16 Purpose of Economic Incentives Address Cost Disadvantages Revitalize Distressed Regional Economies Induce Favorable Economic Activity

CB Richard Ellis | Page 17 Net Effects of Incentives Reduce Operating Costs Lower Start-up Investment Global Research and Consulting

CB Richard Ellis | Page Economic Incentives Environment

CB Richard Ellis | Page 19 Arizona

CB Richard Ellis | Page 20 Observations of Arizona Tax Policies Middle of the pack in corporate income taxes (6.97%) Reduction to 4.9% by 2017 (one of the 10 lowest) Top 5 highest states = PA, Washington DC, Minnesota, Illinois, New Jersey States with no corporate income tax = Nevada, Texas, Washington, Wyoming Being the lowest doesn’t make you more competitive.

CB Richard Ellis | Page 21 Observations of Arizona Business Taxes Personal property taxes can be a deterrent to attract and retain capital intensive opportunities. Accelerated depreciation can be helpful. Maybe… Assessment ratio reduction. Sales taxes are high (9.0% average – 3 rd highest). No gross receipts or inventory taxes are a significant benefit.

CB Richard Ellis | Page 22 Observations of Arizona Incentives Policies Quality Jobs Tax Credit Program (new in 2011); Arizona Job Training program; Renewable Energy Tax Credit Program; Arizona Competes Fund;

CB Richard Ellis | Page 23 Observations of Arizona Overall Competitiveness Arizona is getting into the middle of the road; Other states are more aggressive with designed payroll rebate programs and relatively plentiful discretionary cash grant programs; Business development efforts outside the Commonwealth could use improvement;

CB Richard Ellis | Page 24 Final Thoughts

CB Richard Ellis | Page 25 Focus business development efforts on the industries that you can be good at; Tailor advantages of locating in the region based on the hot buttons for each target industry; Consider a regional approach to economic development. What is good for your County / City is also good for nearby communities; Partner with the Arizona Commerce Authority to show a united effort with prospective Companies;

CB Richard Ellis | Page 26 Optimize local incentives policies based on what matters most to target industries; Incentives might be needed to get in the game and especially to close the deal with a competitive opportunity; Remember the difference between local serving industries and basic sector companies; Don’t give away more money than you need to;

CB Richard Ellis | Page 27 You can’t just sit back & wait for things to happen. Keep diversifying your economy.