Look past the Valley’s long, slow climb out of a difficult recession to the next 10, 20, even 100 years and you see a potential hotbed of wealth and productivity: a regional economy that has diversified from its traditional reliance on growth and housing. That’s the vision painted by board members and financial supporters of the Greater Phoenix Economic Council ( GPEC ), which has been working since 1989 to leverage the many strengths of the entire metro area.
In the 22 years since its inception, GPEC already has assisted 488 companies in their moves to the Valley, which by its own count translates into 88,610 jobs, $9.96 billion
in capital investment and $3.1 billion in payroll.
In the next century, look for GPEC to shape the following sectors and services:
The greatest influence GPEC will have on Valley cities will be to help leaders think of themselves as a unified economy, says Mayor Scott Smith of Mesa, which is one of the 19 cities and towns that contribute financially to GPEC.
“That sounds like a simple thing, but it’s actually been a very challenging task,” Smith says, with the East Valley vying against the West Valley, city fighting city, and “Phoenix fighting everyone else” for economic development opportunities.
In the coming decades, economic activity will continue to consolidate in cities, Smith says. Already, about 85 percent of the nation’s gross domestic product is generated in cities and it is estimated that 90 percent of the new jobs created will be in metro areas. GPEC will continue to play a major role in helping cities get beyond parochialism and work together to create a regional economic powerhouse.
“The Sun Corridor is not some figment of someone’s imagination,” says Smith, referring to the corridor stretching from the middle of Yavapai County south to Tucson that is expected in the next century to merge into one integrated metro area. “We see it growing every day.”
“GPEC plays a central role in that,” he says. “We are learning how to work better together.”
The Arizona of the future will do a better job developing a culture of innovation for small, high-tech companies, says Steve Shope, president of Sandia Research Corporation and a
GPEC board member.
A short-term goal that may reap long-term benefits would be to help companies attain funding through the U.S. government’s Small Business Innovation Research program, which awards funds for research and development that has the potential to be commercialized.
“In Arizona, we’re not doing a very good job of bringing that money into the state,” says Shope, who would like to see the figure double to $50 million.
The state needs a better representation of venture capital in general, he says, and thus needs to nurture venturecapital-ready companies.
Shope is a member of GPEC’s new Innovation Council, which he says is developing a framework for how it will operate and hopes to have a master plan this year.
Another way GPEC will shape the future of the technology industry is by continuing to focus on clean tech companies, particularly renewable energy companies and those involved in residential construction and high-efficiency housing.
Unmanned aerial vehicles, a subset of Arizona’s already mature aerospace and defense industry, is a sector that “is in the Model T stage, but has potential for gigantic growth,” Shope says.
Looking back, one can see how homebuilding and construction became primary drivers of the state’s economy, says Andy Warren, president of Maracay Homes and a GPEC board member.
Looking forward to the next century, GPEC will play a major role in helping to diversify the Valley’s economy so housing plays a less dominant role in it. If GPEC can do that, Arizonans won’t be held hostage to vicious boom-and-bust cycles inherent in the real estate industry.
“If GPEC is successful, the housing industry will be a less significant player in our economy over the next century and that will be a wonderful thing,” Warren says. “The amplitude of those cycles can be pretty extreme.”
It has been estimated that Arizona has lost 300,000 jobs in the recession, with the bulk of those coming from the construction and retail sectors.
GPEC’s efforts to lure high-wage, high-quality jobs in the clean technology, healthcare and aerospace sectors and its efforts to strengthen manufacturing will be instrumental in diversifying the economy of the future, he says.
A key to that strategy is GPEC’s commitment to supporting competitive tax incentives and policies that promote growth, and its work bringing together officials and policy makers throughout the region. “It’s a great collaborative effort,” he says.
When GPEC reaches out to businesses considering a site in the Valley, one of the first things business leaders ask is, “‘Do you have the legal talent in Arizona and in Phoenix to do the things we want done?’” says Barry Halpern, a GPEC board member and partner at Snell & Wilmer.
In that respect, GPEC and the legal community have a symbiotic relationship that will only deepen in the next century as GPEC brings more sophisticated and diverse industries to the Valley, Halpern says.
The legal profession in the Valley — already a diverse community — will have to rise to the needs of emergent industries.
Almost all aspects of economic development require legal representation, including the demand for capital financing or the need for representation in emerging niches like the solar industry, agrees Scott Henderson, a shareholder at Polsinelli Shughart and a GPEC board member.
“GPEC will shape the legal practice as it attracts more businesses and more industry and those businesses will require a greater depth of legal talent,” Henderson says. “To that extent, local law firms will want to play a greater role in the growth of the state. The growth of the economy helps everybody—lawyers are no exception.”
The near future for banking in Arizona is brightening as lending activity has increased and most banks’ biggest problems are behind them, says Jim Lundy, GPEC vice chairman and president and CEO of Alliance Bank of Arizona.
“The recovery is slow, it’s bumping along the bottom, but it is there,” says Lundy, who also serves as chairman of the Arizona Bankers Association.
The long-term prognosis for banks is a bit harder to predict, but Lundy says he is sure of one thing: it is inextricably linked with a diversified Arizona economy that is not dependent on population growth.
In that sense, GPEC’s goal of fostering cooperation between cities and creating a diversified economy will directly shape the industry.
“Our success and our growth depends on companies that actually produce something,” Lundy says. All the important emerging industries — like healthcare, clean tech and aerospace — create spin-offs in the economy that are good business for the banking sector.
“We need successful enterprises to make those loans to,” he says. “At the end of the day, if the banking sector is going to grow successfully it needs GPEC and its role in helping get Arizona’s economy growing again.”
It’s not hard to figure out why leaders in the field of education sit on GPEC’s board of directors: education is essential to economic development, and vice versa.
“As we look to the future, we see that growing the right talent for the new markets that will be out there is imperative,” says GPEC chairman Bill Pepicello, president of the University of Phoenix.
That may require more coordination between Arizona’s “robust” array of higher education institutions—statefunded universities, community colleges and private institutions. “I envision campuses as multi-functional areas that are working cooperatively on the ground and online to serve Arizona,” he says.
Arizona’s education of the future will also need to be “efficient and effective,” says Rufus Glasper, chancellor of the Maricopa County Community College District.
In the next 30 years, he says more than 1.8 million new jobs will be created in Arizona and these jobs will require students who are competent in what is know as the STEM fields: science, technology, engineering and math.
Educational delivery systems will include more online, hybrid and fast-track training, he says, and willuse mobile devices and social media to create more access to new ideas, networks and educational exchanges.
Like Pepicello, Glasper envisions closer relationships between secondary schools, post-secondary colleges and universities.
The Midwest has always been known as the heavy industry manufacturing hub of the United States. But Arizona in the next century could attract more technology manufacturing, says Steven Zylstra, president and CEO of the Arizona Technology Council, which has worked alongside GPEC in the past to nurture the tech industry here.
“To the surprise of a lot of people, manufacturing is actually coming back to the United States,” he says. Wages and manufacturing costs in China are rising, so companies that sent manufacturing overseas are finding that once they pay for shipping, it’s cheaper at home.
Areas of promise include the manufacturing of medical devices, bioscience-related products, renewable-energy equipment and the semiconductor industry.
When it comes to the semiconductor industry, that optimism is warranted, agrees Jason Bagley, a government affairs manager at Intel in Arizona.
Intel has always manufactured most of its leading-edge products in the United States, he says, and plans to continue doing so. Since 1996, it has invested $12 billion in manufacturing in Arizona, not including two projects currently under construction in Chandler.