Arizona Commerce Authority - AZ Business Magazine September/October 2011

Arizona Commerce Authority Aims To Bolster The Business Environment

The new kid on Arizona’s economic development scene is poised to shake things up. The Arizona Commerce Authority (ACA), a public/private entity, is not merely a name change, a rebranding of the Arizona Department of Commerce that over the years received its share of praise and an increasing level of criticism. And it’s not just a committee of top-shelf business leaders.

“It’s more than that,” says Don Cardon, president and CEO of the Arizona Commerce Authority. “It’s really a call to arms.”

Created by Gov. Jan Brewer through an executive order a year ago, and formally established by the Arizona Legislature early this year, the Arizona Commerce Authority is the cornerstone of the Arizona Competitiveness Package, a mix of tax benefits and incentives targeting quality job growth. The Arizona Commerce Authority’s leadership board consists of 17 of Arizona’s top CEOs who provide oversight and valuable input, with House Speaker Andy Tobin and Senate President Russell Pearce as ex officio members. Brewer chairs the Arizona Commerce Authority, and sports entrepreneur Jerry Colangelo serves as co-chairman.

The state’s university president, chair of the Rural Business Advisory Council and other committee chairs round out the balance of the 31-member ACA board.

The leadership board’s focus is on growing and diversifying Arizona’s economy and creating quality jobs throughout the state. The ACA works closely with such key partners as the Science Foundation Arizona, the three state universities, regional economic development groups and local communities.

The ACA is targeting these key base industries — aerospace and defense, renewable energy, science-technology, and small business and entrepreneurship. It is funded through existing payroll withholdings under an annual operating budget of $10 million, plus a so-called deal-closing fund of $25 million, some of which will be allocated for job training.

Michael Manson, an ACA board member and founder/executive chairman of Motor Excellence in Flagstaff, says he thinks the quasi-public agency will produce results for a number of reasons.

“By involving business leaders as we have and funding it by government we are removing some of the politics, enabling more performance and quicker response to commercial opportunities,” says Manson, who also founded PETsMART. “The pendulum swung a little far before the recession toward government regulations, but we need to get back to being more oriented toward entrepreneurial commercial opportunities.”

Mary Peters, president of Mary E. Peters Consulting Group, says the ACA draws from the successful endeavors of other states.

“We now have a mindset that Arizona is open for business,” says Peters, a former federal highway administrator with the U.S. Department of Transportation and former director of the Arizona Department of Transportation. “We’ll do what we can, especially in the aerospace and defense industries. If we’re not out there working to bring them to Arizona, other states will.”

Under the deal-closing Arizona Competes Fund, a company will need to achieve certain performance measures including average employees’ wages above the county’s average wage, health insurance coverage minimums and other requirements similar to the state’s existing job-training program. Backers say the fund will spur investment in projects in the targeted industries.

It replaced the inactive Commerce and Economic Development Council deal-closing fund, is controlled by CEO Cardon, and puts Arizona among the top one-third of states with aggressive economic development programs, supporters say.

Funds provided to growth projects must result in a net benefit to the state, consistent with the Arizona Constitution’s gift clause. In addition, an economic impact analysis by an independent third party will be conducted on all projects to determine potential return on investment benefits to the state. Furthermore, funding will be awarded with contractual provisions for performance and “claw-back” of funds for non-performing projects.

The Competitiveness Package extends the existing job-training program, a reimbursable grant program for job-specific training plans for employers creating new jobs or increasing the skill and wage levels of current employees.

Arizona’s Enterprise Zone Program is replaced with a new Quality Jobs Tax Credit for new job creation statewide. This tax credit is performance based on net new job creation and capital investment with specific eligibility qualifications for urban and rural businesses.

The tax credit for each new quality job created is $3,000 per year for three years and is limited to 400 new jobs per employer, per year. The program is capped at 10,000 new jobs per year. Experts say the program will increase Arizona’s competitiveness ranking to No. 3 from No. 9 in the Mountain West.

On the tax side of the equation, the electable sales factor for multistate corporations increases to 100 percent from 80 percent in equal increments from 2014 to 2017. A corporation that conducts business both in-state and out-of-state must apportion its income from business activity based on the ratio of property, payroll and sales in

Arizona compared to the corporation’s property, payroll and sales everywhere.

The corporate income tax rate is reduced by 30 percent to 4.9 percent from 6.97 percent in equal increments from 2014 to 2017. The change is expected to improve Arizona’s national ranking from 24th to No. 5, and from No. 6 to No. 3 in the Mountain West.

Arizona Commerce Authority

Under personal property, depreciation schedules are further enhanced for prospective acquisitions of commercial personal property on or after 2012.
Colangelo, partner of JDM Partners, explains his determination in agreeing to serve as co-chairman of the Arizona Commerce Authority.

“We will eliminate all distractions in pursuit of the ultimate goal — restoring economic vitality and stability to our state,” says Colangelo, former top executive of the Phoenix Suns and Arizona Diamondbacks. “Our new structure automatically eliminates the agency’s culture of entitlement and political sloth, and we have introduced what I believe to be a ferocious approach to both retaining and attracting business for the benefit of Arizonans, their families and our children.”

For more information about the Arizona Commerce Authority visit www.azcommerce.com.