Arizona Business Magazine Jul/Aug 2010
The Greater Maricopa Foreign Trade Zone Opens Up Business Possibilities In The West Valley
At a time when the West Valley could use an economic boost, officials have put the finishing touches on the proposed Greater Maricopa Foreign Trade Zone. Under the administration of WESTMARC, an acronym for Western Maricopa Coalition, this new Foreign Trade Zone (FTZ) is seen as a welcome economic development tool that will spawn jobs and millions of dollars in new investment.
Participating cities are Avondale, Buckeye, El Mirage, Gila Bend, Goodyear, Peoria and Surprise. Initially, four sites in three of the cities have applied for FTZ status: two in Goodyear at Interstate 10 and Loop 303, one in Surprise near Bell Road, and one west of Buckeye in an unincorporated area. The Greater Maricopa Foreign Trade Zone is actually a series of trade zones, with each city acting independently but represented by WESTMARC.
Federal approval of WESTMARC’s application of the overall trade zone by the U.S. Department of Commerce and the Department of Homeland Security is expected before the end of the year. Launched in 1934, the federal Foreign Trade Zone program provides for reduced or eliminated federal taxes and fees in connection with imports and exports. For customs purposes, an FTZ is considered outside the United States.
Consultant Curtis Spencer, president of Houston-based IMS Worldwide, says there has been quite a bit of interest in West Valley sites from brokers looking for build-to-suit opportunities, particularly for solar and other manufacturers.
Spencer says developers generally pay the initial fee of about $50,000 to be in the FTZ depending on proposed use. Companies locating in an FTZ also pay an annual fee, but Spencer estimates the savings to a company can range from $300,000 to $1 million a year.
A typical business in an FTZ pays wages 7 percent to 8 percent more than a similar company not involved in exporting and importing, and employs 10 percent to 20 percent more workers, Spencer says.
“Foreign Trade Zone activities now exceed the statistical equivalent of imports and exports carried by truck into and out of Canada and Mexico,” Spencer says. “It’s a significant portion of our economy.”
A company in the West Valley area that decides to seek FTZ status puts in an application that will go through WESTMARC, which holds the federal permit, and on to the federal Foreign Trade Zone board. Zones are not limited to the four that have been selected. Likely candidate businesses for an FTZ range from high-tech manufacturers to distributors.
“It should give a major boost in investment and job creation,” Spencer says. “In the next 10 years we should have added hundreds of jobs and tens of millions of new investment.”
Basically, FTZs speed up the supply chain, reduce importing costs and provide better security, Spencer says.
“It’s faster, cheaper and better,” he adds.
Regarding security, companies that have been certified for FTZ status by federal authorities undergo extreme scrutiny, and therefore are not likely to be dealing with unfriendly countries or terrorist organizations. Concern over the importation of contraband has heightened since the attacks of 9/11.
Harry Paxton, economic development director for the city of Goodyear, says participating cities can use the FTZ as a marketing tool.
“It says that these communities are ready to accept businesses involved in international commerce,” he says.
Goodyear, which was among the first to express an interest in establishing an FTZ three years ago, hopes to fill some existing buildings by offering significant property tax breaks. Personal and real property taxes in an Arizona FTZ are cut by 75 percent.
But the perception that such tax reductions will have a negative impact on a city is incorrect, Paxton says. The assessed valuation of an activated FTZ reduces to 5 percent from 20 percent, but still generates additional revenue when compared to agricultural-use sites that collect $300 per 10 acres. What’s more, Paxton says, the FTZ becomes a catalyst for other development not requiring FTZ tax benefits, resulting in a full tax rate on those businesses.
“It’s a win-win,” he says. “It helps us become more competitive.”
Mitch Rosen, director of office and industrial development for SunCor Development Company, says his company owns 250 acres that will be part of the FTZ.
“The reason we’re interested is that we believe it to be an exceptional tool to stimulate the economic development of the West Valley,” he says. “It’s a good way to stimulate quality employment and it creates a competitive advantage for Arizona and the West Valley. It encourages businesses throughout the country to elect to locate in the West Valley.”
Jack Lunsford, president and CEO of WESTMARC, expects FTZs to spring up throughout the sprawling West Valley as cities become more aware of the benefits.
“We are thrilled,” he says, “to help bring this economic development tool to our West Valley communities that will assist them, especially at a time like this.”