At first glance Southern Arizona is dry desert studded with towering saguaros. A closer look reveals lush riparian areas and forested mountains.
The region’s economy has some key elements – from longtime economic drivers like defense and a top-20 research university to younger, fast-growing industries like bioscience and solar power. Both entrepreneurs and global powerhouses have a presence here.
Economic development – business attraction, new company expansion, retention and creation – is the central mission of Tucson Regional Economic Opportunities. Formed in 2005, TREO is the region’s lead economic development agency, now largely funded by the private sector. To date, TREO’s efforts have resulted in the facilitation of 10,550 jobs, capital investments of $582.5 million, and an economic impact of $2 billion – with more in the pipeline.
“We’ve done good work,” TREO’s president and CEO Joe Snell acknowledged. “But the coming months and years are critical for the region. We’re at a crossroads. The community must decide how to allocate its resources to build its future. We need to establish our spending priorities, invest in what will produce a return, and grow our economy.”
Primed by its historic rapid population influx, Tucson’s economy has relied on growth-related industries such as residential construction. This reliance on non-primary industries leaves Tucson
vulnerable to “boom and bust” economies. The recent economic crash (and “bust” in the construction and real estate sectors) demonstrates the need for greater economic diversity.
Primary industries produce more goods and services than can be wholly consumed by the local market. The excess “product” (for instance a medical device, solar panel or aircraft part) is then exported to another market within the U.S. or abroad, and money is returned to Southern Arizona thereby creating an influx of new wealth. Companies become more profitable and thus hire more employees. Primary job growth also expands the community’s need for indirect jobs like doctors, lawyers and teachers.
Consider this: Company XYZ relocates to Tucson and brings 100 high-skilled, high-paying jobs. Those salaries are spent buying everything from groceries and hiking boots to houses, cars and computers. The employees purchase gas and tires, use day care and dry cleaning services, go to the doctor, eat in restaurants, and pay taxes that repair roads and build schools. The ripple effect impacts the entire region.
To create region-wide change, TREO focuses on developing four key industries – aerospace & defense, biosciences, solar and transportation/ logistics. These industries have consistently proven to be a good fit for Tucson. Although these industries are not totally recession proof, they do have a solid foundation for growth.
“If we can further the vision we laid out in the four strategic areas, we can grow Tucson,” said Stephen G. Eggen, CFO at Raytheon Missile Systems and vice chair of TREO’s Board of Directors.
To attract and retain businesses, Tucson must have a market advantage over its key competition which TREO identifies as Las Vegas, Dallas, Portland, Salt Lake City, Austin, San Antonio, San Diego, Albuquerque, Denver, and Phoenix.
Moreover, Tucson must improve its image as a business-friendly region with a unified voice.
Site Selectors Key
While residents recite a long list of why they love living and working here, Tucson has a bit of an image problem among site selectors – those individuals who make most of the decisions related to corporate relocations and expansions.
“These few hundred people – site selectors – influence the majority of corporate decisions about where to move and where to invest,” Snell said.
Opinions Matter
In a recent TREO survey, site selectors had favorable opinions of Tucson in the areas of cost of business and access to technical workers. However, Tucson fell short in market access to customers, financial incentives, access to air service, and access to senior management talent. Other weaknesses were the perception that Tucson has a lack of quality K-12 education and non-business-friendly governments.
In the past five years Tucson has moved up in the eyes of site selectors. For years Tucson was a Tier 3 city, while cities like Denver were ranked as Tier 2 and Phoenix as Tier 1. “In the last perception study, Tucson moved up to Tier 2" Snell said.
Megapolitan Sun Corridor
Rather than compete with Phoenix, Snell said the goal is to leverage Phoenix to Tucson’s advantage. “We can market Phoenix’s amenities like sports while promoting Tucson’s access to scientific and technical workers, the UA, and our quality of lifestyle.
“Phoenix is – and probably always will be – in the top three markets from a business standpoint. Tucson can leverage that the way Birmingham does with Atlanta,” Snell said.
“Today companies are looking at megapolitans – large regions that deliver market value. Tucson and Phoenix are part of the Sun Corridor, definitely a megapolitan. We have the same last name: Arizona. We must work together.”
Recently TREO, along with economic development organizations in Phoenix, Flagstaff, Yuma and Pinal County, recommitted to the Arizona Sun Corridor Partnership, a statewide effort to recruit companies considering expansion or relocation.
Recent Successes
Since mid-2010 TREO has announced several milestones in high-wage job creation and capital investment in the region:
• October 2010: Ventana Medical Systems, the tissue diagnostics division of Roche Pharmaceuticals, announced a five-year expansion of its Oro Valley site that involves capital investment of nearly $180 million. With the addition of up to 500 new jobs, this increases Ventana’s workforce by almost 50 percent.
• October 2010: Sargent Aerospace & Defense, a supplier of precision engineering components, broke ground for its new 70,000-square-foot facility located along I-10. TREO provided project support including facilitating relocation of two businesses that occupied the land adjacent to the former Sargent space.
• June 2011: The Pima County Board of Supervisors unanimously approved construction of a 25-megawatt photovoltaic array on 305 acres of former farmland. SunEdison (formerly FRV) will own and operate the array, the region’s largest solar generating project. This project represents a major meeting of the minds of community leaders. “A big cross section of people was there the day the Board of Supervisors made their decision,” said Paul Bonavia, president and CEO of UniSource Energy, and Tucson Electric Power, and chair of the TREO Board of Directors. “The community is now saying, ‘Let’s stop deliberating and make it happen.’ That’s very impressive.”
• September 2011: Bombardier announced expansion of its Tucson Service Center, initially adding 100 new jobs including airplane mechanics, production line, and other highly skilled technical positions.
• TREO worked with federal officials and the DM50 to retain the 612th Air & Space Operations Center at Davis-Monthan Air Force Base. A base assets realignment had proposed to move this operation to Florida.
• As a result of an expansion adding 60 new jobs, TREO worked with solar company Schletter to increase its engineering and production capacity.
• Coordinating with area jurisdictions and organizations and assisting with real estate options, TREO was instrumental in Bourque Industries establishing a product development and testing facility in Tucson.
• RMS, C3, and Synchronoss opened call service centers in Tucson, adding more than 1,000 new jobs in the region.
What’s Next?
TREO’s 2005 economic blueprint identified five components that drive a competitive economy – high-skilled/ high-wage jobs, educational excellence, urban renaissance, livable communities, and collaborative governance and stewardship.
Now “we are currently assessing how far we’ve come and developing strategies to move the needle and be more competitive,” Snell said.
The statistics are sobering. Prior to 2007 Arizona was consistently ranked in the top five states for growth in jobs, population and income. Since 2007, Arizona has hovered near the nation’s bottom in all three categories. The clear conclusion is that Arizona had a successful formula for many decades – relying on in-migration for growth.
Snell said, “What worked for Arizona in the past is just that – past. The great recession caused a seismic shift both in our economy and how we must compete – both as a region and as a state.” TREO’s independent research and connections with its network of site selectors confirm that the criteria used to choose (or even consider) locations has also changed. Climate, outdoor recreation and cultural amenities once were high on the list. Now corporations review a very different list – one that is headed by the region’s ability to provide talent. Also high on the list of prized assets is a strong research university, modern and well-maintained infrastructure and cost-reduction opportunities (incentives).
“We must embrace this new landscape and compete with a different value proposition,” Snell said. TREO is committed to aggressively marketing the region and has identified focus areas to help our region recover. Collaboration among municipalities and promoting the Sun Corridor is a powerful attraction tool. “By promoting the entire region, we have, in effect, increased the asset base that we can present to site selectors.
“There is strong projected growth within the commercial aerospace industry in the next 10 years. Tucson already offers a critical mass of suppliers for those firms. Naturally we will emphasize our built-in pipeline of engineers coming out of UA and ASU, and our proximity to Mexico as a potential manufacturing location,” Snell said.
Improving the perception of Tucson’s K-12 system, supporting higher education and the entrepreneurial spirit, investing in roads and infrastructure, building on the downtown revitalization efforts, and improving aesthetics citywide all demonstrate a business-friendly environment and will accelerate the region’s progress.
“Our successes are just the beginning of what we can accomplish,” Snell said. TREO will promote the region’s assets with vigor and tenacity. “That’s what it will take and we’re ready to take it on.”
Building the “Place” Brand
Tucson is no different than Adidas or Coke in that it must consistently build and foster its “brand” (in our case, a “place” brand) in order to play in the big leagues. And it must market itself to the right kind of companies – those that fit in where Tucson excels.
This is at the heart of what TREO does.
Tucson has the opportunity to be world class, with assets that include a top-ranked university, technical talent and intellectual capital for growing local bioscience, solar and aerospace & defense industries. Tucson is also a strategic choice from a transportation and logistics standpoint.
“Right now it’s all about selling Tucson’s market advantages,” Snell said. “Know your brand. Stay true. And leverage your resources.
“To do that we created a forceful marketing plan that we will implement in the coming year,” Snell continued. “It includes a national brand awareness campaign to put Tucson at the top of the mind for site selectors.”
As the centerpiece of this plan, TREO produced a new commercial entitled, “Tucson – What Makes A Place Great?” The video highlights Tucson’s educational strengths and its innovative workforce while subtly showcasing the area’s natural beauty and lifestyle amenities. View it on the TREO website at www.treoaz.org.