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Arizona Shows Signs Of Recovery With Growth In Housing, Real Estate Market

by Kristen Cloud/staff writer

The housing and real estate market, which many consider the best gauge of how the economy is doing, certainly appears to be improving in Arizona. In Phoenix alone this year, home prices have risen by more than 20 percent, the highest of any city in the country, ­according to Tim McCabe, president of the Arizona Food Marketing Alliance (AFMA), which represents 1,200-plus food retail members in the state. Additionally, the metro Phoenix construction industry has added more than 3,000 jobs in the past year for a growth rate of 4 percent, according to figures released Dec. 5 by the Associated General Contractors of America. The report notes that the Phoenix area ranks No. 11 out of 337 metropolitan areas in terms of actual construction jobs gained.

“Things are recovering, obviously no where near the rates that they were five or six years ago, but a lot of this recovery is brought about by the fact that housing is really starting to move,” McCabe tells The Shelby Report.

“Overall, (food retail) sales seem to be responding fairly well as a result of the better economy,” he adds.

The state also has a balanced budget, “and actually has a surplus in terms of its overall budget,” McCabe says.

Despite the encouraging signs, the state still has a long way to go to get back to pre-recession numbers. The Arizona ­legislature and others, however, are working to do that.

“(The legislature) has passed some initiatives that make the state more business friendly and gave some businesses some incentives so they could very much compete with other states to relocate here,” McCabe says.

GPEC aims to lure California business to state

In early November, the Greater Phoenix Economic Council (GPEC) launched the California 50 program—aiming to fly 50 Golden State CEOs to the Phoenix metro region for an opportunity to tour and explore the market. Due to the high demand, one week later the program expanded to 100.

“The response to the California 50 program has been overwhelming,” says GPEC President and CEO Barry Broome. “We’ve heard from CEOs up and down the California coast, representing firms in the technology, medical device, financial and life sciences industries and ranging in size from 30 to 10,000 employees. Clearly, the increasingly anti-business policies coming out of California, like Proposition 30, have struck a nerve with the state’s brightest and best-­performing innovators. We think the Greater Phoenix region offers a clear contrast in terms of its value proposition.”

Visiting CEOs are being briefed on the ­region’s business-friendly policies, including lower capital gains taxes and a corporate ­income tax rate that will go down to 4.9 percent by 2017, a $9,000 jobs tax credit, an R&D tax credit and a $630 million tax credit program for export industries.

On Nov. 6, California voters passed Proposition 30, a $6 billion tax initiative that will raise sales taxes on all Californians and income taxes on the high-performers making more than $250,000 annually. Also in November, President Obama called for additional tax revenue to the tune of $1.6 trillion over the next decade, also on the backs of the nation’s top innovators and professionals, according to the GPEC.

McCabe views the program as a timely one considering “what’s going on with the economic and tax situation in California right now, which has apparently become business-unfriendly.

“So now is the time to make a move to try to get some of those businesses to Arizona.”

Concerns about taxes and regulations

While California deals with its tax issues, potential tax-related matters are always a concern for Arizona, McCabe says.

While nothing is pressing at the moment, a 1-cent sales tax implemented in 2010 is slated to sunset in May 2013. The question now, according to McCabe, is from where that approximately $1 billion a year in revenue will come.

Another issue, and one facing the rest of the nation, involves regulations on business.

“Now that the elections are over, there’s a real concern that regulations are going to be stepped up and there’s going to be more regulations on business,” McCabe says. “…The retail food industry is the most regulated business in the world—whether you’re selling fuel out front, all the way through the back door—everything is regulated by somebody.

“We’ve got to be very careful about what kind of government regulations are going to come down, and I think businesses, I know our businesses, are still very cautious about what that means for us, as does the new healthcare that’s going to come, what does that mean?

“Our state’s governor has opted to not have the state healthcare programs, and has opted to go to national program. So businesses still have a concern, but that’s no ­different in Arizona than any other state.”

Tucson extends its voluntary plastic bag ordinance

The city of Tucson in November chose not to consider a ban on plastic bags, but rather stick to an ordinance it passed in 2009. That ordinance does not include a fee or tax, nor does it enforce a ban.

“It was what we recommended,” McCabe says. “And it was an extension of the current voluntary program where people take their bags back to the stores and grow an awareness campaign to let everybody know what to do with their plastic bags and take them to the store.

“We have what we think is a really great program that we hope will be modeled in other places. …It does the right thing with plastic bags by letting the consumer know what to do with them, and the stores themselves recycle the plastic bags as well as other products.

The only other area in Arizona that has adopted plastic bag guidelines is Bisbee, near the Mexican border. Its program also is voluntary and similar to what Tucson adopted.

Food Industry Management ­program launches at Arizona State

Arizona State University, in addition to being the nation’s largest university, now can add another notch to its belt. It has implemented a Food Industry Management (FIM) program that allows students to combine core courses in other business disciplines with upper-level courses specific to the food industry, such sales and management, supply chain logistics and marketing. The program, also available online, was developed in coordination with food industry partners.

“It’s very important that these universities offer things like this if we’re going to strengthen our overall industry,” McCabe says. “As we look at future leaders, we’re encouraging the high school graduates and junior college transfers to get into these programs.”

The AFMA, in fact, is offering a $100,000 scholarship over five years for the FIM program at Arizona State.

“We’re just absolutely excited that they brought this program to Arizona,” McCabe says. “We think this is going to be a tremendous boost to our industry and the future ­leaders of our industry, attracting more talent to get into the grocery business.”

Visit asu.edu to learn more about the FIM program.

What 2013 has in store for the Grand Canyon State

McCabe reveals the Arizona marketplace will continue to be extremely competitive in 2013.

“Arizona’s already has one of, if not the, most competitive supermarket industry in the country, driven primarily by the amount of chain stores we have here—and I feel that is going to continue,” he says.

“While new store openings over the past year have been relatively few and far between—with most grocers in Arizona focusing on remodeling and improving their existing stores,” McCabe anticipates there may be some new store openings in the state in 2013 as “business hopefully continues to improve and margins get a little better for the grocery stores.

“We anticipate slow, steady growth,” McCabe says, “and that, to me, is important, vs. the peaks and valleys that we’ve encountered over the last 10 years.

“It is going in the right direction,” he adds. “The consumer is still very conscious about spending, but we feel that there’s a little more spendable income, unemployment is still continuing to decline slightly (currently at 8.1 percent) and with some new jobs and the housing industry improving, we’re very optimistic that that’s going to be a boost in the economy, and, obviously, the people will start spending more dollars in the grocery stores as a result and maybe start spending it on items that they haven’t been able to afford in the past several years.”

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