January 31, 2006

  

A Publication of the Economic Development Corporation of Utah

 PRESIDENT'S MESSAGE

 More Legislative Priorities



In the past few issues, our feature articles have explained some of the issues facing the state legislature--those sure to have an impact on economic development throughout Utah. Today’s article features an interview with Chris Roybal, Governor Huntsman’s senior advisor for economic development and former president and CEO of EDCUTAH, discussing the governor’s top legislative priorities and how they relate to our statewide efforts.

Today’s Economic Review also includes links to many of the ED-related news stories from the past week. As always, if you have comments, suggestions or topics you’d like to see in the Economic Review, please contact us by clicking the “Comments” button on the bottom of this page.

Enjoy!

Jeff Edwards
Jeff Edwards
President and CEO

FEATURE STORY

An Interview With Christopher Roybal, Senior Advisor for Economic Development


EDCUTAH recently caught up with Christopher Roybal, Governor Jon Huntsman, Jr.’s senior advisor for economic development, where we had the opportunity to ask him questions about EDCUTAH’s legislative priorities regarding tax reform and support for the Governor’s Office of Economic Development (GOED) budget.

Economic Review (ER): A lot has been said and written about lowering the state’s income taxes, especially in light of the huge budget surplus. How does the Governor view tax reform as a tool of economic development?

Roybal: Lowering the state’s income tax rate is important for two reasons: first, it would make Utah’s economic development efforts more competitive with its neighbors. Of course Nevada has no income tax, but Utah’s 7% income tax rate doesn’t compare well against Colorado, at 4.63%, or Arizona, at 5.04%. Second, it reduces the burden on taxpayers, which in turn puts more money back into the economy as discretionary income.

ER: At what percent would you like to see Utah’s income tax rate?

Roybal: We’d like to see Utah’s tax rate down around 5% or lower, which would make us much more attractive to incoming executives and local entrepreneurs. It would also aid local economies across the state because residents could keep more of their income.

It has been decades since the state has reviewed the personal income tax and we believe that now is the time for the legislature to give it serious consideration.

ER: Do you have any estimates of how much money a 5% rate would give back to tax payers, or what it might mean to the overall economy?

Roybal: Analysts are currently estimating the impact; however the competitiveness issue is driving the process.

ER: Is converting to a flat tax structure realistic, and could you still achieve a rate of 5% without a flat tax?

Roybal: Yes, we believe that a simple flat tax is something that the citizens of the state have requested and we believe it to be a realistic opportunity.

ER: During his State of the State address the Governor spoke of removing the sales tax on food. Is that likely and how would he compensate for the reduced tax receipts passed back to local governments?

Roybal: Utah is one of a handful of states that still has a sales tax on food. It was imposed during the Great Depression as a temporary fix—one of those “temporary” remedies that became permanent. With Utah's economy booming and a swelling budget surplus, removing the sales tax on food is just good policy. The House voted by a wide margin to scrap the food tax and we expect the Senate to follow. Regarding how we might compensate for the reduced tax receipts returned to local governments, the Governor mentioned several options in his State of the State address. For example, increasing the share of sales-tax revenue retained by local governments, or by collecting sales tax already due our State from online purchases. Another option being discussed would allow local governments to raise a local option tax to help offset lost revenues.

ER: What about eliminating or reducing the corporate franchise tax? Wouldn’t that also bode well for economic development and recruitment?

Roybal: We introduced the idea in the 2005 Legislative Session to eliminate corporate income tax, but there was not a strong appetite to do so. Over the past year we have heard a larger interest on the personal income tax side, which brings us to focus on reducing personal income tax and the sales tax on food.

ER: Now let’s talk about the Governor's Office of Economic Development (GOED). The Governor recommended a $16.4 million budget for GOED, but with all of the competition for tax dollars, is there any concern that GOED will not receive the funding it needs?

Roybal: The majority of the budget for GOED comes from the ongoing base budget. The enhancements, we believe, are overdue to create more competitive outreach programs and enhancements for such areas as the Centers of Excellence, Business Resource Centers, and Industry Cluster Development. Many of these are pilot programs where we look to generate a positive return-on-investment this upcoming fiscal year.

The Governor is gravely concerned about the state’s declining wages. For the past 15 years Utah has been gradually shifting to a service sector economy. Wages that were 96% of the national average in the early 80s have fallen to 81% today. It’s imperative that we attract higher paying jobs to the state. Fortunately, with GOED, the USTAR initiative, reduced taxes, and many other important efforts, we can attract higher paying jobs to the state and only add to our great economic outlook.

CALENDAR

Feb. 2:  Utah Small Cities meeting (GOED Offices)

Feb. 10-12:  EDCUTAH Site Consultant Event (Park City)

March 8-9:  Big Business and Technology Expo (Orem)

March 23:  EDCUTAH’s Quarterly Investor Update

April 6-7:  Utah League of Cities and Towns Spring Convention (St. George)

April 9-12:  BIO 2006 Annual Conference (Chicago)

April 23-26:  CoreNet Global Summit Spring Convention (Philadelphia)

May 3-4:  Salt Lake Chamber Business-to-Business Expo

May 21-24:  ICSC Spring Convention (Las Vegas)

USTAR UPDATE

Richfield Area Chamber of Commerce Endorses USTAR


The USTAR initiative now before the Legislature is gaining more and more rural upport. The latest rural group to endorse USTAR is the Richfield Area Chamber of Commerce, which particularly liked the Innovation Centers that will be located across the state.

USTAR Legislation Sent to Senate Floor


The USTAR legislation, sponsored by Sen. Al Mansell, was unanimously approved by a Senate committee on Friday and sent to the full Senate for floor action. (SL Tribune and Morning News).

Mansell said the potential exists for the state and its universities to eventually make money from the USTAR legislation because a portion of royalties, fees and equity holdings from the new companies created through USTAR would be returned to the state. Other developments:
  • Businessman Roger Boyer testified that USTAR has the potential to help create a number of new businesses like Myriad Genetics, which now has 720 employees with salaries much higher than the state average.
     
  • A number of senators, including Sen. Beverly Evans from the Uintah Basin, said USTAR is one of the most significant bills of the 2006 session.
     
  • KSL TV aired a story on Friday that illustrates the potential of USTAR. It was about a product developed by a University of Utah chemist and surgeon that makes cancer tumors glow red so surgeons can see precisely where a tumor begins, where it ends, and how much to remove. The U. professors have formed a spin-off company with a great deal of commercial potential. (Press release) USTAR will dramatically accelerate the level of research and development at the U. and USU, coordinated with the Innovation Centers around the state, to generate many more business spin-offs.

IN THE NEWS

Economic Development Headlines

Venture Capital Firms Eyeing the Fund of Funds

- Utah’s Fund of Funds was officially launched by Gov. Jon Huntsman, Jr. before a crowd of local and national investment firms, entrepreneurs and government leaders. The state-backed fund is intended to help create new high-tech start-ups in Utah, leading to higher paying jobs and economic growth. (Utah Business Magazine)

Utah Venture Deals Leap 32%

- Venture capital investments to Utah companies rose to $249 million in 2005, a 32 percent increase from $188 million raised in 2004, according to the MoneyTree Survey. In 2005, there were 27 venture deals in Utah, up from 24 deals in 2004. Utah's average deal size of $9.2 million represented a five-year high, surpassing the national average of $7.4 million. (Morning News) (SL Tribune)

17 Companies Will Present at Wayne Brown Institute’s Venture Capital Conference

- Seventeen companies will present at the Wayne Brown Institute's 22nd Annual Investors Choice Venture Capital Conference - Utah, Feb. 8-9, at the Sheraton City Centre, Salt Lake City. (Press Release)

Outdoor Retailer Trade Show Sells Out

- For the first time in its 17-year history, the Outdoor Retailer Winter Market has sold out, attracting 724 exhibiting companies (there were 692 last year) whose displays will cover 277,500 square feet of floor space at the Salt Palace Convention Center. (SL Tribune)

Salt Lake Hotel Industry Booming

- Salt Lake's hotel rooms are filling up fast. In 2005, the city's overall occupancy rate climbed to 69.1 percent, up from 62.9 percent in 2004, according to the Rocky Mountain Lodging Report, which tracks hotel trends in Utah, Colorado, Wyoming and New Mexico. (Morning News)

Latino Market a Big Niche

- Understanding characteristics of the Latino market — from household size to its youthfulness to its language preference — can help companies considering marketing their products and services to that group. (Morning News)

Women-Owned Businesses Increasing

- According to a new census report the number of businesses owned by women grew at twice the national rate for all private companies from 1997 to 2002. (Morning News)

Developer of $200M Pleasant Grove Project
Says Shoppers' Needs Unmet

- Plans to build a $200 million outdoor retail development in Pleasant Grove were announced last Wednesday. Combined, the projects, called Sundance Commons and The Terrace at Traverse Mountain, will bring 2.5 million square feet of new retail and business space to north Utah County by 2010. (Morning News here and here) (SL Tribune) (Daily Herald)

Corroon Says SL County Can Boost Economy and Go Green

- Salt Lake County doesn't have to choose between jobs and the environment, according to a policy paper commissioned by Mayor Peter Corroon. He wants the county to go green without sacrificing greenbacks. (Morning News)

Business Talk Radio

- Public radio station KCPW has quietly launched Midday Marketplace, a show that aims to explore Utah-focused business and economic issues through conversations with guests and callers. The 30-minute program airs each Monday at 10:30 a.m. (SL Tribune)

Ramped-up Development Activity Planned for Downtown Salt Lake City

- Wasatch Property Management is "committed" to the development of downtown Salt Lake City, as evidenced by the purchase of the Chase Tower and Branch Bank Building and the creation of two new companies to handle what it said will be ramped-up activity downtown. (Morning News)

Funds Sought for Hispanic Shopping District in Ogden

- A Montebello, Calif.-based company plans to seek funding from Ogden to help finance the development of a multimillion-dollar Hispanic shopping district. The Legaspi Co. has purchased much of the property between 24th and 25th streets and Quincy Avenue and Monroe Boulevard for the project. (Standard-Examiner)

Supervalu Inc. to Buy Albertsons

- Supervalu Inc. will acquire all of the Albertsons stores in Utah, Idaho, southern Nevada, Southern California and the Northwestern United States as part of a $9.7 billion buyout. (Morning News)

Zions Bank Launches Free Business Resource Center

- Zions Bank has launched its Business Resource Center, a free service for business owners and prospective entrepreneurs who are working on a business plan, trying to get an idea off the ground or growing to the next level. (Morning News)

OfficeMax to Close Three Utah Stores

- OfficeMax intends to close three stores in Utah by the end of the first quarter of 2006, as part of efforts to strengthen company performance and better serve customers. The stores scheduled to close are located in Murray, Salt Lake City and West Valley City. OfficeMax's 12 other stores in Utah will remain open. (Utah Business Magazine)

Manufacturing a Stronger Economy

- Highlighting the need to hone Utah’s competitive edge, manufacturing industry leaders have advocated greater collaboration in the industry and implementing lean manufacturing strategies. Featuring industry leaders and lean manufacturing experts, a manufacturing panel discussion was held Friday as part of the Governor’s Office of Economic Development’s monthly technology@breakfast series. (Utah Business Magazine)


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