May 30, 2006

  

A Publication of the Economic Development Corporation of Utah

CEO Jeff Edwards

PRESIDENT'S  

MESSAGE

Two Important Events With Significant Influence on Utah ED


Today's issue of the Economic Review includes a co-feature, discussing both Utah-Mexico trade relations following President Fox's visit last week and the recent supreme court ruling in favor of a state's right to offer tax incentives, one of the key tools in our ED tool box. Both issues merit keeping an eye on, as trade between Utah and Mexico is basically in its infancy and may open doors to greater trade opportunities for Utah companies, while tax incentives will most assuredly be scrutinized for years, if not decades, to come.

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

Challenge to Tax Incentives Tossed Out by Supreme Court

Economic developers across the country were able to breathe a collective sigh of relief last week when the U.S. Supreme Court unanimously tossed out the Cuno case on state tax incentives, which challenged the right of the State of Ohio to provide corporate tax incentives to Daimler-Chrysler. (A Sixth Circuit decision had disallowed the state tax incentives.)

The court held the plaintiffs lacked the "standing" to challenge the constitutionality of the Ohio tax incentives. Chief Justice John Roberts ruled states must be free to handle their own fiscal interests without undue interference from federal courts: "States must be free to, among other things, have their own taxing-and-spending policies based on state officials' perceptions of their needs."

Jeff Edwards, president and CEO of EDCUTAH, says the logic behind tax incentives is that the new economic activity created by the business will more than offset the money lost in the tax incentives. In the Ohio case, a $300 million incentive package made up of state and local tax breaks was offered. In return, Daimler-Chrysler invested $1.2 billion to expand its Jeep plant. The expected result was increased income tax receipts and spin-off economic activity.

Edwards says the Cuno case follows a fundamental concern that some groups have expressed that a state should not use public money to bring new competition into a market. Conversely, the state would say it is in the public interest to bring other companies into the market to grow the overall size and diversity of the economy.

"The goal of incentives is to promote healthy, sustainable growth by stimulating job growth and expanding capital investment in a location that will have the most impact," he says. "Utah's tax incentives are used as a stimulus only, with a limited amount of public dollars expended, and for a limited duration. The state provides the stimulus and then gets out of the way."

Because Utah tax incentives are performance-based, a company must achieve agreed upon levels of performance before the incentives will be given. Tax Incentives have primarily been used to recruit new companies to the state. However, the Governor's Office of Economic Development has used incentives for Utah businesses and is currently reviewing ways to establish incentives for the expansion of in-state companies.

Taking state tax incentives off of the table would have a huge impact on Utah's economic development efforts, says Edwards. "However, the challenge to the legality of tax incentives is not resolved. We expect another test case will eventually work its way through the Federal court system."

Economic Development and the
Utah-Mexico Alliance


Mexican President Vicente Fox's historic visit to Utah last week was important to the Utah-Mexican trade momentum created during Governor Huntsman's visit to Mexico last July.
"When Governor Huntsman visited President Fox, it was a signal that Utah is interested in enhancing its relationship with Mexico. President Fox's reciprocal visit to Utah adds further momentum to the relationship," says Miguel Rovira, regional director for Latin America and Canada in the Governor's Office of Economic Development.

Rovira says Mexico is an important trading partner because it offers Utah companies the opportunity to get their feet wet in the global market with less risk. "The business and cultural differences are not that broad, and because of Mexico's close proximity it is easier for Utah companies to develop relationships that can lead to long-term business opportunities-better than anywhere else in the world. Mexico presents an opportunity for Utah to companies to develop relationships and begin trading right away-that's something you can't do anywhere else in the world."

What's more, Rovira says Mexico is a great springboard for trading with the rest of Latin America. "The experiences Utah companies develop while trading with Mexico will serve them well as they expand into Latin America."
Utah-Mexico trade has been trending up since Huntsman's visit, according to Rovira. "We are looking at a seven to nine percent increase." He says Mexico bought approximately $128 million in Utah-made goods and services last year, compared to $122 million in 2004.

Seven of the 10 companies that participated in the trade mission last July have signed contracts with Mexican companies. "That visit was a catalyst that really opened the door for Utah companies," says Rovira. He estimates (conservatively) that between 1,000 to 1,500 companies do bilateral trade with Mexican companies, either importing or exporting. Other relationships exit as well, such as vSpring's work to create a private equity fund that will be investing in Mexican growth industries, and the University of Utah's nursing school exchange program.

Governor Huntsman said last week at the Zions Bank International Trade and Business Conference that there has been a shift in trade policy and that states are now reaching out directly to foreign countries rather than through the U.S. Federal government's programs.

CALENDAR

June 8:  EDCUTAH Quarterly Update (click here to RSVP)

June 23: Non-Profit Organization Volunteer Fair at the Gateway

August 9:  EDCUTAH Annual Meeting

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IN THE NEWS

Economic Development Headlines

USTAR Initiative Used to Recruit Researchers

- Although $200 million in new USTAR funding does not become available until July, the promise of it already has enabled Utah's two research universities to recruit researchers. The first hires under the Utah Science, Technology and Research Economic Development Initiative will transplant their teams to Utah State University and the University of Utah this summer. (KSL) (Morning News) (Daily Herald)

Planners Puts Brakes on Land Use by Complex

- Workers are on a sprint to put the finishing touches on Miller Motorsports Park before the first big event June 16-18. Meanwhile, the Tooele County Engineering Department is applying the brakes to any major development on property near the Motorsports Park and Deseret Peak Complex. (Tooele Transcript)

Utah Wants More Defense Dollars

- With the federal defense budget regularly increasing, state officials are hoping to gain a larger piece of the pie. Since 1997, Utah has steadily seen an economic impact of about 1 percent of the overall defense budget. Officials say recent military base closures elsewhere have added more workload to Utah installations, and local businesses are prepared to join in to take their share. (Standard-Examiner)

Economic Developer Keyes Resigns From Director Post

- After serving Cedar City and Iron County for less than two years as the economic development director, Terry Keyes has resigned for personal reasons. (Spectrum)

Farmington Residents Voice Support for 70-acre Station Park Project

- Station Park, proposed to be centered around the Farmington commuter rail station and the intersection where Legacy, I-15 and Highway 89 will all merge, is planned to have a mixture of eclectic shops, a movie theater, offices and housing. (Morning News)

Hunting Convention to Draw at Least 30,000 Sportsmen to Utah

- Gov. Jon Huntsman Jr. has started beating the drum for a first-ever joint national hunting and wildlife convention expected to draw at least 30,000 sportsmen to Utah next year. (Morning News)

Trading Fines Irk Brokerage Houses

- A bill that slipped through the Utah Legislature with Gov. Jon Huntsman Jr.'s tacit endorsement sparked an angry revolt Thursday among prime Wall Street firms with Utah operations, which could face hefty state fines for trading irregularities. (Morning News)

Kent Erickson: 'New Novell' a Positive Development for Utah

- "There's a new level of passion in Novell's Utah offices these days," Vice President Kent Erickson says. Erickson discussed Novell's present and future position in a presentation to Utah executives at the Utah Technology Council (UTC) meeting at the Canyon Park Technology Center in Orem today. (Press Release)

Forbes Addresses Globalization Trend

- Ray Crosby of Provo-based Champion Safe wants to know how China's rapidly growing economy will affect his safe-making business and how he can compete with lower-cost manufacturers overseas. (Daily Herald)

No Quick Fix for Rural Utah, Panelists Say

- The Governor's Office of Economic Development Board is wrestling with how to best serve the needs of rural Utah. But a variety of factors and characteristics make any blanket approach to rural economic development troublesome, board members heard during a meeting Friday. The discussion focused on whether the state should encourage more high-paying jobs or jobs with benefits or even the creation of any new jobs at all. (Morning News)

Trade unites Utah, Mexico

- Within months, Utah's Cytozyme Laboratories expects to begin introducing some of its newest products into Mexico - one a line of supplements designed to improve a person's health and well-being, the other a line of nutritional products for dogs and cats. (SL Tribune here, here, and here) (Morning News)

Parts Maker Opens in Springville

- An Elon, N.C.-based parts maker for the nutraceutical industry opened a 20,000-square-foot plant in Springville and plans to hire up to 10 machinists, engineers and sales people by year-end. (Daily Herald)

Squeezing Oil Out of Stones in the Rocky Mountains

- The high cost of crude oil has many people looking for new sources of energy -- and taking a second look at some old ideas. Oil shale is an idea that was tested a generation ago, then abandoned when the price of crude oil plunged. Now, a self-taught inventor is once again eyeing the vast shale deposits of the Rocky Mountains. (NPR)

Officials Looking at Shale Prospects

- As the price of conventional oil lingers at around $70 a barrel, Washington leaders are taking a renewed interest in Utah's vast amounts of untapped oil shale. Sens. Orrin Hatch, R-Utah, and Ken Salazar, D-Colo., are expected to visit the Vernal area on June 1, along with Sen. Pete Domenici, chairman of the Senate Energy and Natural Resources Committee. The group's field trip will include sites in Utah and Colorado where petroleum is contained in rock deposits under federal lands. (Morning News)

Passport - to Utah County

- The Utah Valley Convention and Visitors Bureau is hoping to clear a marketing hurdle by making it easy for Utah County residents to become local tourists. Every residence in Utah County soon will be mailed a Utah Valley Adventure Passport - a 60-page publication highlighting 24 area attractions, with discounts and coupons to visit those sites. (Morning News)

Tahitian Noni Cuts 130 Jobs at Provo Headquarters

- Thursday morning, Tahitian Noni announced the layoffs of around 130 employees at its corporate headquarters in Provo. The move is part of a restructuring plan to focus additional resources in global markets. (Utah Business Magazine)