We’re all about business and Tucson

At Inside Tucson Business, we’re all about success and business in the Tucson region. If that makes us cheerleaders in some people’s minds, well, so be it.

Once again, our staff and contributors looked back on a year’s worth of local business events and were asked to rank them as to their lasting impact on the community. In other words, the events will most likely still be affecting us out into the future.

Unlike a year ago when the housing boom of 2005 easily was ranked the top story of the preceding 12 months, this year’s votes were more disparate. Two who participated in our poll ranked the population boom as the top story but no two voted any other event at the top.

In other cases, we asked if certain stories should be rolled together. Such was the case when it came to the various manufacturing announcements that occurred over the year. When it came to retail, some saw the opening of upscale brands as significant but others not so much. Still others thought the construction of retail should be kept separately from retail itself. In the end, we combined them all.

While some events were combined for our rankings, our voters distinctly saw the outcome of the November election as two separate events n the ballot propositions being more significant than the people who were elected.

For what it’s worth, the accompanying story looks back on 2006 and how events are impacting our lives as we embark on 2007.

As always we welcome your comments.

1. People are coming, people are coming

In December, the U.S. Census Bureau reported Arizona’s population grew by 213,311 n closing in on 6.2 million n making it the fastest growing state in the nation. Since the 2000 census, Arizona has climbed from the 20th to the 16th most populous state and is on pace to be ranked No. 10 by 2030, when the population will be over 10.7 million. One out of every five of us in Arizona now, wasn’t here in 2000. For Tucson, the most talked-about figure is when the metropolitan areas crossed the 1 million population mark. The Census Bureau reports data after the fact and is due to report year-old population figures for metropolitan areas in July. If the statisticians who watch these things are correct, Tucson should be tickling the underside of 1 million when the official numbers come out. That means, of course, there are probably already more than 1 million of us living here now.

Outlook: Population growth is driving the local economy and will help the region weather economic downturns other regions of the country will face. The trick, of course, will be managing the growth.

2. Finally, we’ve got a

transportation plan

It’s not near enough money, nor will it come anywhere close to meeting the needs of the next two decades, but Pima County voters in May finally approved a ½-cent sales tax that is supposed to produce $2.1 billion to help pay for construction of improved roads, public transportation, safety projects, bike paths and walkways. Four previous tries over 25 years to get voter approval were unsuccessful so this was a major step at unifying this community. Pima joined Arizona’s 14 other counties in collecting sales tax specifically dedicated to transportation.

Outlook: Already some of the mass transit improvements have taken effect, safety projects are being constructed and initial planning on road projects is underway. The key to success will be bureaucrats staying on top of the plan to keep it moving forward to avoid inflationary issues that have hurt some of Pima County’s previously approved road projects. It is encouraging to note the first whimpers from a NIMBY n Not In My Back Yard n group were quickly, and summarily, rejected by bureaucrats and politicians who are, so far, standing firm that the 3-to-2 margin of victory reflects the will of the people.

3. It may be slower, but housing has second best year ever

It wasn’t a crash, but it wasn’t the forecasted “soft landing,” either. Anticipated for more than a year, the housing market downturn finally arrived during the spring, sending sales plummeting to a four-year low, even as active listings soared to record highs. Responding to a national downturn in residential sales, short-term investors fled the Tucson market, leaving hundreds of new and nearly new homes looking for buyers. This, in turn, caused new home closings and building permits to slide downward, sinking by November to their lowest level since 1998. Despite the downturn, home prices remained high for new and re-sale homes. Declining from $267,725 in May, the median cost of a new home was $257,681 by November. Down by slightly more than $10,000 from the peak, it was still higher than February 2006’s record median price of $253,928.

Outlook: The market will continue to slow during the first quarter of 2007 but Tucson’s sustained economic and population growth will help turn the market around, putting prices and sales on an upward trend by 2008, according to John Strobeck, housing industry analyst and owner of Bright Future Business Consultants, and Marshall Vest, director of the University of Arizona’s forecasting project.

4. Rio Nuevo gets paid for nothing

The Legislature approved extending the tax increment finance district’s life for another 12 years, putting people who pays sales taxes as far east as Park Place Mall on the hook for another $650 million to try to salvage downtown redevelopment. But as 2006 ended, Rio Nuevo was sputtering once again without an expressed vision. Several upscale condominium projects continue to be “imminently ready” to break ground n just as they have for years n but there seems to be little in the way of commercial development to support anyone who might move into new residences. There are only so many times a person can go out to eat at a restaurant, even a good restaurant. There has been no concerted effort to get significant commercial retail into downtown n no supermarket or other major shopping. Emblematic of the situation was Nimbus Brewery’s proposal to locate downtown that now is going forward as a condo project, so far without a commercial component. To its credit, the Tucson City Council approved spending $53.7 million to rebuild Mission San Agustín and a surrounding cultural heritage park west of downtown and Interstate 10.

Outlook: In a word n lost. Somebody may have an idea where it’s headed but they’re not talking. Some at City Hall are making noises about making sure the private sector does its part. The problem is, there are too many opportunities elsewhere in this region for the private sector to want to put too much time and money on risky projects downtown. Whatever the vision is for Rio Nuevo, someone better articulate it n and soon.

5. We’re making

things here now

Pella’s new window and door manufacturing plant on the southeast side has been the flag-bearer for a resurgence in the lagging Tucson manufacturing sector. The first Pella windows made in Tucson started coming off the line in 2006. Beyond that, La Costeña Foods announced it is transforming the former Slim-Fast plant on Tucson’s southeast side into a cannery, Glass Fiber Inc. said it will open a plant to manufacture state-of-the art aircraft insulation, MacSteel Service Centers will open a distribution center for its metal products and Global Solar Energy is moving and expanding its operations, all set to begin in 2007.

Outlook: Marshall Vest, the chief economic prognosticator at the University of Arizona’s Eller College of Management, calls manufacturing jobs the gold standard of an area’s economy. Tucson had been lagging on that score but no more. But a problem is looming: Good available manufacturing space has been gobbled up by these recent announcements, which could crimp ideas of other companies making decisions to relocate here.

6. More ways

to spend money

There are so many retail projects actively being developed it’s difficult to count them all: Arizona Pavilions and at least two more major centers in Marana, Westpoint Crossing on Tucson’s southwest side, Tucson Marketplace at The Bridges near 36th Street and Kino Boulevard, as well as other talked about projects in Rita Ranch, Vail, Oro Valley and Sahuarita. And despite Federated Department Stores’ decision not to open a Bloomingdale’s in Tucson and Nordstrom staying out of the market, the arrival of Tiffany & Co. and Louis Vitton showed the Tucson market is ready for upscaleretailers. There was even a noteworthy juxtaposition in fast-food restaurants: California icon In-N-Out Burger is building its first Tucson area store at 3711 E. Broadway in El Con, right next door to a Krispy Kreme Doughnut store that closed in 2006.

Outlook: The region’s continued population growth is putting Tucson on the radar of more national retailers as well as more locations of those that are already here. Within two years, new retail locations should be opening so fast, they’ll be routine.

7. Progress toward finding the cure

The C-Path Institute, established in 2005 as a cooperative effort of the University of Arizona, SRI International and the U.S. Food and Drug Administration, put together a research agenda and grew during 2006 to occupy two offices in two office complexes on opposite sides of Campbell Avenue near River Road. Joining the effort in 2006 were 15 leading pharmaceutical companies, along with the University of Utah, University of San Francisco and the National Cancer Institute. Now working with C-Path researchers on several projects, they contribute to the search for better methods for drug development and testing. Meanwhile, the University of Arizona ended 2006 with the grand opening of a new campus building to house the BIO5 Institute, capping a year where the center continued its research into plant and insect genetics and their impacts on human health. The BIO5 Institute has received a planning grant from the National Institutes of Health to support a statewide program to foster partnerships to increase patient access to new medical breakthroughs, and joined the genome sequencing project sponsored by the U.S. Department of Energy’s Joint Genome Institute.

Outlook: While the general public is looking for miracle cures for everything from cancer to bad hair days, the biosciences revolution holds some of Tucson’s greatest promises.

8. Voters take charge

Arizonans decided more ballot propositions in November 2006 than did voters in any other state. Among the measures having the biggest impacts on business were those that will institute a state minimum wage, control governments’ powers to use eminent domain condemnation, a handful of measures making life more difficult for illegals in the state and rejection of a ban on same-sex marriages and some of the benefits that could go to those couples.

Outlook: As the year ended businesses were adapting, for good and bad, to the impending institution of the new measures. Fast-food restaurants were raising prices to meet their new labor costs and hopefully governments were rethinking their thoughts of condemning property for anything other than true public use. Governments can continue to offer benefits to same-sex couples without fear and the illegal immigration propositions were probably more symbolic than real. All told, voters’ decisions made Arizona among the most conservative and progressive in the same election.

9. TREO gets a plan

Unlike economic development efforts that preceded it, TREO - Tucson Regional Economic Opportunities Inc. - is doing things in its second year of existence that had never been successfully accomplished. The economic blueprint now being prepared promises to be the most important document ever produced insofar as outlining a future for this region.

Outlook: The document is due to be released in a matter of weeks. Getting more than two people to agree on what they’d like to see as Tucson’s future has been a nearly impossible task. This will truly be a test of whether this region can be unified toward a common goal and establish an economic beachhead from which it can grow.

10. More people

answer the phone

As 2006 ended, local call center employment reached 16,000. Citibank, Convergys, Teletech, APAC and GEICO all expanded operations and were joined by the arrival of United Collections. All came in the face of AOL shutting down its local call center during the year as a result of its shift from a subscription-based service to one supported through advertising revenues.

Outlook: Call centers are not places for low-wage, low-skilled employees and Tucson’s location makes it an ideal location to try to recruit English-Spanish bilingual employees. But with an unemployment rate hovering at just under 4 percent n once considered full employment n further growth in this industry may be difficult.

11. Copper makes a comeback

Nearly written off as part of Arizona’s history, soaring world prices brought copper mining back to life in Southern Arizona. At slightly less than $3 per pound by year-end, copper has become a hot commodity again. Phelps Dodge is proceeding with construction of a new copper mine near Safford, Augusta Resources Corp. wants to open a long-planned 15,000-acre mine at Rosemont Ranch in the Santa Rita Mountains southeast of Tucson and Bolsa Resources paid $1.2 million to buy the historic 545-acre Courtland Mines property, one of several acquired by the company in the Turquoise Mining District at the southeast edge of the Dragoon Mountains in Cochise County. In Pinal County, the Resolution Copper Co. says it is trying to figure out how to tap what might possibly be the richest copper strike in U.S. history, 7,000 feet under a now-closed mine in Superior.

Outlook: Copper’s high-flying times may be coming back down a bit, experts are forecasting that copper prices, which remained flat most of 2006 after peaking in May, will fall during the first three months of this year due to weakening demand in both the U.S. and China.

12. Arizona and Mexico grow closer

While many in the nation continue to haggle over immigration issues, Arizona, Sonora and the rest of Mexico continue to press forward on ways to capitalize on trans-border trade and economic development. Among steps taken during 2006, the Metropolitan Tucson Convention and Visitors Bureau opened an office in Hermosillo, Son.; the Tucson-based National Law Center for Inter-American Free Trade and officials from Arizona, Sonora and Baja California Norte put the finishing touches on legal reforms to open up trade finance and real estate lending in their Mexican states, the Arizona Technology Council announced plans to reach across the border to establish a research and development partnership with Sonora’s Impulsor strategic projects group, and Customs and Border Protection officially launched the FAST (Free And Secure Trade) program to expedite shipments by previously approved shippers.

Outlook: Relationships between the U.S. and Mexico will still face bureaucratic hurdles. For example, as the February deadline approaches for making the switch to electronic manifests for all trucks crossing into Arizona from Mexico, only about half of the more than 5,000 growers and 150 importers using the ports of entry have qualified.

13. Defense spending

benefits Tucson

Whether it’s supplying U.S. military forces in Iraq and Afghanistan or developing innovations to support homeland security, Tucson companies had a hand in it during 2006. Raytheon Missile Systems, a major missile and bomb supplier to both the U.S. and foreign armed forces, recorded more than $1 billion in orders during 2006. Also benefiting from military spending are several local firms, such as optics company EOS Technologies, maker of the popular CROWS vehicle defense system for the U.S. Army. Several companies, including Northrup Grumman in Sierra Vista and Advanced Ceramics Research in Tucson, are developing unmanned aerial vehicles for military ground force support and border surveillance. In addition, Davis-Monthan Air Force Base and Fort Huachuca continue to support more than 30,000 uniformed and civilian employees in Southern Arizona.

Outlook: Washington politics, especially now that the Democrats are in charge of both houses of Congress, will have a hand in deciding defense spending budgets. But it may be politically incorrect these days to go soft on terror.

14. Airlines boost

service from Tucson

New York’s Kennedy International Airport, Washington D.C.’s Dulles International Airport and Newark’s Liberty International Airport are now all among 19 nonstop destinations reachable from Tucson International Airport. Passenger traffic at the airport in 2006 was up 4.7 percent to almost 4.2 million people passing through the terminal. That’s not the case everywhere n Cincinnati, Minneapolis-St. Paul, Pittsburgh, Raleigh-Durham, N.C., and Manchester, N.H., are among cities seeing declining numbers of passengers going through their airports. And, by the way, what a terminal Tucson has. As 2006 ended work was underway on major renovations of the two concourses.

Outlook: The gateway to an area is through its airport. A successful market is reflected by a busy airport. Now the onus is on those of us who are here to support the service that’s available if there is to be hope of continued growth. One positive sign already, United, which in October introduced the first-ever nonstop service to Dulles, had originally planned to offer the service only until April but has now extended that to June 6. With enough support, airport officials are hoping it will be extended to year-round.

15. Union Pacific makes

tracks for more trains

Things have become so congested off-loading ships at the Port of Los Angeles-Long Beach, the Union Pacific can’t get trains out of there fast enough so the railroad wants to build a state-of-the-art, 36-track, switching yard at Red Rock in Arizona. Some neighbors are objecting but the plan has received support from the Pinal County Board of Supervisors.

Outlook: Union Pacific will have to acquire the land, most likely before the end of this year, from the Department of State Lands, which will sell it by public auction. If successful, the rail yard will only further cement this region as integral part of an intermodal transportation system.

16. Accenture WGC

comes to Tucson

A Tucson stop during the first three months of the year, has been the oldest tournament on the Professional Golf Association tour. The trouble has been in recent years, it was overshadowed by another tournament featuring the top 64 invited pros in a match play contest. Well, no more. The Accenture World Golf Championship Match Play Championship is coming here for at least four years and will be played for the first time next month at The Gallery in Marana

Outlook: While the golfers are playing for some mighty big cash prizes n totalling $7.5 million last year n the boom to the Tucson region is the return of a first-class golfing event and what it brings in terms of exposure. For starters, there will be millions of dollars worth of national live TV coverage on the Golf Channel and NBC.

17. Chicago White Sox

say they want to leave

Tucson for spring training

This could be either very good news for Arizona or very bad news for Tucson. The White Sox, who want to move to a new shared facility in Glendale, say they can get someone to take over their contract for spring training at Tucson Electric Park by 2009. If they do, Tucson keeps three Major League Baseball teams, the Phoenix area adds at least two and the Cactus League is bigger than ever. But if the White Sox don’t find a Tucson replacement, they’re supposedly on the hook until 2013 and things could get nasty. If they leave without a replacement, both the Colorado Rockies and Arizona Diamondbacks could, by the terms of their contracts, follow the White Sox out of Tucson.

Outlook: Jerry Reinsdorf, chairman of the White Sox, is sure acting confident. Reportedly, he’s got his eye on getting the Baltimore Orioles to come to Tucson for spring training from Fort Lauderdale, Fla. It’s big business for Tucson, according to the Metropolitan Tucson Convention and Visitors Bureau, each team accounts for about $10 million to the local economy.

18. Robert Shelton named president of University of Arizona

Replacing the likeable Peter Likins, UA president from 1997 to 2006, in July, Robert Shelton seems to have taken to his new role in stride, embracing the Arizona Board of Regents’ push to move the state’s universities to an “enterprise model” to help put the UA, Arizona State University and Northern Arizona University on more firm financial ground. Shelton has already started work to tightly nail down university spending and increase outside funding.

Outlook: A blitz of public relations appearances, his care for the students, faculty and community and his approachability, look to be putting Shelton on a track to be the UA’s most likable president yet. Some of his biggest tests will come over how the UA and city officials deal with a proposal to build a $175 million science center downtown, brewing concerns over the UA’s new medical school in Phoenix, and a projected $5 million shortfall in the university’s athletic budget by 2011.

19. Moderate Republicans

get the boot and Congressional seat goes Democrat

For all the talk and high expectations, the November elections n except for the ballot propositions, ranked No. 8 n the politicians that were elected may not have been as significant an event. Arizonans joined with other voters ousting Republicans and putting more Democrats in charge but it was a rocky road getting there. A couple of prime examples were in Congressional District 8 and Legislative District 26, where in primary elections Republicans chose hard-line conservatives n ousting a moderate in the legislative district n only to ultimately give the seats to Democrats in the general election.

Outlook: With their new-found power, the onus is on Democrats to produce while Republicans try to reassemble their party. Whichever gets closer to the middle is likely to be able to begin to cement some authority while the other flounders.

20. Glassy-winged sharp

shooter eyes vineyards

It’s only about a half-inch long and not dangerous to either plants or animals, but the glassy-winged sharpshooter is the principal carrier of Pierce’s Disease, a lethal infection that destroys grape vines, nut trees and oleanders and its arrival has set off alarm bells in Southern Arizona. The Arizona Department of Agriculture spent $700,000 during the summer trapping and spraying house by house to contain a much larger outbreak and try to protect the state’s $18 million wine industry.

Outlook: With fingers crossed, state officials won’t know whether their efforts to eradicate the insect were successful until springtime.

Philip S. Moore, Joe Pangburn, Steve Emerine and David Hatfield all contributed to the writing of this report. E-mail comments for publication to editor@azbiz.com.

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