March 1, 2011

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Northern Utah

Utah Business Staff

March 1, 2011

Weber County: 8.5 percent unemployment rate 227,259 population $51,413 median family income Ogden largest city Department of Treasury-IRS largest employer Davis County: 6.9 percent unemployment rate 307,656 population $67,004 median family income Layton largest city Hill Air Force Base largest employer *Source Department of Workforce Services Participants: (1) Cari Fullerton, Bank of Utah; (2) Colin Wright, Henry Walker Homes; (3) Troy Thomas, ThomasArts; (4) Ron Kusina, Weber Economic Development Corporation; (5) Brandon Wood, NAI Utah; (6) Kent Sulser, Davis County Economic Development; (7) Nancy DeJong, Davis Conference Center; (8) Sara Toliver, Ogden/Weber CVB; (9) Barbara Riddle, Davis CVB; (10) Travis Lish, Falcon Hill/Woodbury Corporation; (11) Chris Barnes, Candle Warmers; (12) Dave Hardman, Ogden/Weber Chamber of Commerce; (13) David Winter, Lifetime; (14) Jim Smith, Davis Chamber of Commerce; (15) Steve Curtis, Layton City Mayor; (16) Mike Bouwhuis, Davis Applied Technology Center; (17) Chris Hillman, Clearfield City; (18) Scott Parkinson, Bank of Utah; (19) Orluff Opheikens, R&O Construction; (20) Marlin Eldred, Davis County Economic Development; Not Pictured: Steve Rush, Rocky Mountain Power Northern Utah is poised to take full advantage of the economic recovery with a strong tourism industry, vital projects at Hill Air Force Base and a wealth of businesses expanding to the region. We’d like to give a special thank you to Ron Kusina, executive director of the Weber Economic Development Corporation, for moderating the discussion and to the Ogden/Weber Chamber of Commerce for hosting the event. What’s happening in the tourism industry, and where do you see that going for the remainder of the year? TOLIVER: On the tourism front, things are looking really strong in our two counties. We’ve held really strong because of the impact of Hill Air Force Base and some of the government travel that we do, as well as the fact that we are a very affordable destination with a lot of great venues and facilities. So we haven’t seen the big downturn in Weber County that some of our partners across the region have seen. RIDDLE: Tourism is alive and well in Davis County. We have seen visitation increases in 2010. We saw a 4.3 percent increase. Of course, this follows off of 6.47 percent for last year. Regarding meetings and conventions, we found in the second and third quarter of 2010, people were really kind of pulling back and taking a wait-and-see attitude. Fourth quarter rocked. We had phenomenal results in the fourth quarter. And the first quarter is looking equally as strong, and so we are very optimistic about what 2011 will bring. And a great announcement—Home2Suites is opening up in March, which will increase our hotel inventory. We’ll go from 150 sleeping rooms to over 1,600 sleeping rooms. DEJONG: Western States Lodging is the management company of the facility that will be opening up in Ogden as well. So we’re booming, and they’re looking for other places as well. Their retirement community, Legacy Village, just opened up and, if you haven’t been there, it’s amazing. As far as the conference center goes, last year we were just trying to get people in and a lot of people were canceling at the last minute. It was the type of thing where businesses budgeted for it and then they realized at the last minute, “We’ve got to pull back and save some money.” This year we’re seeing a lot of people saying, “We have the funds now. We can spend that money to go forward,” and there’s definitely an increase in bookings in the conference center. The hotel side is booming—we are full to capacity. The government sector, business sector, leisure, is booming. Lots of people already calling about Lagoon from Idaho, so it’s a great time to be in this industry, and I’m just excited to see it take off. How is Utah’s skiing industry doing? TOLIVER: We have actually seen at our resorts this year an increase in skier days, which I believe is a trend happening across the state. The early snow certainly helped this year. It gets people in the right frame of mind early on, so they plan their vacations in the amount of time we hope for rather than waiting until January like last year. So it’s been a good season. RIDDLE: Davis County is in a great location. We like to market ourselves as one destination, 10 resorts, because you can stay centrally within our community and shoot up north or south. CURTIS: I would like to highlight Antelope Island and what an effect it has made on the county and the things that are going on there. In particular the Layton Marathon, which just started and is the only Olympic-qualifier marathon race in the state. It is also the only marathon that, if a world record is made, it’s a qualifier. The first seven miles go across Antelope Island, then they go down the causeway and into Layton, through Syracuse. It is another recreational draw. RIDDLE: Antelope Island has attracted a lot of international attention. We get so many media writers from all over the world that are brought to us by our Utah Office of Tourism. Antelope Island is a 28,000-acre island with wildlife out in the middle of America’s dead sea. It’s truly remarkable. We’re seeing articles all over the country in all different languages. Our goal is going to be in the next six to 12 months to make the visitor experience from an international perspective a lot more favorable in providing some collateral material that’s printed out in multiple languages that will support the marketing brochures that we have in multiple languages. As locals sometimes, we’re not as excited about going to Antelope Island. I’m hoping that perception is changing, because when I first started talking about Antelope Island, so many people would come up after and say, “I’ve never been there.” I don’t hear that so much anymore. Now I hear people talking about taking friends or their family that are visiting in the community. We did an economic impact assessment, and we came up with $11.7 million as the economic impact that Antelope Island brings to our community. How is the retail sector faring? BARNES: It’s picking up. Year over year, same store sales are up, which is a good thing. And they were up in the fourth quarter, which is really good. I’m talking more about from a broad retail sense, not anything particular to do with us. But our customers, both big box and small independent gift stores—their sales are increasing. We have seen quite a bit of contraction with our small independent gift stores, though. A lot of them are closing down, unfortunately. HARDMAN: As I’ve talked to most of the general retailers, they saw a significant improvement this holiday season over a year ago, of course, comparing it to the bottom of the barrel. But many of them were looking at a 4 to 6 percent increase over last year. The mall in Weber County also saw an increase overall store for store, and even our friends at Wal-Mart had a great holiday season. We also have had six new retailers move to the downtown Ogden area, most of them small Utah-based companies, with the exception of Black and Decker. Recreation Outlet is the biggest of the regional stores, and they’re finding great success. They had a fantastic holiday season. What is happening at Falcon Hill National Aerospace Research Park? LISH: Falcon Hill broke ground last October on its initial phase of development of Hill Air Force Base. The projects include a new private building to house the ICBM program, new entrance road and gate facility to alleviate stacking on I-15, new utilities systems and project infrastructure, and a new security forces building for Hill Air Force Base as well. The initial projects total approximately $46 million in development and will be constructed over the next 18 months and will employ over 450 people during the construction period alone. And planning and development also commenced on the second private building, which will total approximately 75,000 square feet. The interest from government contractors and private companies to relocate divisions of their company to Hill Air Force Base and Falcon Hill is really exciting. Hill Air Force Base employs anywhere from 22,000 to 25,000 Utahns, not to mention the numberless private contractors and other ancillary businesses that support and sustain Hill Air Force Base. So not only will these projects allow for tremendous economic growth opportunities in Northern Utah, it will also continue to provide for the growth and protection of Hill Air Force Base. As federal funding continues to be cut, there can’t help but be another round of BRACs. There’s no way for the military branches to continue to sustain and support all of these bases around the country with the huge amounts of budget cuts that have been announced. So this is an exciting way to protect and preserve Hill Air Force Base in addition to growing it as well. KUSINA: We happen to be named as the first base to get the F-35, which is the most advanced of the future aircraft that will be used by the Air Force. What that basically does is put a big target on our back so everybody else can start trying to find a way to pass us up. It’s, “How do we knock down Hill?” So the Utah Defense Alliance is a strong organization that has now twice successfully defended us around BRAC and will be available and willing to try to do that again in the future. Mayor, why don’t you take a moment and talk to us about East Gate. CURTIS: The East Gate development is a 560-acre business research park development, and what we’re trying to do there is complement what is being done on the east side by bringing the base’s inventory to its front door. The base has been very cooperative in working with us and developing East Gate, and we do have an anchor now in Janicki Industries. We have two great institutions to help facilitate the workforce that will be going in there. The DATC has a composite program that is phenomenal and is one of the biggest reasons why Janicki chose this area. And Weber State has at its Davis campus a couple of manufacturing schools that will be an asset also. It’s going to be a domino effect now that Janicki has announced that their building is virtually completed—they’ll be occupying it in the next month or two. HILLMAN: What you’re beginning to see, as with Janicki, is Davis County and Northern Utah are becoming a leader in the composite industry that is being most definitely recognized nationwide. The same day that Janicki held its groundbreaking in East Gate, ATK announced a very large expansion. They have two contracts that they are looking at to help support. The first one is a commercial contract, which is the Airbus contract—that’s the French airplane manufacturer. They’ll be manufacturing parts for those commercial aircraft. What’s more is with the F-35s, they’ll be making composite parts for that contract as well for the U.S. government. The investment by ATK over 20 years is estimated to be about $400 million. They will be bringing 800 new jobs to the Davis County area, and these are going be high-paying engineering jobs. It’s really helping to put the foot in the door the same way with Layton. This area is now becoming, like I said, sort of a hot spot for composite manufacturing. And ATK, working with Janicki and other suppliers, is looking at creating a composite campus where additional expansion and additional manufacturing in the composites industry will occur. SULSER: I have to compliment what Clearfield and Layton are doing with respect to Davis County. Businesses need landsites to develop, and over the past two years we’ve been able to work with the cities and get 3,183 acres in different parks rezoned or in the process of being rezoned, layering it with CBA, whenever possible, and this acreage will be the future of Davis County and our region. It’s projected that these landsites that we have been working on will, in future decades, create over 31,700 jobs just in the those landsites alone. And it’s mostly on manufacturing and professional services. What are we seeing in the state’s manufacturing sector? WINTER: Our business [Lifetime] is doing really well right now. 2008 was our dip. As a lot of people had in 2009, we grew little bit. Last year we had a record year, and this year we’re looking at pretty modest growth. We’re out there in the Freeport Center. We have operations in China as well. We’ve been picking up some new business—we got into the kayak business. We’re producing kayaks right here in the Freeport Center now and selling those to mass market. Technical training is becoming an increasingly important emphasis to meet the needs of employers. Discuss the local educational institutions’ efforts to enhance the state’s technical training programs. BOUWHUIS: Technical education is experiencing its greatest acceptance both from the legislature and throughout the state and by students. Our enrollment increase over the past three years has been 52 percent. We’re the fastest-growing institution in the state. The other closest institution is 10 percent behind us. We are reaching 4,000 students right now, and a lot of the popularity is in manufacturing. We’ve had increased enrollments in composites, welding and machining. We are the Western regional trainer now for Volvo/Mack Corporation. Something that’s encouraging is we’re seeing a lot of growth in placements. It’s been stagnant for a while, and now we’re getting a lot of demand for welders and for machinists. We’ve had orders now from ATK to place 40 people in June and another hundred in the fall. The composites industry is also interesting. We developed a program in response to Adam Aircraft and ATK and several other companies that approached us and said, “The metal world is going away. It’s time to get into the composites industry.” So we looked at the top programs in the country based on employer direction as well as funding, and we came back and started our composites program. And it’s grown. We’ve gone from a small facility to double the size. We’ve set up a lab at Weber State, we’ve set up a lab at Salt Lake Community College, we’ve set up a lab at Morgan High. We are directing, through a federal grant, a $2 million effort to create composites throughout the state of Utah. Weber State also does joint programs now with Ogden/Weber and Davis. You can start an LPN program with us and never leave the building and get your RN through Weber State. We also have a cooperative associate degree with Weber. We’ve announced that the higher education system will now accept the credits obtained under 900-hour programs at ATCs, and all you have to have is your gen. ed. and you can get an associate degree of applied science from Weber State. That’s a big announcement. It means that our students will be basically hardwired into an associate degree. What is Rocky Mountain Power seeing in the area regarding utilities in general? RUSH: When people come in and look at Utah, the things they want to know about are education, basic infrastructure, utilities. We are trying to stay ahead of the game. Most of you are aware that we’ve been building large transmission lines out of Wyoming into Northern Utah. We’re doing the same thing through the south. We got asked a lot of times, “Why are you still building when the economy is so slow?” Well, it’s like building an interstate. It takes a long time to do this stuff and you know the need is going to be there. And we just made a commitment to keep spending the money. In our case, the commitment is $20 billion over a 10-year period. That’s power lines, that’s the high-voltage transmission, the major substations. I’ll talk briefly on rates. We filed for a fairly significant price increase—for us in the utility business, when you spend billions of dollars, you have to go to public service commissions, and that’s the way you recoup your costs for these things. So we’re in the middle of that process right now. Those rates will eventually come back down, as they did in the ‘80s and ‘90s. Right now, we’re in the lowest 20 to 25 percent in cost in the nation. We will remain there. So from a competitive basis, when we’re bringing in businesses, we will remain extremely competitive, along with Questar. What does 2011 hold in store for the construction industry? OPHEIKENS: This is the most optimistic meeting that I have sat in in probably three years, and I can’t tell you what a pleasure it is. I sit in meetings like this down in Las Vegas, and that was the fastest-growing city in America for 20-some years. Man, the stories that are down there are awful. So it’s such a joy to come back to Utah and think about all the things that have been accomplished and all the programs and ideas. Not very many years ago there was a time when if you were a contractor in Ogden, trying to survive would be a really tough thing to even consider. That forced us to move out of not only Ogden, but out of Utah. And so we’re scattered all over 16 states. The good news for us is because of that, we’re full. You know, jobs are not necessarily real profitable, but they’re OK. Our guys are working. But there appears to be a tale of two stories in the construction world here because at the same time that we’re full and actually hiring, that doesn’t mean that we’re looking to hire a hundred people tomorrow. But if we can find the right project manager or the right estimator, the real talented people, we’re looking for those people today. The future is bright for R&O, but at the same time, there are other construction companies that are closing their doors and laying people off. So it’s a real mixed bag. I think, though, that contractors in Utah are probably going be able to get through this thing. You can start to see we’re bouncing along the bottom. It seems like one step forward and then one step back. For a while it was one step forward and maybe three or four steps back. It’s been a wild two years. But in general, construction is starting to see some light at the end of the tunnel. How about on the residential real estate side? How is that starting to shape up? WRIGHT: The best part of contraction is that the price of a home now matches the income ratio. That’s an important thing that got out of whack, and it’s good we’ve corrected that. The fear in the market seems to be gone for home buyers. They do demand a great value in the home they buy, but they’re not afraid that their home will be worth less two years from now than they’re worth today. So they’re active in buying homes. There are good loan programs today. There’s a lot of complaints that buyers can’t get loans in this market. That’s not true. Buyers that should get loans can get loans, so it’s a healthy market. We still have competed against short sales and foreclosures. We’ve worked through most of those in 2008, 2009. We’ll still have that as a headwind for the next two to three years, but it’s manageable. In all of these cities there were subdivisions that were built that maybe shouldn’t have been built or were priced incorrectly, and we’re starting to work through that inventory. So new subdivision development might be a couple of years away. A couple years from now, you will see farms that will be developed, once again, into subdivisions. In the homebuilding industry, as it’s contracted by 70 percent, that means there’s great talent that is willing to come to work at the right price, and we can pass on that value to our buyers. It’s been an advantage for us in this contraction to have a great team of great people. WOOD: It’s probably the first time in the last three years that I can use the word optimistic. It’s cautious regarding the real estate market, but it’s optimistic. There were about 20 percent more transactions in 2010 versus 2009 and about 20 percent more square feet in 2010 versus 2009. But you’ve got to take into perspective that the number in 2009 was very, very small. So we’re seeing steps. Things are getting better. What I’m starting to hear in the last six months is that businesses are profitable again. Their top number, their revenue, is not near what it was in 2006 and 2007, but they’ve corrected their facts. They’ve cut things down, they’re working more efficiently, they’re doing more with less, and a lot are profitable and feeling comfortable that they can operate in this economy. Because they’re feeling confident in their own businesses, they’re starting to make decisions about growth, about facilities, which they just put on the shelf for the last two or three years. It’s hard to say that things are bright and rosy because it hasn’t translated into the numbers significantly yet, but there are a lot of good things that have happened. Northern Utah is scrappy. Last night, I was looking at some of the projects that have started construction or are in different phases of development right now. You’ve got the Miller’s Megaplex in Centerville, a very difficult project to finance in any market, let alone this market, and that one got done. Station Park at Farmington is well underway. The East Gate Business Park with Janicki was able to be built. The new IRS building is going on downtown here in Ogden, CSN stores, tenants over at BDO. There’s a lot of big deals that have happened right here in our backyard, and I think everybody in this room can pat themselves on the back. It’s a lot of work. Those deals would not have happened if people weren’t being aggressive and creative. SULSER: I think it’s an opportune time to say thank you to our legislators in helping Utah stay competitive. What Huntsman did years ago to reduce the corporate income tax, to keep it a right-to-work state, and to allow local and state incentives to occur, are the reasons projects are being built today. Because financing is tough. ELDRED: We utilized a lot of the recovery zone bonds this last year. Janicki Industries took $9.5 million from a facility in its own bonds, and Larry H. Miller’s project took about $12.5 million. Neither of those projects would have transpired without that funding. We were allocated through the county—between public and private—we had about $20 million allocated to us. At the end of the year last year, we had actually taken between private and public almost $50 million. The county is going forward with a new administration building, Bountiful City is upgrading electric, and then the private business have taken it. But Lisa Janicki made a comment that without the $9.5 million available in those bonds, it would have made the financing almost impossible to come to East Gate. So without the incentive put on the table, and those bondings in place, it would have been a tough market last year. What’s going on in the world of banking and finance? PARKINSON: We happened to weather the storm OK at Bank of Utah, but it was really miserable. Diversity is so important, and we are so fortunate in these two counties to have manufacturing, distribution, a government that imports dollars into our community. There’s a lot of discussion about banking, that we’re not making loans. And, in fact, we’re under extreme pressure to make loans. Most of the banks have a lot of liquidity. Money is not worth a whole lot. It’s out there and available. And you can get it pretty cheap. FULLERTON: We are lending money and we never stopped lending money. On the commercial side, we continue to seek credit-worthy borrowers. And that’s the key for all borrowers, residential or commercial. We’re back to the fundamentals. You have to have capacity and you have to have a history of repayment. There’s no such thing as a stated income kind of commercial loan, and there never was. What we’re going to see on the commercial side will be impacted a little bit by what Brandon said, because you do have to have a credit-worthy seller and credit-worthy buyer. And a lot of people who are under water have negative equity in their commercial projects as well, and that stalls them from selling or moving, absorbing, leasing up, because it’s too low. They just won’t lock in their loss. And that’s happening a little bit, people are moving, but what we’re seeing is they don’t want anyone to know. It’s a silent movement because landlords don’t want folks to know they’ll lease at $5 a square foot in Ogden city. They don’t want it on the MLS because it’s a little bit too low for the capacity that we want to engage. But it’s happening and it needs to happen. It’s got to get absorbed, it’s got to get sold. You also see a little bit of silent inventory in the banking industry. There’s some foreclosures and stuff that banks are sitting on. They haven’t moved the inventory out. They don’t want to lock in their loss either. So we’ve got that headwind that will continue to impact us in 2011, probably 2012. From a marketing and public relations perspective, how is the economy looking? THOMAS: We’re a Davis County success story. Our headquarters are right in Farmington, which is not what you maybe first think of. It’s not Madison Avenue, but we like being there. Eight years ago we started, and people in this room were some of our initial contacts. We literally grew up here in Davis and Weber County. To the point now, though, where we’ve become a nationwide company—just this year we’ve opened offices in New York. Just last week we opened an office in Dallas, and we also have offices in Minneapolis and California. But our headquarters are right here in Utah, and that’s actually the bulk of our employees. We have 120 employees in our Farmington office. There’s a reason for that. We can operate efficiently. As we’ve talked to clients, that’s totally what they’re looking for right now. They’re looking for more efficient ways to maximize the budgets. In a contraction, marketing is one of the very first things that gets cut. I think that’s a little bit unfortunate. Actually, I think a lot of the smart companies continue to market heavily through a contraction, through a recession, because it positions them on the other side to really gain share and to have an opportunity to—as the growth cycle kicks back up—to take full advantage of that cycle. A lot of our clients have recognized that and have continued to spend, but they need to be more efficient in how they spend. So what we’ve tried to do is provide a model where we can provide in-house capability of virtually any kind of marketing that they would need. We’ve made a big investment both in terms of personnel and equipment in developing new ways to speak to consumers, because the old ways—the old standard of TV, radio, billboard campaign—that’s changing quite a bit. Consumers are spending more and more time online, they’re spending more and more time interfacing digitally. It’s a seismic shift in consumer behavior. Ultimately, it’s going to provide some really great opportunities for companies that are on the edge of that to speak to consumers in a more direct way than they ever have, in a real one-to-one kind of way that is meaningful to consumers. We see just incredible opportunities out there. It’s been difficult. To echo a lot of the comments here, it’s been a slaughter. It’s been three very tough years. And in the advertising business, the strong survive. We feel like we’re in the position where we can, not just survive, but thrive. And what’s wonderful about it is we can do it right here where most of us grew up. It’s wonderful that we’re able to provide jobs right here in Farmington. SMITH: The companies that have survived this downturn are very efficient and they are very smart, and they are going to come out tremendously strong in terms of using capital and using liquidity and using human resources, that as the sales number grows, there’s some tremendous success lying ahead of us. And as we get a little more optimistic, we are poised to have some real success in our market.
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