February 1, 2008

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The Crossroads

Strategic Location Makes Relocation to Utah a Breeze

Gretta Spendlove

February 1, 2008

According to the buzz at the national level, Utah is a hot state to do business. Forbes, CNBC and the Kauffman 2007 State New Economy Index have all recently recognized Utah as a business-friendly place. In the midst of a fragile national economy, aggressive state and local efforts are attracting major companies to Utah, which bring thousands of jobs with them. In 2007, Procter and Gamble announced plans for a new manufacturing plant near Brigham City, bringing 900 full-time jobs and more than $400 million in new state wages during the next 10 years. Barnes Aerospace Group is expanding its plant in Ogden, bringing 474 new high technology jobs. Thermo Fisher Scientific is expanding its biotech manufacturing plant in Logan, The Hershey Company has announced a new western distribution center in Ogden, and FiberTEK Insulation is establishing a fiberglass insulation plant in Nephi. These projects are on the “Top 10” list of 2007 corporate investment and community impact projects, assembled by the Utah Governor’s Office of Economic Development (GOED). “We target areas of business in which Utah-based companies can compete with any companies throughout the world,” says Jason Perry, executive director of GOED. The state’s current targets are aviation and aerospace, defense and homeland security, life sciences, outdoor products, information technology, energy, and financial services. “We’re looking for companies that will provide high quality, family-sustaining jobs with benefits. We want jobs that pay at least 125 percent of the county median wage, or in rural areas at least 100 percent.” Perry attributes Utah’s success in attracting new companies to community efforts, natural enticements, and other incentives, including recent legislation. “Utah is a tremendously important distribution point because it has well-developed and responsive rail lines and is ideally sited to ship goods to the West Coast, Canada, and the central U.S.,” Perry says. “Those factors were very important to Procter and Gamble in making its move to Utah.” Utah’s young and well-educated work force, relatively low cost of living, attractive quality of life, airport hub and freeway system with great access north, south, east, and west make it a natural site for manufacturing and distribution facilities as well. According to Perry, Utah has become very competitive in attracting business since the state legislature approved Economic Development Tax Increment Financing (EDTIF) in 2005. Under EDTIF, local governments can create “economic development zones” where employers that create new jobs or invest significant capital may apply for a partial rebate of taxes paid to the state. Additionally, the state Industrial Assistance Fund, created in 1991, provides incentive grants for companies expanding or relocating in Utah. “We can mix those two types of funding and rebate up to 30 percent of income, sales, and withholding tax for up to 20 years,” says Perry. “We can tie money to the front end of a deal to allow the company to move here, and then do the tax rebate. Because of the way the rebate is structured, the company only gets the rebate if it has produced the promised economic growth to the state.” All for One One success story of Utah’s economic development is the cluster of outdoor products companies in Ogden. “We call it the three ‘M’s, which are the mountains, the money and the mayor,” says Mike Dowse, president of Amer Sports, in explaining why his company came to Ogden. “By mountains, we mean the proximity to the mountains that allows us to test skis and snowboards. By the money, we mean that the cost structure of doing business in Ogden is very affordable for both our business and our employees. By the mayor, we mean [Mayor Matthew Godfrey’s] vision of Ogden being an outdoor recreation hub. He was number one in recruiting us because Ogden was not originally on our list. He changed our minds and convinced us on Ogden.” Peter Metcalf at Black Diamond and Kurt Geiger at Descente helped recruit Amer Sports, says Perry. “You can see the strength of an industry when its members help recruit other companies in their industry. Once you have critical mass, you have an industry that stays and grows, and a solid foundation for an economy that is not run by cycles. The word ‘coopetition’ describes companies that work cooperatively, as well as competing against each other. Clustering of companies in a location good for that industry creates coopetition. That is what we are creating in Ogden.” Following the Money Jonathan Cohen, vice president of relocation for Coldwell Banker, explains that attracting new business to Utah creates ripples of profit through the state’s economy, since companies that move to Utah typically bring some workers with them, as well as hiring many in state. Coldwell Banker has done relocation work for such companies as the IM Flash joint venture, Kraftmaid, and Amer Sports. “All that relocation business helps keep Utah’s real estate market healthy,” says Cohen. Across the country, including Utah, the real estate market has slowed down. Units are on the market longer, and properties are sitting in inventory. “Because Utah is still one of the health-iest states, still attracting new business, its real estate market is also stronger than it would otherwise be. New workers moving to the state provide opportunities for Utah sellers,” Cohen says. “Governor Huntsman has done tremendous things for business development in Utah,” says Perry. “When he took office, he began working on transportation, the food tax, and the income tax, and on trying to identify and remove any barriers to business development in Utah. “Now we’re building the base, and in the future we’ll become even more proactive in targeting the businesses we want,” Perry says. “We’ll say ‘What is the key company in that industry?’ We’ll try to get more corporate headquarters in Utah.”
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