Here’s What is in Store for Arizona Economic Development in 2024

Article originally posted on AZ Big Media on November 10, 2023

The Arizona economic development community has worked diligently in the past few years to attract massive projects such as LG Energy Solution’s $5.5 billion battery factory in Queen Creek and American Battery Factory’s $1.2 billion facility in Tucson. Doing so requires these professionals to show the merits of locating in Arizona, both in the short- and long-term.

AZRE magazine sat down with the following officers of AAED’s board of directors to reflect on the economic conditions of 2023, the importance of workforce development for growth, and the intersection of water stewardship and economic development:

• Vincent “Skip” Becker, president of Becker Development and Consulting

• Wendy Bridges, economic development director for the City of Goodyear

• Jennifer Lindley, downtown development manager for the Town of Queen Creek

• Karla Moran, principal of economic development for SRP

• Heath Vescovi-Chiordi, director of economic development for Pima County

The following responses have been edited for clarity and length.

AZRE: At the beginning of 2023, there was talk of recession, and issues with supply chain, inflation and labor were hampering Arizona economic development. Are these still  factors as the year comes to a close? 

Karla Moran: Supply chain problems have definitely pushed out schedules and made them longer. Timelines for some of the electrical equipment — not even on the SRP side, but the client side — have gotten longer, so developers and construction companies have to be creative to get users up and running quicker.

As a utility, we’ve seen that lead times have only gotten longer in the past eight months and costs have also gone up. We’re also seeing spec development slowing down a little bit, so there’s hope that it might alleviate some of the supply chain issues. Labor has also been a challenge on the construction side with no end in sight.

Jennifer Lindley: From the perspective of the Town of Queen Creek, I’m in the throes of doing a lot of development agreements right now and developers are more cautious on the timeline, not only from a construction standpoint, but from a lending perspective, ensuring that permits and entitlement are in place before breaking ground.

While there are some timelines being affected by the labor shortage like Karla said, along with interest rates, I still think there’s excitement. There are projects in the pipeline that are waiting for LG Energy Solution to break ground, and I think that will have a ripple effect on the state of Arizona.

Vincent “Skip” Becker: The inflation rate [as of September] in the U.S. was 3.7%. That was a 0.6% increase over July, and Arizona’s inflation rate is actually 4.4%. With a steady rise in transportation costs, we are going to see more of what you’d call a recession.

That said, Arizona has created an incredible synergy in the technology industries, from chip manufacturing to electric vehicles, not to mention all the suppliers that are strategically relocating to support these industries, as Jennifer said. Arizona has experienced an unprecedented amount of direct foreign investment.

Wendy Bridges: On a bigger scale, we can’t ignore the fact that there’s an election coming up and that always affects people’s comfort level in how they invest. As we get closer to the end of the year and into the new year, we may learn about changing sentiments for different industries depending on politics.

Transportation funding is another thing of interest for Arizona. I’m located in the West Valley, and we’ve seen lots of new investment as a result of the great transportation network we have. But that network is also underserved — there isn’t the financing mechanism to help manage the number of vehicles on the road with the increase in industry, particularly logistics and manufacturing in the West Valley. That’s why Prop 400 is very top of mind because the transportation network is something that literally moves development.

Heath Vescovi-Chiordi: I’m going to put my Southern Arizona hat on right now because we have a lot of Valley representation. Karla mentioned a slowdown in spec development, which is interesting because the Southern Arizona market has seen a marked increase in spec builds recently. Just between two projects — one in Marana and the other in the core of Tucson — we’re seeing almost 1.5 million square feet of spec space going up, which is something we haven’t seen for many years. So, our developers are active in identifying where the opportunity is and how to take advantage of that even amongst all the critical issues that we’re facing right now.

A unique thing about Tucson is that we’re a tier-two market, and we know it. But we’re seeing a lot of things that are going to be super beneficial for the state as a whole. We’re going to have a groundbreaking down here for American Battery Factory soon, and that in and of itself is going to spin off a lot of upstream and downstream suppliers.

While everybody else is focusing on inflation and the labor market, it seems that Tucson and Pima County in general are about to start cutting our teeth in the midst of all this difficulty. We’re always seen as problem children to a certain extent, but we’re about to grow up really quick as the rest of the state advances as well.

AZRE: Labor shortages have come up a few times during our conversation about Arizona economic development. What is being done to promote workforce development? 

VSB:From my perspective in rural Arizona, I think we need to change our strategic play when we talk about workforce development. With inflation and the cost of capital, there are going to be businesses that fail. We have to position ourselves to pick up the employees from those businesses and retrain them or help them go support other projects that we’re bringing in.

About five years ago, we had mines close in La Paz and Mojave Counties and some 3,000 workers were displaced. Now, miners are usually more transient than other workers, but we’re going to see more situations like that moving forward.

WB: I’ll add that AAED does a lot to support workforce development across the state. We have a committee that brings in speakers on a range of topics and best practices so we can inform our membership of the current trends and opportunities in workforce development. We also have professional development across a range of topics within AAED that’s great for people in this field.

I’m in the West Valley, and there are so many more opportunities there than have ever existed before, not just with development, but also in education. We’re fortunate to have to have Franklin Pierce University, but not everyone is going to take a college track. There’s also technical education through West-MEC and career training through private colleges throughout the Phoenix Metro.

That’s the amazing thing about Arizona — it meets you where you are. If you have a bunch of letters after your name, there are opportunities for you at the executive level. In Goodyear, Amazon is one of our largest private employers, with something like 3,000 employees at just one of its facilities here. Those jobs don’t require a lot of experience to get started, and that can be a career path, and there are a lot of other manufacturing positions that don’t require a college degree. So, I think we really do have something for everyone throughout the state.

HVC: Pima County, both as an individual organization and a region, is steeped in workforce development. My department — economic development — is in communication with our workforce development department literally every single day. What they do is informed by our department and vice versa. There’s a consistent feedback loop with businesses telling us what they need, and then we figure out how to create programs and projects to ensure we’re facilitating recertification, training, education, apprenticeships and all the things needed for those specific industry sectors. It has been very successful so far, and we’re going to continue to build that up.

Over the last three or four years, we’ve gotten the University of Arizona directly involved in the economic development conversation. We know what type of engineers businesses need, so we can work with the College of Engineering to turn those people out. Now all the partners are at the table every single time we have a significant employer we’re looking to bring here.

I also want to give a special shout out to Pima Community College because they’ve done some amazing things, including the Drive48 program with the rest of the community college network. From the outside, it may look like it was created specifically for Lucid Motors, but it’s truly to help innovate in that growing sector.

JL: I just want to highlight the need for robust career exploration early on. One of the things that Queen Creek is doing in partnership with our chamber of commerce is getting into high schools, middle schools and even elementary schools to let those students discover what a job in a particular field would look like.

It’s important because by the time a student is in college, they’ve often made up their mind on a career path, even if it’s just getting a general business degree. Pivoting can be more work that someone wants to go through at that age, so it may be too late. We’re trying to get in front of those students way before they’re in high school and start making career decisions.

AZRE: What should people know about the intersection of Arizona economic development and water stewardship across Arizona?

WB: There’s a lot they should know, but the first part of the story is that Arizona has a long history of being water aware — sustaining our water supply in the desert is not new to us. Active water management has been going on for decades, to protect our communities and our residents.

The second part is that the designation of assured water supply, which many of our Arizona communities participate in, is an ongoing designation. They don’t just have to show that they have 100 years of water once — they have to keep demonstrating that they have the supply to sustain development 100 years into the future. That allows communities to identify potential issues early on and time to proactively develop solutions.

Arizona also has a diverse water portfolio, with groundwater being just one source. There’s lots to say on this topic, but I’ll just add that I think our water system is doing exactly what it should be — identifying potential water concerns early so our leaders and water advocates can have the conversations and take action to not only prevent but mitigate any issues that arise.

HVC: When we talk about assured water supply, if I were to take a page out of [City of Tucson’s Water Director] John Kmiec’s book, he’d just say, “We’re good,” and walk out of the room. The reason for that is we’ve cultivated a culture of conservation because that’s the vibe of Tucson, and that has put us in a strong position when it comes to water.

If you juxtapose that with what we’re seeing from the context of the state as a whole, yes, we do get lumped into the idea that there’s no more water. But once we sit down with people and we have the discussion about what’s going on, not only can we clarify our position, but also help with the Phoenix area’s position as well.

We’re engaged in that discussion constantly, and it has not hurt our ability to attract companies; in fact, the companies that we court are actually very receptive to the cultural element we imbue in our discussions.

JL: Queen Creek has been working on diversifying our water supply, but I think the educational part of this is huge too. We’ve been working with our [homeowner associations] to monitor and reduce their water usage. We’re also going into elementary schools to create that generational understanding of water use.

VSB: In rural Arizona, you have to understand your client’s need, but you also need to understand your natural resources and where you’re locating these folks. Every inch of this state is different — you have different [active management areas (AMAs)] but you also have towns with 500 acre-feet of water. That’s not a lot. When you get into agriculture projects, you have to be careful about the amount of water usage and understanding the aquifers in the rural areas. The political environment in rural Arizona is also interesting — people might be more misinformed than really understanding the resources that are available in the area.

KM: The recent Phoenix AMA groundwater study has helped spur conversation around the best use of water. What is the economic impact of that water use? Is it beneficial to the community? I think we have to continue that discussion on what type of industries are best suited for certain parts of the state. How does that affect Greater Phoenix, and how does each city want to approach that?

We’ve had a lot more conversations with end users that want to be sustainable, and they want to be good corporate citizens within our community. They have to understand that water is a precious resource and figure out how to reuse it, refine it, process it and return it to the aquifer.

AZRE: Is there anything else you’d like readers to know about your communities or what’s coming in 2024?

HVC: There’s a feeling of opportunity in the air, and that’s what I want to leave you with. Not only is Southern Arizona in a favorable position because of the confluence of everything we’ve been talking about, but AAED is also in such a good spot, and we’re only going to get better. We’re making the correct moves and investing in the right things, so you’re going to see AAED become even more preeminent than it is.

My final shoutout: Bring your business to Southern Arizona!

WB: I don’t just want to say, “What he said but insert the City of Goodyear,” but I do think there’s tremendous opportunity happening across the state. Just outside my office window, I’m seeing how our leadership is taking great care in creating Goodyear’s first downtown. We have some great buildings going up, a gorgeous library, a beautiful park and a great setting with lots of restaurants and office space coming. The chance to work in a community that’s at a young stage with such great potential doesn’t come along often in our careers, and I consider myself fortunate to be in this position.

JL: Sometimes, we need to step back and remember that it’s a marathon and not a sprint — especially in economic development. We need a good plan, but there are roadblocks that are going to come up. Economic conditions could change, or something like COVID could hit and we’d have to pivot.

Economic development is not always glamorous. I’ve been working at the town for nine years, and there’s a project that I’ve been working on for nine years. I just hope that before I leave the Town of Queen Creek that I get to see that come to fruition, but that’s economic development. We land these projects, hurdles come into place, we pivot, but we’re in it for the long haul. It’s a good mindset to have.

KM: The state is in a transition to more manufacturing, so we have to figure out how to help our workforce be prepared for that and be sure our infrastructure is ready for it. We’re in the midst of some growing challenges now, but we can all learn from each other. There are different things going on in different localities, so we need to share those best practices with each other.

VSB: I want to end with speaking about AAED as a whole. If you look at our 500 members and our sponsors, we are the most dynamic association in Arizona. We touch nearly all projects that come into the state, and that’s because of these professionals that this synergy has been created. We’re so blessed to have our new executive director Katie Hurst coming on board to work with these folks. I’m blessed to be the old man in the room.