September 1, 2008

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Utah County

September 1, 2008

We’d like to thank Noah’s in Lindon for hosting the event and Jeff Edwards, CEO of the Economic Development Corporation of Utah, for leading the discussion. Participants: (1) Dennis Astill, Anderson Geneva Development; (2) David Dyches, Employer Solutions Group; (3) Russ Fotheringham, Economic Development Corporation of Utah; (4) Joe Brown, G Code Ventures/Utah Flash; (5) Matt Packard, Central Bank; (6) Mike Washburn, Thanksgiving Point Institute; (7) John Garfield, Provo Marriott; (8) Glen Jensen, Agel Enterprises; (9) Steve Densley, Provo/Orem Chamber; (10) Dave Nazare, UDOT; (11) Chad Linebaugh, Sundance Resort; (12) Reed Price, Utah Lake Commission; (13) Brad Whittaker, CEDO; (14) Charlene Christensen, Utah Valley Convention and Visitors Bureau; (15) Mike Alder, Brigham Young University; (16) Jeremy Hanks, Doba; (17) Jeff Edwards, Economic Development Corporation of Utah; (18) Brian Thompson, Bank of American Fork; (19) Heber Thompson, American Fork City; (20) Martin Lewis, Utah Business. As the construction and real estate sectors slow, local business leaders find the positives in a growing county – new transportation options, revamped educational offerings and a healthy dose of entrepreneurial spirit. What is the current overall economy in the valley? Recently, Utah reported a 1.4 percent job growth, which was 14 times the national average. How is that reflected here? DYCHES: We are still seeing a lot of entrepreneurs who are starting new businesses, and some are viewing this as a chance to go out on their own. Microsoft was founded during a recession, and I think we’ll see lots of mini Microsofts founded during this economic downtown. It always creates an opportunity for the best to rise. PACKARD: In Utah Valley, the real estate market has been on jet fuel. You cannot get the kind of acceleration and appreciated values that happened over the past three or four years; it’s just not sustainable. That always precipitates a very big fall, which is what we’re going through. There are some major adjustments and vibrations that are going on in the residential market. But if you look at the long term, it’s actually very good for the economy because it builds a base and allows things to start moving again in two or three years. MAYOR THOMPSON: In support of that, we have a significant reduction in building permits in the city over the last year, which impacts our revenue. There is a very strong indication that has bottomed out as far as American Fork is concerned but there was a great decrease, something like 45 percent. B. THOMPSON: On a positive note, the net migration here is high. So, we’ll work through the inventory we have out there. That’s one thing we have going for us that other states don’t. DENSLEY: We totally anticipated in-migration continuing quite heavily in Utah County. I met with the Board of Realtors, and they are monitoring what’s happening with gas prices because it seems to have an impact on how far away people are living. They are starting to reevaluate living closer to where they work. FOTHERINGHAM: A lot of companies outside the state are looking to come into the state. They are looking for large parcels and large sites, and those are easily found in Eagle Mountain and some of the cities in the south end of the valley. ASTill: On the residential side, we have a companion development in Vineyard Town called the Homesteads. And for about six months, we saw absolutely no activity. And then in the last month and a half, we’ve seen some of the major builders ready to come back and stick their toe in the water, but they are doing it cautiously. On the economic side, I think there is a tremendous amount of confidence in investors and business owners in the valley, which we’ve seen in the sales of industrial property. You don’t spend millions of dollars buying land and building unless you believe there is going to be something there. PACKARD: From a banking standpoint, because of what’s going on at Wall Street, there is a tremendous illiquidity and that pipeline of residential mortgages has changed dramatically. So as the markets start to get back on track, those things will start to loosen up again and will make it possible for a lot of the residential mortgages to be funded and pushed through the system. DENSLEY: The realtors projected 80,000 new people in Utah this year, and that would translate to 30,000 new homes or residents. HANKS: Speaking about whether we build offices all over the place or disperse them, from my viewpoint that doesn’t help or hurt me really because we have a very highly skilled labor force. Wherever my business is located, there is not enough population density in Utah that I can get the skilled labor I need without somebody having to drive. I’ve got employees from south Payson. Ten percent of my workforce lives north of the Point of the Mountain. And everybody is feeling the pinch, whether they are driving 10 or 40 miles to work for Doba. What is happening with mass transit? NAZARE: There was a bill passed by Representative Sumsion that gave the Department [of Transportation] $3 million to look into building a causeway across the lake. However, as we look at the environmental document, it needs to be broader than that. And we will be studying a way to address east/west transportation within Utah County and how we make some type of transportation corridor work for that location over to Provo/Orem. PRICE: The [Utah Lake] Commission recognizes that Utah Lake is an obstacle to efficient east/west transportation. There are over 55 east/west lanes in Salt Lake County for people on the west side to get to the east and the east to the west. And in Utah County, Highway 6 and Lehi Main Street are the only ways we can get east to west. The population is not as great on the west side of Utah Lake, however, it’s growing and the numbers show that it will rival that of Salt Lake in 20 or 30 years from now. We refer to it as a transportation corridor, and often a bridge structure, that would allow water to flow through. The Utah Lake Commission is not a proponent or an opponent of such a structure at this time, but we want to be involved in the study process to make sure that the lake is looked after and that appropriate studies are done to help us understand what structure, if recommended, will do. NAZARE: UTA has awarded a contract for putting in a commuter rail from Salt Lake City down to the University viaduct in Provo. They are going to be spending upwards of $9 million on that facility and are scheduled to complete it in 2012. Additionally, the legislature, has put up almost a billion dollars worth of other capacity projects in northern Utah County. And all this will happen just prior to the I-15 project, which includes widening of SR 92 from I-15 to Highland, a new facility that would be the frontage roads for the future expressway along 2100 North in Lehi from I-15 over to Redwood Road. That’s funded. We have what’s called Pioneer Crossing now, which is a new five lane facility that would go from Redwood Road south of the Crossroads and over to American Fork Main Street and probably be a five lane facility. Dennis alluded to the Vineyard Connector, and that is another funded project, which will be a five lane facility that parallels I-15 to the west from 8th North up to AF Main and tie into Pioneer Crossing. And then, of course, we’ve awarded a design/build contract for about $70 million to construct 4th South in Springville to make that a five lane facility where it is currently two, put in a new railroad structure across the presently at grade crossing, and then reconstruct the interchange with I-15. All those projects are going to be going in 2009 and 2010. If you count that plus the commuter rail, that’s pushing a billion dollars, and that’s before we even get to I-15. Where is commercial development and real estate going? GARFIELD: I think with the Zions Bank announcement, there will be a revitalization in downtown Provo. One thing that’s great about this community is we tend to be more positive. The headlines don’t help us, but generally speaking, most people are positive by nature. And so even if there is a downturn, we tend to think through the muck and see a light at the end of the tunnel. MAYOR THOMPSON: We have a couple of business parks that show no sign of slowing down. So it’s a strong environment still for industrial/commercial. FOTHERINGHAM: The number of businesses that are showing an interest from outside the state to come into the state has never been greater. And then on the other hand, a lot of the people who have been looking to come into the state for some time have said they may put it off a little bit. BROWN: As the commercial side continues to be strong and we have interest from outside employers and people continue to move to Utah County, I think we are going to start to see the residential side of the market start to slowly turn up with the continued growth and interest. One of the real trademarks of Utah County is the entrepreneurial spirit. Do we have what we need to keep that alive and to keep those companies here? ALDER: I really do believe that we’ve taken for granted the good technology-based business development that’s occurred here. We are known in the Salt Lake community for having had some unusual events in technology development but nothing that can be sustained. I’ve probably had visits from 10 venture capital companies to BYU and they never come back. And resident capital is critical. A place for companies to go is critical. BYU is a global university, so we don’t mind where the companies locate. But from my own perspective, I think it would be marvelous to see these companies grow up locally. And if I were to tell you about the three or four greatest opportunities that have recently emerged from BYU, you’d really want them to stay here. JENSEN: To start a business as an entrepreneur and grow up here is not an easy task. We’ve grown fairly rapidly in the three years that we’ve been in business, but it is hard to attract the talent and the capital to get it started. HANKS: We probably got more lucky than anything, but we’ve grown our business with no outside capital. We figured out a way to sell something that didn’t exist for a long enough time to fund the business, but it’s extremely difficult. I’m not surprised to hear that some of the best opportunities that we have are leaving. We’ve had serious conversations about whether we need to do that. BROWN: Is this more of a cultural problem? Is it a local city problem that we need to address? Do we need legislators to help us solve this issue? ALDER: I’m not sure. I think that in the past, we’ve been opportunistic. We’ve had some great successes and we’ve had great entrepreneurs that push ahead and determinedly build companies. There are some huge capital sources locally if they would band together and try to do more local investing. Oftentimes it is characteristic that investors are looking where they shouldn’t be looking to try to find a deal. Right here in our backyard there are some really outstanding opportunities. FOTHERINGHAM: There are people who do have resources and they are very interested in having those resources used here in Utah Valley. I think it’s an organizational problem that we are trying to address. And I think that we are making progress. The companies that are here are not just interlopers. They can be attracted somewhere else very easily. And we ought to be nurturing them and we ought to be making sure that they have places to be. Workforce touches every business here. Are you able to find people? Are the educational institutions in this valley producing the kinds of workers that you need? LINEBAUGH: At Sundance, we have about 400 employees year round but up to 650 in the winter season. And we have been surprised at how well we’ve been able to maintain staff levels. Ninety-eight percent of our employees live in Utah County and a high percentage of those are students at BYU or UVU. DYCHES: I think it’s clear that the valley’s labor supply and demand has reached a better balance than it was two or three years ago. And I think what that’s led to is many would-be employees are seeing that they have to upgrade their skills. I am seeing people who are working harder to differentiate themselves because where there were three or four candidates for a position, now there are 20 or 30 for a position. DENSLEY: The immigrant workers are absolutely vital to our salvation in Utah County. If we didn’t have them, we would be in serious financial difficulty in Utah County. And as you look to the future, we’ve got to be able to factor that in. We’ve also had the whole machinist issue. We’ve talked about whether they are qualified or if we have enough. We don’t. We have one company we are working with in the aerospace industry that the owner simply has said he was going to move his company to Atlanta because he couldn’t find people. HANKS: I think one of the challenges of BYU is its students basically come to BYU from all over and then go somewhere else. They don’t stay. Predominantly, it’s “I’m going to go make my way in the world and that world doesn’t include Utah County,” in the mindset. So I think UVU will have a huge impact because I think that would be a little different mindset.
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