Washington County

• 3.8 percent unemployment rate
• 147,800 population
• George largest city
• Washington County School District Largest employer
• Source: Department of Workforce Services

Iron County

• 4.2 percent unemployment rate
• 46,780 population
• Cedar City largest city
• Southern Utah University Largest employer
• Source: Department of Workforce Services

A special thank you to Jeriah Threlfall, executive director, Economic Development Council of Washington County, for moderating the discussion.

PARTICIPANTS

• Steve Carwell, Dixie Applied Technology College
• Meri Crandall, Washington County Board of Realtors
• Chris Hart, Ivins City
• Bruce Jensen, Town & Country Bank
• Mari Krashowetz, Southern Utah Home Builders Association
• Bruce Lancaster, Wilson Electronics
• Lecia Langston, Department of Workforce Services
• Rusty Lee, Dixie State University
• Matt Loo, City of St. George
• Pam Palermo, St. George Area Chamber of Commerce
• Travis Parry, Cushman & Wakefield/Commerce
• Rick Rosenberg, Santa Clara
• Troy Scheel, CBC Advisors
• Roxie Sherwin, Washington County Convention & Tourism
• Danny Stewart, Cedar City/Iron County
• Neil Walter, NAI Utah South
• Tyler Wilkinson, Soltis Investment Advisors

How is our tourism industry faring? What are some of the key events or attractions that, besides our sunshine, drive tourism to this area?

SHERWIN: Tourism is back. 2015 was a very strong year. At Zion National Park, the visitation was up by 450,000 people over 2014. So they hit 3.7 million people. That’s good and that’s bad. It brings its challenges.

We saw a double-digit increase in the transient room tax last year, right around 11 percent. There was a 2 percent increase in occupancy and about a $5 increase of the average daily rate, which is pretty strong. So not only are we getting more people, they’re paying more.

With that increased visitation, everybody starts looking to build new hotels. I’ve heard rumors, some of them are a little stronger than rumors, of six new hotels going in. The Hyatt House will be behind the convention center. As soon as the Holiday Inn opens, they’ll start on that next property right there by it. A new Marriott in Springdale, I believe they’ve broken ground. Sentierre by Tuacahn. There’s also Encanto that’s going in out there. Estancia out in Green Valley, it’s a big property.

I don’t expect tourism to slack off this year. It’s just a rolling train. Tuacahn is one of the biggest drivers of tourism here, short of Zion National Park. Tuacahn brings $75 to $80 million into the economy. Followed by golf, followed by conventions. Then you have smaller events like the Iron Man, the marathon, Parade of Homes, things like that that are definite contributors.

STEWART: We’ve all seen how the Mighty 5 campaign has really impacted the parks, and they’ve impacted the monuments and the other destinations as well. For Iron County in 2015, it was the biggest year yet. The transient room revenue was up just under 10 percent over the previous year. Lodging occupancy was up. Cedar Breaks had over 831,000 visitors. It’s still kind of a sleepy destination, but it’s getting busier all the time.

It’s unique for people to be able to come and golf here and ski at Brian Head on the same day. That’s a really boon for Southern Utah. And last year was a huge year in spite of it being the second-driest snow year in history. They were up 20,000 skier days. There is a new owner at Brian Head. They’ve put a lot of improvements and different amenities up there. So with the increased snow this year, they’re anticipating this to be a record-breaking year at Brian Head.

We’ll have Tour of Utah back in 2016. It’s been a lot of work in the past, but we’ve seen some payoff in the community. It’s generated some interest in cycling. We have the BLM and a cycling group that are working on 100 miles of mountain bike trails on the east side of the community from north to south that will connect mountain bikers all over the mountain, eventually up into the Brian Head area as well.

Let’s talk about the general business climate. What’s the current forecast, and what are some projects you’re excited about?

HART: The outlook in Ivins for 2016 is pretty remarkable for a city our size. Ivins is a city that seems to attract some pretty exclusive kinds of projects. In our general plan, we declare ourselves to be a destination resort. That’s what we’re striving to become. And last year it was announced that Sentierre, the first five-star, world-class resort that will come into Washington County is going to be built adjacent to Tuacahn. It’s over $150 million project, so it’s pretty significant.

In addition to that, Rocky Vista University College of Osteopathic Medicine has decided to locate in Ivins. They’re going to locate next to the veterans home on Center Street. They’ll be constructing about a $35 million, 107,000-square-foot complex there, and 160 student housing units that will be adjacent to it. They also purchased our Snow Canyon Clinic, which is going to be an administrative building along with some clinical use.

ROSENBERG: Santa Clara is on the cusp of having the first major commercial center within the city. Harmons will hold its grand opening in February. It’s a beautiful store. They started construction in 2008, right before the recession hit. They had actually done the grading, excavated the footings, and were ready to pull the building permit when they backed away and waited for it since 2008. So it’s exciting to see it get opened up.

STEWART: 2015 has been positive in a lot of different areas in Cedar City.   Housing permits last year were up 25 percent. We’ve got some big projects going on in the community with the Beverly Taylor Sorenson Center for the Arts, the new home of the Shakespeare Festival and the Southern Utah Museum of the Art. That’s a big economic driver for the city, and that’s bringing that complex a lot closer to the center of historic downtown.

We also had the opening of our new Southwest Applied Technology College. The ATC is so important in our community, as it is here in St. George. They’re opening some new programs in the new building that they hadn’t had in the past—a culinary arts program and some expanded nursing programs.

The thing that has probably the biggest financial impact but
the lowest visibility at this point is the solar power industry. We have 17 utility-scale solar plants that have been approved. One is online and operating right now. It’s an 80-megawatt plant. There will be 15 more plants between 3 megawatts and 80 megawatts that are all racing to get done by the end of 2016. But the impact on the county is $1.2 billion in construction, so that’s pretty significant for us.

MSC Aerospace had their SyberJet announcement a few years ago. That was slowed down, but they’re back on track with that. MSC Aerospace signed a $48 million contract for the A10 aircraft.

LANGSTON: For the three counties in our portion of Southwest Utah, the economies are good. Job growth has been steady for Washington County for quite a long time. And Iron County and Kane County have joined the party and they’re seeing good job growth. We’re all kind of hanging out in the zone where the job growth is good but it’s not overheated.

Unemployment rates for all three counties are hanging out at about 4 percent, which is definitely in the full employment range. That means we’re creating enough jobs for people entering and reentering the labor market. We’re kind of in balance, so that’s good.

JENSEN: From a banking perspective, we’re seeing no slowdown whatsoever in our loan demand locally. That’s a good sign, obviously, because we do a lot of construction. If we make it to March with economic growth nationally, it will be the fourth-longest expansion in history. But I will say that this is the most disappointing recovery, probably, in my memory. We’ve all seen the consumer confidence numbers, but it’s subpar recovery. We are a little fearful given some of the things we’re looking at.

The IMF, for example, reduced their projections for global growth from October and for USGDP. A lot of other investment firms have revised downward their expectations for growth. So it’s been very lackluster.

I will say this: Except for 2008, which was really that recession driven by the housing debacle, St. George doesn’t tend to move in tandem with the national economy. At least to the extent the economy will tank, St. George has been a little bit more resilient. So from a banking perspective, we’re still pretty bullish with some reservations nationally. But we expect 2016 to be a very strong year for St. George.

CARWELL: A week ago, the DXATC broke ground for a new $45 million campus at the old airport. We need the space. In fact, we’re building 160,000 square feet there, and we already are fearful that we’re out of room in some of the programs.

At the college, our job is to work in concert and partnership with local employers and respond to the changing needs they have. And I’m getting calls looking for senior-level people in our local manufacturing and service industries right now. That’s a good sign that local manufacturers are planning for growth; we’re seeing a lot of second shifts being added back, third shifts being added back. The increase in employees is reasonably significant for a small county like Washington County.

Construction and residential real estate is a large component of our economy. What are you seeing on the frontlines of those industries?

KRASHOWETZ: As far as new construction, building permits were about 1,500 last year. A slight increase from the year before, which was about 1,400.   But the building industry professionals I talk to are extremely busy. The greatest challenge we’re dealing with is the labor shortage. We’re very excited about the DXATC. And we’re a strong supporting partner for them to inspire our future building industry professionals.

CRANDALL: Real estate is fabulous and it’s going up on a steady pace. We’re never going to have a bubble again. We’re about 27 percent down from the median price of value from that year. We’re up 5.29 percent in prices. So we’re right at that plateau where it’s good to be a buyer, it’s good to be a seller. We need some more homes under $150,000 because our inventory is very low there. Anybody that has a house in that price range gets multiple offers and it’s sold within just a few days.

Overall, this year is going to be about the same as 2015, but just a little bit better. The only thing we have a really high inventory in is houses over a million dollars. There’s about a four-year supply in that. In the other sectors, it’s closer to four-and-a-half months. So if somebody is looking for a million-dollar home, they can probably get a really good deal.

In new construction, we’ve got four new projects. One is the Brio, in Washington, Green Springs. I went over there the other day and they were so busy that people were lined up talking to the agents. Then we have Sentierre in Tuacahn, which is just breaking ground. And then we have the Desert Gardens, which is half-acre and acre properties over by the southern corridor. And the third phase of Stucki Farms is going in.

WALTER: We have a real problem with the inventory of homes that are in affordable ranges, so 150- to 250,000. With new construction, it’s a huge problem when you’re trying to deliver affordable lots and between the water and the city, you have impact fees of $20,000, and the impact fee is the same if it’s a 700-square-foot multi-family unit or if it’s a 7,000-square-foot-home. That’s something that our community is going to have to deal with. Otherwise, we’ll incentivize building bigger homes. And you can already see absorption is lower on larger homes. The fastest absorption and the most demand is in the affordable ranges.

It used to be a big issue in 2005 and ‘6. This issue is coming back in a really tough way because if you’re a developer, and you’re trying to figure out how to make money and all the incentives are lined up to build bigger, then we will build bigger, and we will have fewer affordable options.

LANCASTER: One of the advantages of this community, especially coming from the Bay area of California where it’s so incredibly expensive, is the affordability of doing business here in Southern Utah. I want to keep manufacturing here, but I need to keep labor affordable. If housing prices go up and we can’t attract affordable talent, then, well, it’s a circular argument. So we have to be very cautious.

LOO: How do we resolve it?

WALTER: I think it’s actually pretty straightforward. We need to have a different impact fee structure for a different product, particularly within the residential side. You can look to a bunch of other municipalities in the state for good examples. There are some municipalities doing some things that are really innovative that our local community would absolutely die over to even consider. Everybody has seen the fight over trying to develop business within Salt Lake City. They waived all their impact fees.

Now, I’m not suggesting we ought to waive all of our impact fees across the board. But if you want some apartments in this market, waive your impact fees or lower your impact fees or change the incentive structure. Because if you’ve got to deliver a unit at $120,000 a door, your impact fee is 20 percent of the cost of the unit.

LOO: From my point of view in St. George, I think we are at the beginnings of making some pretty aggressive changes. Our hope is that if we can do these changes, maybe we take the lead and other municipalities and other government structures jump on board.

WALTER: Let me just throw one other controversial topic into this particular issue. We talk about long-term water in our communities. If we build the Lake Powell pipeline, to pay for it, you’re going to have to raise water impact fees. If you don’t build the Lake Powell pipeline, the demand for housing will increase impact fees, right? So we have to be very deliberate today to make sure that we have a product offering that allows Wilson Electronics to stay in our market. If we don’t do that today, then at some point, we’re going to have a shortage of housing and a shortage of water, which is going to drive the cost of housing up. We have to deal with this.

LOO: I agree. Just from my perspective, there’s a lot that local government could look at differently. Anything we’ve talked around the table, it really doesn’t work if local government is not onboard. We understand in the development sector that one of the biggest obstacles is dealing with processes and governments and municipalities.

Let’s move into industrial and commercial real estate. Tell us what’s happening.

SCHEEL: Industrial real estate is hot. Our vacancies are extremely low, and lease rates are starting to go up. We’re not quite there. We can’t go out and build some new spec space because our lease rates just haven’t caught up with construction costs quite yet.

Moving forward in 2016, we’re going to start see some more activity on industrial land, which, for the most part has been pretty quiet for the last several years. You did have a Family Dollar that came into town in 2012 and took a major portion 88 acres. We need to focus more to get some of those big users into town, create some of those jobs—along with some of the smaller users, which will then increase prices and lease rates. And hopefully we can get to a point where we can go out and start to build some specs.

PARRY: In the industrial sector, our vacancy sits about 2.11 percent right now, and dropping. This next week will probably hit about 1.7 percent, which is essentially no vacancy. Most of the 160,000 square feet of vacancy that we have is in between 10,000 to 20,000 square feet. The small stuff, for the most part, is gone. Big stuff has been gone for a while. That has really hurt having new employers come into the market. Because they want to walk into a building, they want to see walls and a ceiling. They don’t want to look at dirt and envision what the building is going to look like.

Lease rates are 15 percent year over year in industrial. A year before that, they were up 30 percent year over year. So we’re there. We need to see some spec development. But everybody got burned so bad in the last downturn. What’s going to happen? Everybody will wait, wait, wait, the market will hit, and then everybody will go and hit it at the same time and build three or four specs out of the ground, and they may have missed the mark.

But that should have been a year ago—they should have had it under construction and ready to go because the market is there on the large industrial.

We’re already seeing land getting picked up. The cheaper-priced industrial lots are getting sold fairly rapidly. Just even at the turn of the year we’ve seen in one development, we’ve got four lots went under contract immediately. And so there’s definitely a bit of interest there. But it’s mostly the small- to medium-sized industrial users that are picking up and building lots.

WALTER: Retail has been a really bright spot on our market. Office has really lagged. A lot of that stems from the fact that we have very few primary office users. When you drive into Northern Utah and you go over the Point of the Mountain, you see all the office construction. You have a lot of primary office users who are absorbing that space. That’s not a component of our market today. It’s mostly service-oriented businesses.

Another interesting thing is there is a tremendous appetite for investment in Washington County. Investors see the growth. They see a beautiful area to live. They see long-run dynamics that are strong. And that makes investing in Southern Utah really an appealing opportunity for them. Our biggest problem, like a lot of our other strong markets, is there’s not that much inventory to sell.

What are the plans for the Ridgetop?

LOO: The city has approximately 90 acres up on the Ridgetop, formerly the old airport. Our anchor will be DXATC. Currently they’ve got 30 acres set aside and they’ve got some hopes for a few more acres as they expand. Our vision for that property is exclusively technology. We are going to be very picky on who we allow and what industry we allow up there to make sure it matches the overall vision of that area. We are working with a few homegrown tech companies, like Printer Logic and Busybusy. We are hopeful that will be an exclusive tech area, along with some other mixed-uses like restaurants.

JENSEN: Does the plan also call for a tech corridor along the Southern Parkway?

LOO: There’s been a couple of talks on Mile Post 2 on that side. I’ve had a conversation with a couple of the major developers, and they’re looking at doing a massive mixed-use down there. That could be pretty interesting if they ever pull it off. But a part of that is also a tech side as far as a usage in that Mile Post 2 area.

Rusty, could you tell us a little bit about some of the innovative educational offerings taking place?  

LEE: There are a lot of collaborative efforts with Dixie State, DXATC, private industry, all gathering together for this focus. Some of the things that Dixie State University and DXATC are doing currently are aimed at developing our workforce. So they are starting at the elementary level. Vista Elementary is a STEM school. There’s several throughout the community. But that’s where some pilot projects are going. They have a Minecraft programming class that just started this semester. They have Lego Robotics. These things are aimed at just getting kids to touch tech because you have to start. You cannot start in high school. You cannot start in college. If you’re ever going to develop that pipeline, you have to start early, you have to start with children, and you have to engage girls.

In the middle school, we have Tech Savvy, eSmart, code school and design school. Those are run in conjunction with private industry. At the high school level, we have Code Camp, Launchpad, Startup Weekend, Concept to Company. These help grow an entrepreneurial culture which we need here.

So everyone here, if you have children or if you know children, maybe sponsor them in one of these activities. You never know what might spark an interest. And get involved personally. If you have a skill set or if you have something that you can contribute, even in a small way, whether it be money, whether it be equipment, whether it be just showing up and actually doing the work, do that.

LANCASTER: I agree we have to start at an early age, and that’s critical. We also have to go all the way through the universities. Right now I could hire a dozen engineers into the company—electrical engineers, computer science engineers. It’s very difficult to find them here. I am recruiting simultaneously in Dallas where I have a tech center. We opened up the Dallas Tech Center because you just cannot find the qualified people here. We need to be graduating engineering talent, BSMEs, BSEEs, computer science majors that have this skill.

If you want to be a tech hub, you’ve got to have the engineering talent, and you’ve got to be able to attract outside talent as well so it builds. And when I say “outside talent,” I mean outside of the U.S. It’s a very homogenous community here. It’s hard for me to talk an engineer into moving to St. George. The tech industry here is still small. They want to know that they can find some other work elsewhere in the community if times change. You need to build local but you need to bring in talent from the outside.