Archive for February, 2010

27th February
2010
written by JHiggins

GUEST OPINION: Difference in attitude
By Hugh Holub, special for Inside Tucson Business
Published on Friday, February 26, 2010

One of the interesting pieces of information from the Census statisticians is the difference in median household income between Tucson and Phoenix. According to the American Community Survey compiled in 2003, in Phoenix the median household income is $40,919 a year and in Tucson it is $32,414. That’s a difference of more than $8,500.

So if you want to make $8,500 a year more in your family, what is the answer?

Why is this the case?  Local government being hostile to business?

My favorite Tucson story involves a business that put flags up in front of its headquarters in honor of each country it did business in. They were cited for violating Tucson’s sign code. They moved their headquarters outside the area.

But the governments of Tucson and Pima County reflect the people who vote and participate in the political process.

It could be said that a whole lot of people in Tucson do not depend on the local private sector to eat. And even if they do, they don’t vote their paychecks. How could they when Tucson is a franchise town?

Tucson is also a government town.

If you look around the broader region, from Austin to Albuquerque to Maricopa County and westward, you see communities with very strong and clearly identifiable private sector business leadership. They have big plans. They have a “can do” attitude about improving the income levels of their areas. They have courage and confidence.

When the other cities go looking for jobs, they land Intel plants. When Tucson looks for jobs they land call centers that compete with workers from India.

Recently when companies were solicited by the federal government for renewable energy proposals, all of the companies on the short list were from Maricopa County. None were from Tucson.

There is also a healthy respect for the private sector in El Paso, San Antonio, Austin, Albuquerque, Phoenix, Las Vegas and San Diego. Not so in Tucson. The private sector is viewed by many as the enemy of desert rodents.

Look at the downtowns of the cities in the region. You see lots of privately owned buildings.

Tucson has an almost total governmental monopoly of ownership of its downtown. The only cities with higher percentages of government buildings might be Washington,D.C., or Moscow.

The private sector in downtown Tucson was bulldozed out of existence in favor of monuments to tax revenues.

A friend once suggested making the downtown library building — which is spectacularly out of place architecturally — a mausoleum for dead Tucson politicians. Government workers could have an annual parade down Stone Avenue, with local politicians standing on the roof of the building.

The lawn next to the mausoleum would have gravestones for all the downtown businesses that have died since 1950. There would be lots of them.

What is Tucson the headquarters of besides one of the most obstructionist environmental groups in the nation?

What is Tucson famous for making, besides a sign code that makes it difficult to fly an American flag at your business?

Inside Tucson Business came out with its 2010 Book of Lists at the end of January. A suggestion for a new List in the 2011 edition might be: Regional Business Leaders. Who are they?

And besides reducing the amount of red tape businesses have to deal with, what should  business leaders be doing to eliminate that $8,500 a family income gap?

Contact Hugh Holub, an attorney who works in real estate development, public utility, water and environmental law, at HughHolub@msn.com.

Copyright © 2010 Inside Tucson Business

27th February
2010
written by JHiggins

Tucson’s modern streetcar – now we get to the pesky details
WAKE UP, TUCSON: Does it make sense?
By Joe Higgins, Inside Tucson Business, or Chris DeSimone, Inside Tucson Business
Published on Friday, February 26, 2010

 We can hear it now, “Why do those Wake Up guys have to bang on the streetcar?” Don’t they have anything better to do than bum us out about this “high point” in Tucson’s economic development soap opera?

Does light rail make sense when Tucson lacks a crosstown freeway, our streets are so bad Joe almost lost his car in a pothole, and freight trains routinely botch up rush hour traffic along the east side of Interstate 10?

Spending $144 million — $38 million per mile — to build rail tracks on roads that nearly empty Sun Tran buses now travel makes complete sense to us — in fantasyland! Print this story

 
Our electeds love to work with the broad brushstroke. That’s good for campaign pamphlets, but the pesky details about this modern streetcar/light rail worry us.

 It’ll spur private investment

Portland, Ore., is the land of light rail. They’ve been modernizing their light rail system since 1986. After 10 years, Portland’s then-City Commissioner Charles Hales noted the many vacant sites along its light rail system and said, “It’s a myth to think the market will take care of development along transit corridors.”

Ten years and a career change later, in 2006 Hales, now a development consultant to HDR Engineering, the company that helped sell Tucson on light rail, was quoted saying “The $55 million streetcar line has sparked more than $1.5 billion (and growing) in new development.”

What the ex-commissioner, now light rail promoter, failed to mention is to-date, Portland’s governmental subsidies have exceeded $1.5 billion.

 It’ll spur housing

Is light rail really the impetus to finally get student housing built downtown? For the last decade, the University of Arizona has suffered from a housing shortage and downtown needed the development.

Downtown has the Ronstadt Transit Center and lots of Sun Tran buses to take students to campus.

The lack of student housing downtown has more to do with developers not wanting to get tangled up in the city’s and Rio Nuevo’s insider deals, development services, payoffs for pet projects, bureaucracy, and more.

Having a streetcar without major reform in the downtown redevelopment process leaves us in the same swamp of stagnation.

Ongoing expenses

Once the light rail is built it’s going to take money to keep it running. Fares are planned to be somewhere between $1 and $2 per ride. The actual cost will be something else.

The scariest example comes from Beaverton, Ore., where the TriMet system has an average cost of $33 per rider but collects just $1.15 per person in fares. (read about Oregons experience HERE)

Construction isn’t cheap

The “Happy Gilmore” check in federal stimulus money our esteemed electeds now hold represents $63 million of a total $144 million project. Tucson Transportation Director Jim Glock was quoted saying it will more than likely come in under budget. God bless him in his optimism.

Call us skeptical, but after a 50 percent cost overrun on the $46 million Fourth Avenue Underpass and the $820,000 that was spent on a 15-minute movie about Rio Nuevo, our confidence in the cost projection is a little low.

The Federal Transit Administration studied 21 rail projects and found they had an average 40 percent cost overrun on construction. That’s only an extra $56 million in Tucson’s case. Maybe the mayor can find that amount under the cushions of his couch. (Read the US Dept of Transportation report HERE)

Why not celebrate?

Lastly, we’ve heard: “How can you guys knock Tucson winning a $63 million federal grant, who would be against something so wonderful?” Our simple response is these tax dollars are your tax dollars. The working family in Oakland, Calif., the single mom in Lincoln, Neb., and the cab driver in Ft. Lauderdale, Fla., are all contributing to a city in Arizona that’s getting $63 million of their hard-earned tax dollars. For what? To build a four-mile rail system that will shuttle college students to and from school.

Other’s excitement and Tucson’s excitement over winning the money may not match up.

 We hope we are wrong regarding Tucson’s venture into the world of light rail. We hope ridership is through the roof and businesses spring up along the route. We hope the project comes in under budget. We hope light rail is the spark downtown needs to get going.

Our history, research and past experience with projects run by the City of Tucson just isn’t encouraging.

Contact Joe Higgins at joe@joehigginsinc.com or Chris DeSimone at provenpartners@comcast.net. They’re the hosts of “Wake Up Tucson,” which airs 6-8 a.m. weekdays on The Voice KVOI 1030-AM. Check out their blog at www.TucsonChoices.com.

Copyright © 2010 Inside Tucson Business

More about light rail from Antiplanner.com.

19th February
2010
written by Arizona Kid

18th February
2010
written by admin
10/17/2005     IBM article
Monday, October 17, 2005IBM in Tucson: Past, present, future

Once the city’s biggest private employer, still a major player

TEYA VITU

tvitu@tucsoncitizen.com

quarter of a century ago today, IBM dedicated its sprawling high-tech plant on Tucson’s Southeast Side.

The town was giddy: We landed Big Blue. The high-tech research and manufacturing operation employed 1,000 workers and was expected to grow to 5,500.

Eight years later, IBM announced it would shut down the manufacturing portion of the facility, laying off 2,800 people.

Related story:

Reach of local IBM spans globe

Fast forward 17 years and Tucson still has not recovered – at least in manufacturing.

IBM’s downscaling hit so hard that to this day a number of people living here believe IBM “left” town, even though the company today is Tucson’s No. 2 high-tech employer with 1,850 employees.

“I’m not sure we recovered to the point to where Tucson was in the first few years of (IBM) production,” said George Leaming, owner of the Western Economic Analysis Center in Marana. “There’s been nothing to replace IBM. The IBM loss and Texas Instruments cutback (from 1,300 under the Burr-Brown name to about 900 today), has had a depressing impact on the commercial industry and the labor market. It’s made it much less stable.”

IBM’s campus, however, provided a template that has allowed Tucson to launch a next-generation high-tech sector built around much smaller technology firms in the areas of optics, bioindustry, plastics, information technology, nanotechnology, environmental technology and aerospace.

“These are the jobs that every city lusts over,” said Marshall Vest, UA’s economic forecaster. “It’s clean industry, high value, high-wage jobs.”

Tech park acts as launching pad

IBM’s massive campus, with 11 buildings and 1.9 million square feet of floor space, was essentially given to the University of Arizona in 1994 and has reemerged as the UA Science and Technology Park. Today the park houses 30 companies instead of one and employment has topped 7,000 – more workers than IBM ever had on the property.

IBM, which still fills four buildings (and parts of two others), remains a dominant tenant along with Raytheon.

“The science park is a major asset to this community,” Vest said. “If a city is offered a portfolio, one big company or 30 smaller companies, a city would take 30 companies every time. It’s a portfolio management idea.”

As the tech park’s chief operating officer, Bruce Wright orchestrated the former IBM campus’s reinvention to top-rated university research park. Wright is on the verge of diversifying beyond industry by building a 250-room hotel at the park with other plans calling for housing.

The tech park has added an average of 500 employees a year since UA acquired the property.

“Despite the fact there is a lot of churn in high-tech, we’ve seen this to be pretty steady,” Wright said. “The high-tech world is highly competitive and ever changing and you can’t embrace a formula and expect it to carry you long into the future. We have to constantly track trends. We’re trying to understand what’s happening with the nano and bio industries.

“The goal in economic development is diversification. If you’re doing this right, the big companies will attract the medium-sized companies. In the main, the park is much stronger because of the diversification we have.” Back in 1977, the goal was the bigger the better and nothing was bigger than IBM announcing it would build a massive manufacturing plant on land it had been piecing together since 1969.

Everything went hyper-speed with this project, even John Carter’s hiring as the first general manager for the Tucson plant.

“At home (in Rochester, Minn.), I got a call Friday and was asked to be in a meeting at 8 a.m. Saturday in San Jose,” Carter said. “I went to San Jose, was offered the job, flew back because I had a bridge party in Minnesota Saturday night. I started (in Tucson) on Wednesday.”

Broad impact

IBM brought much change to Tucson.

The company imported bushels of intellect. IBMers showed up at group mixers and networking events, triggering many a “chance meeting,” said David Taylor, the city’s planning administrator.

“There’s a synergy that would not occur otherwise,” Taylor said. “That starts more research and development. There’s no meter on that.”

Nonprofit organizations received a big boost.

IBM and its employees have given to United Way more than $13 million since 1977, the second highest total behind Raytheon, IBM spokesman Lon Levitan said.

“Even in 1994 (when the company had only 850 employees), they were still the second largest contributor,” said Duff Hearon, chairman of the Ashland Group investment firm and United Way chairman in 1994.

This month, 600 IBM employees took part in United Way’s Days of Caring, in which 2,500 community volunteers worked for two days on 168 projects for 59 agencies. IBM is the driving force behind Days of Caring, the largest volunteer push of the year, said Ed Parker, executive director of the United Way of Tucson and Southern Arizona.

Home prices soar

The company’s employees also caused real estate values to shoot up.

Home prices surged 10 percent to 15 percent in 1977-78 as thousands of IBMers flocked to town, said Chuck Pettis, former president of Tucson Realty & Trust.

Average home prices in Tucson jumped 13.5 percent in 1977, the year IBM announced its intentions, and then escalated 24.6 percent in 1978 and 30.2 percent in 1979 as thousands of IBMers moved to Tucson, according to statistics provided by Vest.

“They certainly had an important role, particularly the first wave of more expensive homes in the foothills,” said Pettis, today a real estate consultant for the University of Arizona Foundation.

And IBMers found the Northwest Side – clear across town from the plant – jump-starting a housing boom there.

“They found the commute by freeway was just as easy or easier than going through town,” he said. “(The Northwest Side) had not boomed yet.”

UA big winner

IBM’s influence at the University of Arizona goes beyond the Science and Technology Park. Only four universities provide more graduates to IBM nationwide than UA. More than 100 Wildcats in the past three years went to work for IBM, Levitan said.

Many of those came from the No. 2-ranked management information systems program at UA’s Eller College of Management. Eller’s management information systems program was one of 12 business schools to get $1 million from IBM in the early 1980s, and since then IBM’s Tucson plant has donated computer equipment, ranging from services and storage systems to wireless systems and PCs.

“IBM has been instrumental in the initial development of the MIS program and its continuing prominence as a major player in the MIS field,” said Mohan Tanniru, head of the MIS program.

IBM’s $1 million put Eller on the map and opened the door to other institutions giving nearly $50 million to MIS. The program pioneered developing technology systems for group decision making before the group management mentality gained popularity, and UA’S MIS developed COPLINK, which links law enforcement databases and gained prominence during the Washington, D.C., area sniper shootings.

“In general, IBM hires our students, they evaluate our student projects They are an integral part of our education process,” Tanniru said.

IBM Employment

1964 – 41 engineers and technicians to maintain IBM equipment here

October 1977 – announced building of manufacturing plant with possible 5,000 employees

October 1977 – projected to employ 1,000 by the end of 1979, a few months later increased that to 1,500-2,000

March 1978 – said could have 5,000 by 1983.

1988 – 5,500 workers

June 29, 1988 – IBM announces it will eliminate 2,800 jobs at its Tucson manufacturing plant. Many accepted a generous buyout (see tomorrow’s article).

1991 – 2,500

1993 – 1,700

1994 – 850

2005 – 1,800

Source: Tucson Citizen archive

BY THE NUMBERS

1,850 employees

$ 150M payroll

$ 12M paid by IBM and its employees in state income, local sales and property taxes each year

800 IBM employees volunteered locally in the past year

100 graduates of local colleges hired by IBM in the past year

1,300 retired IBMers live in Tucson

Tucson

It’s been 25 years since IBM dedicated its Rita Road facility. Although its corporate presence in Tucson has been erratic, the company has helped shape the city’s business environment, economic development and community service.

Today – Even when IBM drastically downsized its Tucson operation, the city benefited. The original campus now houses 30 small businesses.

Tomorrow – When the company laid off thousands of employees about 15 years ago, many left with healthy buyouts. Some of them started businesses that are still here.

14th February
2010
written by JHiggins

Why Tucson’s elected officials put business on the back burner
WAKE UP TUCSON: Time to restore balance
By Joe Higgins, Inside Tucson Business, or Chris DeSimone, Inside Tucson Business
Published on Saturday, February 13, 2010

We have many callers to our “Wake Up Tucson” radio show who ask the same question: Why are business owners treated like second-class citizens in Tucson and Pima County? One big reason is that the environmental lobby and the neighborhood associations have done an end-run around the business community.

It’s time for the business community to meet the competition for your local elected officals’ interest. They are kicking your butt.

Environmental lobby 
 
The environmental lobby is extremely successful in our region. There are dozens of groups loosely assembled but they come together like a laser light focus to achieve their goal. Their mission is to stop humans from encroaching on habitat and slow or stop growth from coming to the Sonoran Desert.

Their techniques are multi-pronged and in most cases, very effective. Some of the tools of their trade include:

• The Endangered Species Act, which uses the federal court system to block growth.

• The Sonoran Desert Conservation Plan, adopted in the late 1990s that laid the path for future growth, land use planning  and wildlife corridors.

• Political influence exerted on county elected officials and bureaucrats. Taxpayers have spent over $200 million buying ranches around the county. Uber-environmentalists sit on the Pima County Bond Committee, for gosh sake. With only 16 percent of the land in Pima County in private hands and 10 percent already built, the idea of affordable housing that matches our region’s wages will soon be gone.

• Federal rules regarding dust control, navigable water ways, 404 bridge crossing permits, and U.S. Army Corps of Engineer studies.

• The joint water–wastewater study, which has been in planning for 20 months, is the latest battleground. The blue ribbon panel (Blue Ribbon Panels: Where good ideas go to die…) is looking to merge Tucson Water and Pima County Wastewater Management. In the Phase II report, we see lots of talk about sustainability and stopping growth but little discussion on diversifying our industries. The county has been using its wastewater authority to control growth for years. Give those bureaucrats Tucson Water and things will look even worse.

NIMBY associations

If the goal of the environmental lobby is to stop sprawl and preserve the desert, then city folk need to allow for denser populations, vertical growth, tear down and rebuilds, and infill of vacant lots. When a business man or woman tries to venture into the Tucson city limits to open, develop or grow a business, they run into an entirely new set of problems:

• A land use code that has such restrictive parking, set backs, landscape requirements and now rainwater harvesting, that less and less of their property is actually usable.

• A system that allows one or two rogue neighbors to wield tremendous political influence. A small minority faction can delay your business opening until you’re out of money or completely discouraged to the point that you wonder why you chose Tucson in the first place.

• City council members and offices that realize taking care of neighborhoods above all else has been the path to getting re-elected. When elected officials’ actions are constantly in deference to what these vocal minorities want, the message to city staff is pretty clear: Take care of the neighbors and put the business owner on the back burner.

 The business community is trapped between enviros in the county and neighborhood associations in the city. What are we to do as a group? As we’ve said before, the electeds need to fear us at election time — 97 percent of all electeds want one thing in life: to be re-elected. They know the dysfunctional business community does little to help them or their opponents get elected.  They will continue to govern in favor of the groups that they perceive will get them votes.

Environmental groups and NIMBY neighborhood associations are united and passionate about their issues. Who speaks on behalf of the Tucson business community with passion and on a consistent basis?

Each month, we ask that question during our many presentations to business groups. We haven’t received an answer yet.

Contact Joe Higgins at joe@joehigginsinc.com or Chris DeSimone at provenpartners@comcast.net. They’re the hosts of “Wake Up Tucson,” which airs 6-8 a.m. weekdays on The Voice KVOI 1030-AM. Check out their blog at www.TucsonChoices.com.

Copyright © 2010 Inside Tucson Business

14th February
2010
written by JHiggins
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