Posted: Friday, July 22, 2011 8:00 am | Updated: 9:44 am, Thu Jul 21, 2011.

By Roger Yohem, Inside Tucson Business | 0 comments

For economic conditions to improve in Tucson and Pima County, only one thing matters: jobs. But from where?

We already have too many university and government jobs. Manufacturing diversity is weak. Real estate is in tatters. It could be 2015 before the housing debacle heals.

For job growth, Tucson trails the nation and the state. For 2011, the metro area is poised to be the only Arizona region not to gain jobs. According to Moody’s, Tucson will be one of the last cities in the entire country to recover from The Great Recession.

Around here, meaningful job growth is a fantasy. Developers are vilified by enviros and NIMBYs. Copper mines and corporate profits are characterized as filthy free enterprise. To open a low-wage burger joint, the cost of permits is equivalent to funding a government worker’s pension for a year.

Sad to say, the nation’s economic recovery has bypassed Pima County. The upturn will come about the time the Wildcats play Ohio State in the Rose Bowl.

Forever lost are many jobs. Staggering uncertainty about the future has changed the economy’s fundamentals.

These uncertainties include more regulation. City and county officials continue to send anti-business signals. Plus, what will ObamaCare really cost?

Supply-demand fundamentals are out of balance. Sluggish sales create no jobs. Future demand is uncertain as costs rise for energy, materials, taxes and soon, inflation. That’s why businesses are hoarding cash and not hiring.

Tucson’s labor forecast is dismal. For the entire state, jobs are expected to grow a pathetic 0.7 percent in 2011. Tucson got a zero. The most growth will be in overburdened taxpayers and underemployed workers. That’s no way to keep well-educated young people in town.

The state’s labor analysts say Arizona’s economic downturn began in 2007. For Tucson, their most current data (through May) shows:

Construction employment peaked at 28,700 jobs in mid-2006. By the end of 2008, some 8,000 jobs had been lost. As of May, the sector employed 15,200, down 13,500 jobs due to the recession.

Since peaking in June 2001 at 33,500 jobs, manufacturing has broken down ever since. When the economy turned, the level was 28,500. As of May, the manufacturing sector had 24,800 jobs, a cut of 3,700.

In the trade, transportation and utilities sector, the May total was 58,400 jobs, some 8,000 less than the December 2007 high of 66,700. Information services peaked in mid-2006 at 6,700 jobs and is now 2,600 less at 4,100 workers.

In finance, the mid-2007 top was 18,800. It was 17,400 in May, another 1,400 jobs in the red.

In professional and business services (call centers included), jobs hit 53,900 in November 2007. Today, the level is 47,800, a 6,100 loss. In health services and private education, Tucson had 56,200 in December 2007. Currently, this category has gained 3,500 to 59,700 workers.

In the leisure and hospitality sector, jobs peaked at 41,500 in early 2007. Today, its 36,600 people, a loss of 4,900 jobs. And in the miscellaneous category, jobs are off 2,600.

Then there’s government. To be clear, the state and feds define this category as all local municipalities, universities, local school districts, and other sectors like the post office thrown in.

In December 2007, local governments employed 81,100 people. As the recession took hold, jobs jumped to 82,600 in November 2008. During 2009, jobs bounced around but settled at 82,200 in May 2010. As of May 2011, the total was 80,100, a net decrease of only 1,000 jobs.

Add it up: the damage in the private sector is 39,600 jobs lost. That’s almost 40 business jobs cut per one job cut in government.

People move to where the jobs are, but that business concept conflicts with the leanings of many political officials. Their attitudes toward economic development haven’t really changed despite the despair caused by unprecedented unemployment.

This recession is different, driven by debt. The housing collapse crushed mobility. Unemployed workers can’t afford to sell their homes to move to better labor markets.

To survive the economic uncertainty, many companies have reorganized around technology, outsourcing and the disposable worker. Workers are added as needed, then let go until needed again. Plus, they are working harder and smarter for less money.

Many pre-recession jobs are lost forever, replaced by just-in-time disposable workers. At 40 to 1, the odds are stacked against the business community.

Contact Roger Yohem at ryohem@azbiz.com or (520) 295-4254. His Business Ink appears biweekly and weighs in on local political, social and business issues.

Posted: Friday, July 22, 2011 12:00 pm | Updated: 1:36 pm, Thu Jul 21, 2011.

Marana, Pinal County collaborate on developing transportation corridorBy Roger Yohem, Inside Tucson BusinessInside Tucson Business | 0 comments

HERE

Is the Arizona Daily Star Following the Path of the Tucson Citizen?

Posted by John Schuster on Fri, Jul 22, 2011 at 1:00 PM

The Arizona Daily Star confirmed that 52 people were laid off from the publication Thursday. If its figure of roughly 400 employees cutting paychecks in some capacity at the Compound at Park and Irvington is accurate, yesterday’s gutting would account for about 12 percent of the work force.

Gone: an estimated 15 newsroom employees and workforce reductions in advertising, circulation, finance and IT. The Star didn’t make reference to the massive drawback, by accounts the largest in the paper’s history, until midnight Friday in the business section at azstarnet.com, and of course in the print edition. However, online they were able to provide an update on a house fire that displaced a family of four and a story on Alzheimer’s testing Thursday evening. Would they have ignored a 12 percent workforce cutback until the following day, making no mention on the Web site, for any other large business in town, or even in regards to other media layoffs that occurred at the likes of radio clusters Clear Channel or Citadel, not to mention the numerous layoff cycles and eventual shutdown of the print edition of the Tucson Citizen?

Company financial woes have a way of being a distant issue-that doesn’t affect me just yet—until the salvos are launched. Star employees were broadsided Thursday.

Said Star President and Publisher John Humenik in Thursday’s Star story:

Our leadership team is confident that these steps will enable us to focus our efforts and position us for a bright future.

Really? Let’s match that statement with that of Tucson Citizen publisher Jennifer Boice during an August 2008 layoff cycle.

While these steps we are taking are painful, I hope we can all emerge from this economic downturn stronger.

As the record shows, that was one of many layoff swaths at the Tucson Citizen, until the paper finally shut its doors in May of 2009.

This is what management says when it’s against the ropes. It talks, as Humenik did, about how tough a day it was, and I’m sure it was. As easy as it is to pigeonhole management as the evil ogre behind the fancy closed door, it’s probably not terribly fun to announce the dissolution of much of your workforce, and then watch as an asinine corporate HR decision degrades them further with the assistance of a security escort. Then management desperately tries to put a positive spin on the future as a result of the downsizing, hoping it can somehow appease the remaining employees and right the ship, or buy some time before abandoning it altogether, as long-time Tucson Citizen publisher Michael Chihak (some might argue wisely and with a view on reality—a view he might not have shared directly with others) did.

Now to state the obvious. What Humenik says is not what Humenik knows. Lee Enterprises, the publisher of the Arizona Daily Star, is in deep shit. The reality remains the company is staring at a billion dollar debt payment due in April, and has yet to reach a negotiation on the financial terms it would prefer. But Lee doesn’t have much bargaining power, and if any of the more than 150 investors Lee has met with don’t like the terms, their patience could be the company’s demise. If that happens, Lee goes belly up, because Lee needs to make a deal with someone. There were rumblings from sources quoted in a Bloomberg.com story said to be inside Lee negotiations a week or so ago suggesting bankruptcy was very much on the table.

According to company CEO Mary Junck, Lee has cut debt by more than 700 million dollars since 2005. It actually turned a profit of 46 million dollars in 2010, and says it has a cashflow of 110 million dollars, but those numbers don’t add up very well when a billion dollar bill comes due in eight months. On July 15, Lee reported it expects another third-quarter decline, down 4.2 percent from the same period a year before. Lee received a delisting warning from the New York Stock Exchange July 8 when its stock, which has gone into freefall the last three months, trickled below the one-dollar threshold.

There is no bright future in morning daily print journalism. We’ve known this for most of the last decade, but the public’s transition to online news has moved much faster than the industry’s ability to effectively monetize it. The option as it sees it: cut staff, and therefore almost certainly sacrifice the quality of the overall product, and hope nobody really notices.

That said, unlike the Tucson Citizen, which suffered from the additional technological time deficiency of being an outdated afternoon paper, the Star will be a major part of the media landscape for the foreseeable future. But whether that means it will do so under the Lee banner, or while being operated by another entity such as Gannett, which still has its grubbies on a profit-sharing model and probably loves the prospect of operating the state’s second largest newspaper in addition to its stranglehold in the Valley with the Arizona Republic, that remains to be seen.

But in this industry, and in this community, if this bright future has shown us one thing, Thursday’s 52 layoffs may not be the last.

$30 million ‘Accounting Restatement”

$30 million of ‘Capital Assets’ that Rio Nuevo paid for and were included on Rio Nuevo’s balance sheet.  ‘It was determined’ by City of Tucson would be removed from Rio Nuevo’s balance sheet.  This resulted in swinging Rio Nuevo to a negative net worth position: (.ppt presentation from COT Finance Director, Pg 13, 3/24/2010)

“Infrastructure Assets Contributed to City of Tucson”

Mission Site/Origins Park                                              $12.1 million

Mercado/Avenue del Convento                                               $ 1.3

Cushing Street Bridge                                                    $ 0.7

“Donated to Other Agencies”

UofA Science Center                                                      $5.7 million

“Will not result in a Capital Project”

Mission Site/Origins Park                                              $5.7 million

Citizens Auto Exchange                                                 $2.2

Rialto Theater                                                                    $0.3

Civic Plaza                                                                            $0.7

Civic Plaza Parking Garage Plan                                  $0.7

Congress Streetscape                                                    $0.3

Miscellaneous                                                                   $0.2

Fox Theatre: $16 million*

$11.5 million paid by Rio Nuevo

$4.3 million outstanding balance on Revenue Bonds Series 2005 (Fox Theater)

$7.5 million loan to Fox Theatre carried on balance sheet as a ‘Long Term Asset”

Rio Nuevo will have paid almost $16 million and is owed $7.5 million from the Fox.  Yet Fox Theater is on the balance sheet for approx $700k and Rio Nuevo has no operational control.  For example, a new Executive Director for the Fox was recently selected yet no consultation with Rio Nuevo.

Depot Plaza Parking Garage: $14 million*

$13.7 million paid by Rio Nuevo.  City staff has informed Rio Nuevo that the Development Agreement indicates that Rio Nuevo will pay for it.  Upon completion, the garage will be ‘donated’ to City of Tucson.

*Rio Nuevo Flow of Funds through 2/28/2010.  Prepared by COT Finance Dept.

Larry Lewis

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Southern Arizona Branch Manager at Guardsmark LLC (See more below)

Tucson, Arizona Area

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• Sourthern Arizona Branch Manager at Guardsmark LLC
• Real Estate Investment Advisor at Town West Reatly, Inc

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• President and General Manager at Florida Builder Appliances

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• California State University-Sacramento
• Encina HS

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President’s Letter: Letter to 50 key executives in Illinois

In January the Chamber wrote 50 key executives of corporations in Illinois.

In our letter we noted that the Illinois State Assembly was in session to deal with their budget shortfall and that the Texas Legislature was meeting as well to address how to balance our budget in a time of declining state revenues.

“We will write you back,” we promised in our letter, “after the Texas Legislature completes its work,” to let you know how business fared in Texas as compared to how business and citizens fared at the hands of the legislature in Illinois.

Our expectation was that Texas would take a different approach to its budget challenge than the one Illinois did.

One would hope so.  In fact, the Illinois legislature promptly increased personal income taxes on its citizens by 66% and raised the business tax rate by 46%, (to see the New York Times report, click here).

The Texas Legislature did no such thing.   Expenditures were reduced and a significant surplus was left in the state’s rainy day fund (our Chamber is concerned over the long term impact of education funding that does not keep pace with growth or inhibits development of our future workforce, but that is a story for another day).

The DRC’s economic development department has now delivered on our promise to write these executives back and we wanted you to see the actual letter, Illinois letter, we have put in the mail to them.  To leave nothing to chance we wanted to include an easy to read chart of the comparative business climates between Texas and Illinois after our respective legislatures finished their work.

The chart proves with clarity and simplicity the reason why businesses and corporations all across America are finding their way here, often deciding to move to the Dallas/Fort Worth region and often with our direct help. (View Illinois vs Texas Chart June 2011). We believe it will be an effective tool to help explain why a company should move here now.

Illinois is not the only state to heavy-up on taxes at a time when businesses, especially smaller ones, can least afford it.   Other states come to mind for both tax reasons and the heavy hand of over regulation.  They are finding our economic development department knocking on their doors as well.

We have a tremendous amount of work to do to achieve the goals we have set out in our strategic plan.   To get there we will be growing our activity in economic development to take advantage of the opportunities other states are giving us.

The Chamber’s executive committee has recently given us the green light to proceed with new efforts to grow our economic development fund so that we can be involved in even more “hot pursuits” of companies which express an interest in moving here or corporations which we identify and want to see locate here.

Our Economic Development Committee is hard at work on a highly organized effort to target these companies.  We will be engaging with a number of our member investors on how we can grow our resources to meet the opportunities that will truly make us the most prosperous region in the country as well as the most desirable place to live.

View Looking for the New New World, the SMU O’Neil Center 2010 Annual Report.

PCC would quit offering the lowest tier of remedial classes – Math 82, Reading 71 and Writing 70.

The chancellor and faculty advisory groups have said few students are successful in these classes.

Flores spoke of Math 82 as an example.

Students who place into Math 82 tested at grade levels one through five, Flores said. About 1,160 students placed into that class last fall semester, he said. That’s 18 percent of PCC students entering college for the first time.

Simone Gers, a writing faculty member, talked about Writing 70.

PCC taught 50 sections of the class last year, and only 5 percent of students succeeded, she said.

Many of the students would be better served by taking English as a second language classes or adult basic education classes before attempting college-level classes, she said.

The chancellor has said the classes are not a good use of student tuition money or tax money.

It costs about $6,600 to educate a full-time student at PCC. Local property-tax payers pay a large part of the cost.

The state subsidy is $325 per student.

I believe in Las Vegas. I think its best days are ahead of it. But I’m afraid to do anything in the current political environment in the United States. You watch television and see what’s going on on this debt ceiling issue. And what I consider to be a total lack of leadership from the President and nothing’s going to get fixed until the President himself steps up and wrangles both parties in Congress. But everybody is so political, so focused on holding their job for the next year that the discussion in Washington is nauseating.

And I’m saying it bluntly, that this administration is the greatest wet blanket to business, and progress and job creation in my lifetime. And I can prove it and I could spend the next 3 hours giving you examples of all of us in this market place that are frightened to death about all the new regulations, our healthcare costs escalate, regulations coming from left and right. A President that seems, that keeps using that word redistribution. Well, my customers and the companies that provide the vitality for the hospitality and restaurant industry, in the United States of America, they are frightened of this administration.And it makes you slow down and not invest your money. Everybody complains about how much money is on the side in America.

You bet and until we change the tempo and the conversation from Washington, it’s not going to change. And those of us who have business opportunities and the capital to do it are going to sit in fear of the President. And a lot of people don’t want to say that. They’ll say, God, don’t be attacking Obama. Well, this is Obama’s deal and it’s Obama that’s responsible for this fear in America.

The guy keeps making speeches about redistribution and maybe we ought to do something to businesses that don’t invest, their holding too much money. We haven’t heard that kind of talk except from pure socialists. Everybody’s afraid of the government and there’s no need soft peddling it, it’s the truth. It is the truth. And that’s true of Democratic businessman and Republican businessman, and I am a Democratic businessman and I support Harry Reid. I support Democrats and Republicans. And I’m telling you that the business community in this company is frightened to death of the weird political philosophy of the President of the United States. And until he’s gone, everybody’s going to be sitting on their thumbs.