Rim Country Wins New Tools To Lure Job-Producing Firms

Region nearly lost out on reviving Enterprise Zones to provide tax breaks to manufacturing firms

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In the nick of time, the state has approved an Enterprise Zone that could help lure major new businesses to Rim Country — perhaps even manufacturers which could erase the area’s economic boom/bust cycles.

Already, Payson has two or three manufacturing firms interested in setting up shop in Rim Country. Several could reap benefits worth hundreds of thousands annually from the Enterprise Zone designation.

“It can be a deal-maker in an economy that’s so tough,” said Payson Mayor Kenny Evans.

The town recently announced with fanfare the arrival of a firm that wants to manufacture ammunition for police departments in a modified warehouse near the Payson Airport, an area that will fall inside the Enterprise Zone. That represented the first new manufacturing firm to locate in Payson in perhaps a decade.

Evans said the town is in talks with another group, which could save $150,000 a year as a result of the tax breaks available inside the Enterprise Zone — including a $3,000-per-worker tax credit and a sharp reduction in property taxes.

“We have multiple groups interested right now,” said Evans.

“They were already interested” without any incentives offered by the town “but the Enterprise Zone certainly sweetens the pot.”

County economic development officials nearly let lapse an Enterprise Zone that could provide big financial breaks for new businesses as a result of a series of oversights.

At the last possible minute, the Northern Gila County Economic Development Corporation spearheaded the submission of an application to revive the lapsed incentives. The state allows counties and cities to offer the bundle of tax breaks to new businesses that meet certain criteria inside the zone, which is intended to bolster the economy in blighted areas with high unemployment.

At one time, all of Gila County qualified as an Enterprise Zone. But when the Legislature tightened the criteria, the county redrew the lines to include about half of Payson, a portion of Star Valley and then a narrow strip of land to connect the Rim Country with distressed areas of Globe and Superior.

“To really understand the big picture, you have to understand just how non-competitive Arizona has been for a long time relative to other states,” said Ken Volz, director of the Northern Gila County Economic Development Corporation.

The state Legislature put sharp limits on many other tools counties and cities had to lure new businesses, including the elimination of tax breaks for redevelopment districts.

As a result, Arizona has fewer tax breaks it can offer to recruit businesses. Moreover, small rural towns like Payson have far fewer incentives available than places like Phoenix.

As a result, Rim Country — without a railway line — has a hard time competing in the increasingly fierce struggle to attract light industry with relatively high, stable salaries.

“The Enterprise Zone is one of the few incentives the state offers anymore, so anything we can get and take advantage of is crucial,” said Volz.

Such an Enterprise Zone focuses on the development of commercial and industrial uses, with retail development limited to less than 10 percent. Volz said year-round manufacturing operations not only provide relatively high-income jobs with full benefits, but could offset the region’s current, narrowly-based economy — critically dependent on tourism and construction.

“We’ve been stuck on a few businesses and industries that are severely affected” by economic downturns, said Volz.

That made the near-death experience of Gila County’s Enterprise Zone especially alarming to economic development officials, who watched helplessly as the housing market collapsed, businesses shut down and the supply of potential new businesses slow to a trickle.

“At the peak, we had 50 or 60 businesses annually” talking about opening operations in Rim Country, said Volz. About two years ago, that total had slowed to about 30 contacts annually. In the past year “we’re down to a lot less than that,” said Volz.

The evaporation of most potential new business reflected both the deep recession and near collapse of the market for business loans, but also the region’s reputation as “anti-growth.”

“For the past eight or 10 years, we’d created the perception of being anti-business, anti-growth,” said Volz.

“Only in the past two or three years has there been a concerted effort to change that perception.”

Volz said saving the Enterprise Zone could prove even more meaningful if the Legislature adopts proposals to provide much greater incentives to businesses in the zone — including perhaps boosting the per-job tax credit from $3,000 annually to $9,000 annually for the first several years of operation.

Currently, new businesses inside the zone are also valued at 5 percent of assessed value instead of 25 percent for a startup period — a huge potential boost in a startup businesses’ profit margin.

The approval of the Enterprise Zone gives the town new blandishments for developers.

“What this downturn has taught is that we’ve been going about economic development and improving the overall economy in the wrong way,” said Volz. “The bottom line as far as Enterprise Zones are concerned, is it’s going to make everybody more competitive in trying to lure businesses to this area.”

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