Arizona Gov. Doug Ducey offered reassurance with a dose of caution about the future of continued growth in the state when he spoke to the real estate development community at a Valley Partnership meeting Friday.
Arizona is flush with success right now but it must continue to grow responsibly with future generations in mind, Ducey told a crowd of 260 real estate professionals and community members.
Maintaining a business-friendly environment is essential to maintain economic success, he said.
“In the game of states, citizens vote with their feet and Arizona is winning,” Ducey said. “There are certain policies that have made our state attractive. Lower taxes. Lighter regulation.”
Gov. Ducey spoke during a “fireside chat” with Cheryl Lombard, the CEO of the non-profit Valley Partnership, which advocates on behalf of the commercial, industrial and master planned real estate development industry in the Phoenix metropolitan region.
Lombard asked the governor about issues important to the industry: water supply, highway construction, labor shortages, education, gaming, and the state’s vast land trust holdings.
No new taxes
Ducey stated several times that he opposes any new taxes. And he called efforts to hike taxes to fund education “a bad idea.”
“If people want to see more dollars spent on education, we’ve got $1 billion sitting in the general fund right now available for additional spending.”
He mentioned two industries that recently chose Arizona over other states because of its welcoming business climate: Mark Anthony Brewing, which is opening a brewery and manufacturing center in Glendale for its popular White Claw beverage, and Nikola Motor Co., which is building a hydrogen-electric truck manufacturing plant in Coolidge.
“We’ve got a booming state and a roaring economy,” Ducey said. “The last thing we should be doing is raising taxes in the state and taking a page out of California about how to push the producers out of California.”
As the U.S.-Mexico-Canada Agreement, or USMCA, awaits President Donald Trump’s signature, Lombard said the development community is anxious to see the proposed Interstate 11 come to fruition.
The highway would run from Nogales to Wickenburg, and eventually to Kingman and on to Las Vegas. The federal government has identified I-11 as a high-priority corridor eligible for federal funding.
“We’re supportive of I-11 and we’d like to see a little more urgency in terms of the project,” Ducey said.
Upon completion, I-11 would link the Las Vegas and greater Phoenix metro areas with an interstate highway. Las Vegas and Phoenix are the two largest metropolitan areas currently not connected by an interstate.
Ducey mentioned other highway and bridge projects slated over the next three years including:
-A $300 million project to widen 23 miles along Interstate 17 north of Phoenix.
-A commitment to widen to six lanes remaining portions of Interstate 10 in both directions between Phoenix-Tucson. The governor’s budget this year calls for an acceleration of that effort with a new six-lane bridge over the Gila River.
-Improvements also are continuing on State Route 189 in Nogales, U.S. 95 in Yuma, and along the newly opened Loop 202, also known as the South Mountain Freeway. It is the largest project in state history, adding 22 miles of freeway to connect the East and West Valley.
Managing water to feed the thirsty urban areas will continue to be a constant challenge to carry on Arizona’s long history of innovation, Ducey said.
“Israel is the only place in the world that’s better at water than Arizona. We use less water today in Arizona than we did in 1959.”
He credited the Groundwater Management Act of 1980 as an example of the state’s foresightedness. The act requires homebuilders to have an assured 100-year water supply in place before a new subdivision can be built.
As water supplies become more scarce, homebuilders see water transfers as an important component for inland development in central Arizona, Lombard said.
Ducey stated that water issues will be resolved through reaching consensus among constituencies like tribes, homebuilders, utilities and agriculture.
“No one is better at it in the nation,” Ducey said.
“Water is a very hefty lift and you know the saying, ‘Whiskey’s for drinking and water’s for fighting.’ There’s a lot of truth to that.”
Last year, competing water interests worked feverishly to successfully negotiate Arizona’s piece of the seven-state-and-Mexico Drought Contingency Plan to stave off shortages on the Colorado River, the largest water resource in the Southwest.
Homebuilders also took a monumental step, striking a $97.5-million deal with the Gila River Indian Community to provide water for development for the next 25 years in the mushrooming mega corridor between Phoenix and Tucson.
Groundwater will be the next frontier as the state determines how to conserve and manage it. A flurry of bills on the topic are starting to pile up at the state Legislature.
“Today, we’re in a good position and we want to stay in a solid position where we can grow,” Ducey said.
Education funding for K-12 and universities–without raising taxes–will continue to be a priority, Ducey said.
He listed increased education funding over the past five years as one of his proudest achievements. By the end of this year, education will have received more than $6 billion in additional dollars. Among the reasons why:
-In 2018, a plan was approved for teachers to receive an average 20 percent raise over three years.
-In 2016, Arizona voters approved Proposition 123. It resulted in increased funding of an estimated $3.5 billion over 10 years from an increase in distributions from the Permanent State School Fund (State Land Trust).
“And it was all done without raising taxes,” Ducey said.
The state land trust that supports schools, universities and other public agencies, currently has its highest balance ever at $6 billion, Ducey said. It’s another reason he opposes a tax hike.
These funds can be tapped for education, rather than “sending up a flare to say things are changing in Arizona.”
State lands for new development
When asked about the possibility of more state lands for development, Ducey stated: “If you took the land available, it’s worth $80 billion in value and it’s not really doing much for anybody.”
“I do think we’ve got a great asset here,” he said.
An example of selling state trust land to spur economic development–and a larger tax base–is the sale of trust land north of Loop 101 in Scottsdale to insurance giant Nationwide Mutual. After decades of sitting empty, Nationwide Realty Investors successfully bid for 136 acres of trust land at the northwest corner of Hayden Road and Scottsdale Road.
Now under construction adjacent the freeway is a mixed-use project called Cavasson that will house Nationwide’s new regional headquarters. Choice Hotels announced last year that it is moving its technology headquarters to the site.
In addition to providing more support to K-12 and universities, Ducey also spoke of the need to fund career and technical education programs like the “second chance” program in Arizona prisons.
In 2017, Ducey launched Second Chance Centers to equip inmates with the skills and resources they need to successfully reenter society. Located at the Lewis and Perryville State Prison Complexes in Maricopa County and the Tucson State Prison Complex in Pima County, the three centers offer inmates job skills trainings, résumé and interview preparation, on-site job fairs, enrollment in health care and more.
About one hundred companies partner with the centers to offer jobs to the inmates. More than 2,300 inmates have “graduated” from the program.
Increasing trade and commerce with Mexico will continue to be a top goal, Ducey said.
“Mexico is our No. 1 trading partner now times four,” he said.
In 2014, the Arizona Commerce Authority established its first international Trade and Investment Office in Mexico City. The office has assisted approximately 456 companies since then. The governor last week commemorated the opening of two new offices in Chihuahua and Guanajuato.
“Our relationship with Mexico has never been better. We are seen as the ambassador state.”
Asked about the gaming compact with tribes, Ducey noted that he mentioned it in his 2020 State of the State address “to set down the marker.”
State officials have been negotiating with tribes over a new compact. But it is not without controversy. Though Ducey said he would like to see a plan in place this year, there are political battles brewing, including an effort to tie water settlement disputes to the pact.
Ducey and his administration have been engaged in talks over the past two years to modernize the pact. If successful, it could expand gaming including sports betting.
“We think there’s a way to have a modern gaming compact and keep it uniquely Arizona and it will benefit our general fund.”
“It’s something I’d like to get done on my watch,” Ducey said. “I think we’ve got a good agreement and I want to bring the tribal nations along.”