Joe montoya senior center flagstaff

ECONOMIC IMPACT OF COCONINO INDUSTRIAL PARK ON THE CITY OF FLAGSTAFF

Prepared for The Flagstaff City Council

Flagstaff, Arizona

Prepared by Martha E. Montoya

Senior Research Consultant Sedona Development Company

January 12, 2019

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Sedona Development Company 426 Saddle Rock Circle www.sedonadevco.com

Sedona, Arizona 86340 928.450.3348

January 12, 2019

City Council City of Flagstaff 211 West Aspen Avenue Flagstaff, AZ 86001

Dear Council Members:

The attached report, requested by the Flagstaff City Council in a letter to Goldman-Lyon & Associates dated October 20, describes the economic impact of Coconino Industrial Park on the city of Flagstaff. We believe you will find the results of this study useful in evaluating future development of industrial parks within the city limits.

This study was designed to examine economic impact in three areas:

• Current and projected tax and other revenues accruing to the city from Coconino Industrial Park

• Current and projected employment generated by the park • Indirect effects on local employment, income, and economic growth

Primary research consisted of interviews with 15 Coconino Industrial Park (CIP) tenants and managers, in addition to a 2018 survey of over 5,000 CIP employees. Secondary research sources included the Annual Budget of the City of Flagstaff, county and state tax records, government publications, periodicals, books, and online resources. Results of this research, discussed more fully in this report, indicate that Coconino Industrial Park exerts a significant beneficial influence on the Flagstaff metropolitan economy.

We would be pleased to discuss this report and its conclusions with you at your request. My firm and I thank you for your confidence in selecting our company to prepare this comprehensive report.

Sincerely,

Martha E. Montoya Senior Research Consultant

MEM:coe Attachment

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A letter or memo of transmittal announces the report topic and explains who authorized it. It briefly describes the project and previews the conclusions, if the reader is supportive. Such messages generally close by expressing appreciation for the assignment, suggesting follow-up actions, acknowledging the help of others, or offering to answer questions. The margins for the transmittal should be the same as for the report, about 1 to 1¼ inches on all sides. The letter should be left-justified. A page number is optional.

Martha E. Montoya

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TABLE OF CONTENTS

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

INTRODUCTION: COCONINO AND THE LOCAL ECONOMY . . . . . . . . . . . . . 1

BACKGROUND: THE ROLE OF CIP IN COMMERCIAL DEVELOPMENT . . . . . 1

DISCUSSION: REVENUES, EMPLOYMENT, AND INDIRECT BENEFITS . . . . . . 2

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Sales and Use Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Other Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

CONCLUSIONS AND RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

LIST OF FIGURES

Figure 1 Revenues Received by the City of Flagstaff From Coconino Industrial Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 Employment Distribution of Industry Groups . . . . . . . . . . . . . . . . . . . . . 4 3 Average Annual Wages by Industry Groups . . . . . . . . . . . . . . . . . . . . . . 4

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EXECUTIVE SUMMARY

The city of Flagstaff can benefit from the development of industrial parks like the Coconino Industrial Park. Both direct and indirect economic benefits result, as shown by this in-depth study conducted by Sedona Development Company. The study was authorized by the Flagstaff City Council when Goldman-Lyon & Associates sought the City Council’s approval for the proposed construction of a G-L industrial park. The City Council requested evidence demonstrating that an existing development could actually benefit the city.

Our conclusion that the city of Flagstaff benefits from industrial parks is based on data supplied by a survey of 5,000 Coconino Industrial Park employees, personal interviews with managers and tenants of CIP, city and state documents, and professional literature.

Analysis of the data revealed benefits in three areas:

• Revenues. The city of Flagstaff earned over $3 million in tax and other revenues from the Coconino Industrial Park in 2018. By 2025 this income is expected to reach $5.4 million (in constant 2018 dollars).

• Employment. In 2018, CIP businesses employed a total of 7,035 workers, who earned an average wage of $56,579. By 2025, CIP businesses are expected to employ directly nearly 15,000 employees who will earn salaries totaling over $998 million.

• Indirect benefits. Because of the multiplier effect, by 2025 Coconino Industrial Park will directly and indirectly generate a total of 38,362 jobs in the Flagstaff metropolitan area.

On the basis of these findings, it is recommended that development of additional industrial parks be encouraged to stimulate local economic growth. The city would increase its tax revenues significantly, create much-needed jobs, and thus help stimulate the local economy in and around Flagstaff.

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Executive summaries focus on the information the reader requires for making a decision related to the issues discussed in the report. The summary may include some or all of the following elements:

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INTRODUCTION: COCONINO AND THE LOCAL ECONOMY

This study was designed to analyze the direct and indirect economic impact of Coconino Industrial Park on the city of Flagstaff. Specifically, the study seeks answers to these questions:

• What current tax and other revenues result directly from this park? What tax and other revenues may be expected in the future?

• How many and what kinds of jobs are directly attributable to the park? What is the employment picture for the future?

• What indirect effects has Coconino Industrial Park had on local employment, incomes, and economic growth?

BACKGROUND: THE ROLE OF CIP IN COMMERCIAL DEVELOPMENT

The development firm of Goldman-Lyon & Associates commissioned this study of Coconino Industrial Park at the request of the Flagstaff City Council. Before authorizing the development of a proposed Goldman-Lyon industrial park, the city council requested a study examining the economic effects of an existing park. Members of the city council wanted to determine to what extent industrial parks benefit the local community, and they chose Coconino Industrial Park as an example.

For those who are unfamiliar with it, Coconino Industrial Park is a 400-acre industrial park located in the city of Flagstaff about 4 miles from the center of the city. Most of the land lies within a specially designated area known as Redevelopment Project No. 2, which is under the jurisdiction of the Flagstaff Redevelopment Agency. Planning for the park began in 1999; construction started in 2001.

The original goal for Coconino Industrial Park was development for light industrial users. Land in this area was zoned for uses such as warehousing, research and development, and distribution. Like other communities, Flagstaff was eager to attract light industrial users because such businesses tend to employ a highly educated workforce, are relatively quiet, and do not pollute the environment (Cohen C1). The city of Flagstaff recognized the need for light industrial users and widened an adjacent highway to accommodate trucks and facilitate travel by workers and customers coming from Flagstaff.

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The first page of a formal report generally contains the title printed 2 inches from the top edge. Headings for major parts of a report are centered in all caps. In this model document we show functional heads, such as PROBLEM, BACKGROUND, FINDINGS, and CONCLUSIONS. However, most business reports would use talking heads or a combination such as FINDINGS REVEAL REVENUES AND EMLOYMENT BENEFITS. First-level headings (such as Revenues on page 2) are printed with bold upper- and lowercase letters. Second-level headings (such as Distribution on page 3) begin at the side, are bolded, and are written in upper- and lowercase letters. See Figure 9.6 for an illustration of heading formats.

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The park now contains 14 building complexes with over 1.25 million square feet of completed building space. The majority of the buildings are used for office, research and development, marketing and distribution, or manufacturing uses. Approximately 50 acres of the original area are yet to be developed.

Data for this report came from a 2018 survey of over 5,000 Coconino Industrial Park employees; interviews with 15 CIP tenants and managers; the annual budget of the city of Flagstaff; county and state tax records; and current books, articles, journals, and online resources. Projections for future revenues resulted from analysis of past trends and “Estimates of Revenues for Debt Service Coverage, Redevelopment Project Area 2” (Miller 79).

DISCUSSION: REVENUES, EMPLOYMENT, AND INDIRECT BENEFITS

The results of this research indicate that major direct and indirect benefits have accrued to the city of Flagstaff and surrounding metropolitan areas as a result of the development of Coconino Industrial Park. The research findings presented here fall into three categories: (a) revenues, (b) employment, and (c) indirect benefits.

Revenues

Coconino Industrial Park contributes a variety of tax and other revenues to the city of Flagstaff, as summarized in Figure 1. Current revenues are shown, along with projections to the year 2025. At a time when the economy is unstable, revenues from an industrial park such as Coconino can become a reliable income stream for the city of Flagstaff.

Figure 1

REVENUES RECEIVED BY THE CITY OF FLAGSTAFF FROM COCONINO INDUSTRIAL PARK

Current Revenues and Projections to 2025

2018 2025 Sales and use taxes $1,966,021 $3,604,500 Revenues from licenses 532,802 962,410 Franchise taxes 195,682 220,424 State gas tax receipts 159,420 211,134 Licenses and permits 86,213 201,413 Other revenues 75,180 206,020 Total $3,015,318 $5,405,901

Source: Arizona State Board of Equalization Bulletin. Phoenix: State Printing Office, 2017, p. 28.

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Sales and Use Revenues

As shown in Figure 1, the city’s largest source of revenues from CIP is the sales and use tax. Revenues from this source totaled $1,966,021 in 2018 according to figures provided by the Arizona State Board of Equalization (28). Sales and use taxes accounted for more than half of the park’s total contribution to the total income of $3,015,318.

Other Revenues

Other major sources of city revenues from CIP in 2018 include alcohol licenses, motor vehicle in lieu fees, trailer coach licenses ($532,802), franchise taxes ($195,682), and state gas tax receipts ($159,420). Although not shown in Figure 1, other revenues may be expected from the development of recently acquired property. The U.S. Economic Development Administration has approved a grant worth $975,000 to assist in expanding the current park eastward on an undeveloped parcel purchased last year. Revenues from leasing this property may be sizable.

Projections

Total city revenues from CIP will nearly double by 2025, producing an income of $5.4 million. This estimate is based on an annual growth rate of 0.65 percent, as projected by the Bureau of Labor Statistics.

Employment

One of the most important factors to consider in the overall effect of an industrial park is employment. In Coconino Industrial Park the distribution, number, and wages of people employed will change considerably in the next six years.

Distribution

A total of 7,035 employees currently work in various industry groups at Coconino Industrial Park. The distribution of employees is shown in Figure 2. The largest number of workers (58 percent) is employed in manufacturing and assembly operations. The next largest category, computer and electronics, employs 24 percent of the workers. Some overlap probably exists because electronics assembly could be included in either group. Employees also work in publishing (9 percent), warehousing and storage (5 percent), and other industries (4 percent).

Although the distribution of employees at Coconino Industrial Park shows a wide range of employment categories, it must be noted that other industrial parks would likely generate an entirely different range of job categories.

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Figure 2

EMPLOYMENT DISTRIBUTION OF INDUSTRY GROUPS

Source: 2018 survey of CIP employees

Wages

In 2018 employees at CIP earned a total of $398 million in wages, as shown in Figure 3. The average employee in that year earned $56,579. The highest average wages were paid to employees in white-collar fields, such as computer and electronics ($65,200) and publishing ($61,100). Average wages for workers in blue-collar fields ranged from $48,500 in warehousing and storage to $53,400 in manufacturing and assembly.

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AVERAGE ANNUAL WAGES BY INDUSTRY GROUPS

Coconino Industrial Park, 2018

Annual Industry Group Employees Wages Total Manufacturing and assembly 4,073 $53,400 $217,498,200 Computer and electronics 1,657 65,200 108,036,400 Publishing 672 61,100 41,059,200 Warehousing and storage 370 48,500 17,945,000 Other 263 51,300 13,491,900 7,035 $398,030,700

Source: 2018 Survey of CIP employees

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Other (4%) Warehousing and storage

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Publishing (9%)

Computer and electronics

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Manufacturing and assembly

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CONCLUSIONS AND RECOMMENDATIONS

Analysis of tax revenues, employment data, personal interviews, and profes- sional literature leads to the following conclusions and recommendations about the economic impact of Coconino Industrial Park on the city of Flagstaff:

1. Sales tax and other revenues produced over $3 million in income to the city of Flagstaff in 2018. By 2025 sales tax and other revenues are expected to produce $5.4 million in city income.

2. CIP currently employs 7,035 employees, the majority of whom are work- ing in manufacturing and assembly. The average employee in 2018 earned $56,579.

3. By 2025 CIP is expected to employ more than 15,000 workers producing a total payroll of over $998 million.

4. Employment trends indicate that by 2025 more CIP employees will be engaged in higher-paying white-collar positions.

On the basis of these findings, we recommend that the City Council of Flagstaff authorize the development of additional industrial parks to stimulate local economic growth. The direct and indirect benefits of Coconino Industrial Park strongly suggest that future commercial development would have a positive impact on the Flagstaff community and the surrounding region as population growth and resulting greater purchasing power would trigger higher demand.

As the Coconino example shows, gains in tax revenue, job creation, and other direct and indirect benefits would follow the creation of additional industrial parks in and around Flagstaff.

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Projections

By 2025 Coconino Industrial Park is expected to more than double its number of employees, bringing the total to over 15,000 workers. The total payroll in 2025 will also more than double, producing over $998 million (using constant 2018 dollars) in salaries to CIP employees. These projections are based on a 9 percent growth rate (Miller 78), along with anticipated increased employment as the park reaches its capacity.

Future development in the park will influence employment and payrolls. One CIP project manager stated in an interview that much of the remaining 50 acres is planned for medium-rise office buildings, garden offices, and other structures for commercial, professional, and personal services (Novak interview). Average wages for employees are expected to increase because of an anticipated shift to higher-paying white-collar jobs. Industrial parks often follow a similar pattern of evolution (Badri, Rivera, and Kusak 41). Like many industrial parks, CIP evolved from a warehousing center into a manufacturing complex.

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If this formal report had used APA referencing style, the references would appear as shown here. The writer lists all references cited in the text as well as others that she examined during her research. The writer lists these citations following the APA referencing style. Notice that all entries are arranged alphabetically. Book and periodical titles are italicized, but they could be underlined. When referring to online items, she shows the full name of the citation and then identifies the URL as well as the date on which she accessed the electronic reference. This references page is shown with single-spacing, which is preferable for business reports. However, APA style recommends double-spacing for research reports, including the references page. APA style also shows “References” in upper- and lowercase letters. However, the writer preferred to use all caps to be consistent with other headings in this business report.

REFERENCES

Arizona State Board of Equalization Bulletin. (2017). Phoenix: State Printing Office, 26-29.

Badri, J., Rivera, H., & Kusak, M. (2017) A comparison of sustainability and economic development in urban industrial parks. Journal of Industrial Ecology, 24(4), 233-268. doi: 10.1078/0366-6133.25.335

Cohen, A. P. (2017, December 14). Industrial parks invade suburbia. The New York Times, p. C1.

Fighting poverty and protecting the environment: Development of a sustainable technologies industrial park. Retrieved from http://www.smart-communities .ncat.org/success/northam.shtml

Miller, A. M. (2017). Redevelopment projects: Future prospects. New York: Rincon Press.

Pearson, S. (2017, June 30). Travel to work characteristics for the 50 largest metropolitan areas by population in the United States. Retrieved from http://www.wsj.com/article 130630

U.S. Department of Labor, Bureau of Labor Statistics. (2017). Overview of the 2010-2020 Projections. Retrieved from http://www.bls.gov/ooh/About /Projections-Overview.htm

APA Format

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Brochure

Journal with doi

Newspaper article

Article with URL

Book

Online article

Government publication

On this page the writer lists all references cited in the text as well as others that she examined during her research. The writer lists these citations following the MLA referencing style. Notice that all entries are arranged alphabetically. The MLA Handbook, Eighth Edition (2016) requires italics for titles of books, magazines, newspapers, and journals. The works cited page is shown with single-spacing, which is preferable for business reports. However, MLA style recommends double-spacing for research reports, including the works-cited page.

Note: The MLA Handbook, 8e, page 48, states that “when possible, citing the DOI [digital object identifier] is preferable to citing a URL.” Also optional is the date of access. Check with your instructor or organization regarding its preference for the inclusion of URLs and dates of access.

Works Cited

Arizona State Board of Equalization. Bulletin. Phoenix State Printing Office, 2017, 26-29. Print.

Badri, Joseph, H. Jose Rivera, and Michael E. Kusak. “A Comparison of Sustainability and Economic Development in Urban Industrial Parks.” Journal of Industrial Ecology, vol. 24, no. 4, Jan 2017, pp. 233–268, doi. 10.1078/0366-6133.25.335

Cohen, Andrew P. “Industrial Parks Invade Suburbia.” The New York Times 14 Dec. 2017: C1. Print.