Article originally posted on AZ Central on June 28, 2018
TUCSON — The recession, both nationally and in metropolitan Phoenix, ended years ago.
But those trends have been slow to materialize in Tucson, which still hasn’t quite recovered all the jobs it lost during the recession of 2007-2009.
The region has badly lagged metro Phoenix and the nation in creating jobs, attracting new employers, growing businesses and improving its residents’ prosperity.
There have been signs of life lately, helped by a revitalizing downtown and expansion plans announced by several big corporations. But Arizona’s second-most populous city still has a lot of catching up to do.
“The recession hit Arizona hard, but it hit Tucson really hard,” said Joseph Snell, president and CEO of the area’s Sun Corridor economic development group. “And we just weren’t seeing the recovery.”
It has been a mostly lost decade.
Last place in the West
Tucson is at or near the bottom in most economic categories when compared with other Western cities of roughly similar size, a new online tracking website run by the University of Arizona shows.
The online dashboard, or monitoring website, shows Tucson to be dead last of 12 Western cities in growth rate for new businesses, growth of local gross domestic product and teacher wages.
It’s next to last in median household income and poverty, and below average in employment growth rate, median wages, college degree attainment of residents and housing cost burden.
The website, mapazdashboard.arizona.edu, compares Tucson with Phoenix; Las Vegas; Salt Lake City; San Diego; Albuquerque, New Mexico; and six other cities.
Other studies have shown similar signs of stress.
A WalletHub report ranked Tucson as the “neediest” of nine Arizona cities that the website evaluated, based on 25 indicators from child poverty rates to the percentage of residents lacking insurance.
A U.S. News & World Report ranked Phoenix as the nation’s 19th-best city in which to live, with Tucson much lower, in 67th place. That study examined factors including local job markets, home affordability, healthcare, education and crime.
Other economic headwinds
Tucson’s economy is much less diversified than metro Phoenix’s, with a higher reliance on the defense industry and government spending. This is a key reason the region struggled in recent years amid public-sector belt-tightening.
Tucson also is relatively dependent on trade with Mexico, which has been hurt by a strong dollar and concern over the future of the North American Free Trade Agreement
Arizona’s exports to Mexico peaked in 2015, then tumbled 17 percent over the next two years, said George Hammond, a University of Arizona economist. Any unraveling of the trade pact — let alone outbreak of a trade war — could hurt southern Arizona even more.
Also, Tucson is especially vulnerable to the hiring or layoff decisions made by corporate executives outside the state. Of the 35 largest public companies headquartered in Arizona, Tucson has only one, a medical-testing company called Accelerate Diagnostics.
All other larger Arizona-based companies — such as mining giant Freeport-McMoRan, trash-hauler Republic Services and Microchip Technology in semiconductors — are in metro Phoenix.
Hammond predicts the Tucson area will add 5,500 net new jobs this year. Although that’s an improvement from a couple of years ago, it represents just a 1.5-percent growth rate. It’s also barely half the historic pace of growth for the city and compares poorly with forecasts calling for 2.8 percent job growth in metro Phoenix.
The Tucson area’s estimated population growth in 2017 was half that of metro Phoenix and has trailed significantly coming out of the recession.
Tucson ranked 31 out of 50 on a June 2018 list by 24/7 Wall Street of the worst cities to live in the United States. It was the only Arizona city to be included.
Tendency to leave
Job growth in recent years has been so sluggish in Tucson that the city hasn’t created enough new positions to accommodate the nearly 10,000 annual graduates from the University of Arizona, let alone people coming out of local high schools and community colleges and those moving in from other parts of the state and nation.
Joe Previte graduated from the university in 2016 with a degree in general studies but had no luck with Tucson employers.
“I applied with maybe five or 10 companies there but didn’t get any interest,” he said.
Previte eventually followed his girlfriend to the Valley. Having taught himself computer programming, he landed a job in Scottsdale, where he now lives and works.
“In Tucson, it feels like the university is the main hub of the city,” he said. “Unless you’re working there, there’s not as much attraction (for staying) and not as much going on.”
As noted, the Tucson area still hasn’t quite recovered all the jobs it lost over the past decade, although metro Phoenix is up nearly 10 percent. The Tucson region was starting to emerge from the recession just when automatic federal spending cuts, including those centered around defense, hit in 2013.
Without many job openings, the population of the Tucson area, with 1.03 million residents, increased just 0.8 percent in 2017, less than half the gain for metro Phoenix.
Coming out of the recession, from 2010 to 2016, Tucson’s population grew about 0.6 percent a year, well below the nearly 1.6 percent annual rate for the Phoenix area.
Reasons for optimism
Despite the tough past several years, some things appear to be looking up in Tucson.
Amazon said in May that it would add at least 1,500 jobs at a new order-fulfillment center. Construction equipment maker Caterpillar is expanding too, with 600 new jobs, many of them high-paying engineering and management positions.
Insurer Geico, which already employs more than 2,000 people in the area, plans to add 700 more over the next couple of years.
Business is booming for missile-manufacturer Raytheon, the largest employer in Southern Arizona with nearly 12,000 workers. Bolstered by rising orders from the U.S. military and allies, the company has boosted its head count.
“Tucson is a unique place that offers a lot for us as a company,” said Greg White, vice president of finance for Raytheon’s missile division.
He cited room for expansion and testing as a favorable factor, along with both a major university and a big military installation, the Davis-Monthan Air Force Base, in the vicinity.
Tucson and its voters have earned a reputation for being anti-business and anti-growth, perhaps best exemplified by the tendency not to raise taxes to fund road improvements.
But White said Raytheon received broad support for its expansion plans, from local officials on up to Gov. Doug Ducey’s office.
“There was no partisanship at all,” he said. “They all asked, ‘How can we help?’”
Fletcher McCusker, the former CEO of a Tucson-based corporation who now heads the city’s Rio Nuevo downtown-revitalization district, also senses more cooperation.
“What’s working now that wasn’t working before is increased private-sector involvement,” he said.
Waking up from recession
Snell at Sun Corridor said the recession and slow recovery have been a “wake-up call” for companies, elected officials and academics to start working together.
The new approach includes more aggressive marketing of Tucson to land corporate expansions and jobs, with emphasis on targeting the consultants who help companies with site selection plans.
Tucson economic development officials also are honing in on industries where they think they have the best chances for success — and passing on others.
Snell cited four key sectors for southern Arizona: aerospace/defense, distribution/logistics (including shipment of goods to and from Mexico), natural resources such as copper mining, and biomedical research, with an emphasis on disease diagnostics.
Those sectors draw on strengths such as existing large local employers, as well as University of Arizona researchers and graduates.
Tucson officials have become more assertive in seeking opportunities, rather than sitting back and hoping they materialize, Snell said. They also have become more willing to cooperate with businesses and development officials in the Valley, rather than competing as rivals.
“We’ll never be able to go head to head against Phoenix,” he said. “We’re one-fifth their size.”
Downtown Tucson has become more of a priority, too.
Over the past five years, $1.4 billion in state and local tax money, and private investment funds, has come into the area, said McCusker, head of the Rio Nuevo development group.
The intent was to pump life into a downtown that, until recently, was an eyesore.
“Everything was boarded up and abandoned,” he said. “It was a ghost town.”
A streetcar now runs through the area and nightlife is returning. Sales tax revenue in the downtown district jumped 30 percent in 2017, McCusker added, attributing that to increased commerce, not higher tax rates.
Visitors come downtown for concerts, ballet, the opera and minor-league hockey, while spring training for Major League Soccer brings tourists, including those from Mexico. About 85 restaurants have opened in the 4-square-mile downtown district, including many housed in century-old brick buildings.
“Even the young crowd is coming down more,” said Mercedes Ledezma, a 23-year-old waitress at the Iguana Cafe, a Mexican-food eatery featuring karaoke and live bands.
“A lot of the old-fashioned buildings help,” she added. ” A lot of youngsters are into old things.”
City officials are considering adding reclaimed water to refill the dry bed of the Santa Cruz River, to create a tourism/recreational renaissance similar to what has transpired with Tempe Town Lake. Construction of a 20-story office/retail highrise, which would be among the tallest buildings in the area, is planned.
The first new downtown hotel in nearly 50 years opened last fall, part of the AC Hotels by Marriott chain.
Even actress Diane Keaton got involved. She recently paid $1.5 million for a downtown residence — a 4,500-square-foot home in a renovated adobe building that dates to the 1880s.
Air connections and spouses
Tucson is more geographically isolated than Phoenix and many other western cities, which can work against attracting employers.
Phoenicians often grumble about the scarcity of nonstop flights to Europe and Asia, but Tucson residents can’t even fly direct to the Northeast. That can be a problem, especially for business travelers.
Providence Service Corp.,a company offering health care and workforce development services, moved its headquarters out of Tucson two years ago, citing a desire to be closer to key operations.
Downtown hotels are considering raising money from a 2 percent voluntary bed tax to subsidize air travel in hopes of landing more nonstop flights, McCusker said. The intent would be to make connections more viable by purchasing some unoccupied seats.
Another concern is convincing newcomers that the city is a good place to live, with enough jobs to meet the needs of two-worker households, along with quality schools, ample health facilities and fun things to do.
With the typical home in Tucson selling for about $261,500, housing affordability isn’t a problem. But it can be tough finding employment for a spouse when his or her partner is offered a transfer to the region.
“We need to convince talent that Tucson is on par with San Diego, Palo Alto (California), Portland (Oregon) or Austin (Texas) in terms of lifestyle and things to do,” McCusker said.
Deciding to stay
Shiva Planjery runs a technology startup company from a small office with sweeping views of downtown Tucson and the mountains to the west.
After earning a doctorate in electrical engineering at the University of Arizona, he decided to stay rather than take the more common path — relocating almost anywhere else.
“A lot of my former labmates all wound up working in the Bay Area,” he said. “There was an expectation that I’d move to the Bay Area.”
But Planjery said lower expenses for office rent and other factors have helped his young company, Codelucida, start strong. He also believes there’s a better work-life balance in Southern Arizona compared with the highly competitive Silicon Valley.
“Tucson is close enough to California that we can make frequent trips if needed,” Planjery said. “It has worked out really well for us.”
Tucson economic development officials hope more UA graduates, and other businesspeople, bet on the city. It’s one factor that could hasten Pima County’s slow rebound from the recession.
Tucson, much more than metro Phoenix, has serious economic development work to do. But local officials say they now better recognize the challenges and are more willing and able to address them.
“There’s been a resurgence, more signs of life, over the last three years,” Snell said.
How is Tucson doing?
Tucson’s economy has been slow to rebound and still hasn’t recovered all the jobs lost in the last recession. The metro area fares better in some additional measures, but not so great in others.
Here’s a sample of Tucson’s economic and social health, gleaned by the University of Arizona and reported at mapazdashboard.arizona.edu. Where possible, the website compares Tucson to 11 other Western cities including Phoenix, Las Vegas, San Diego and Denver.
Cost of living: Good
Tucson’s cost of living in the most recent year examined was 4 percent below living costs across the nation, and prices were below those in all but two of the 12 comparable Western cities. Only people in El Paso and San Antonio could live more cheaply.
Tucson residents earned median or midpoint wages 4.5 percent below those of other Arizonans and 8.1 percent less than Americans overall. Wage inequality – the gap between rich and poor – is narrower in Tucson than many other places, but that’s mainly because high-end workers earn less in Tucson.
Home affordability: Excellent
House hunters will see their dollars stretch further in the Tucson area. Home prices in and around the city are cheaper than those in all other 12 peer cities in the West.
Air travel: Poor
Tucson residents don’t have a lot of choices when flying to or from the city, with relatively few departures or available seats. With just 4 airline seats available per capita annually, Tucson ranks near the bottom of comparable airports in the West. Las Vegas offers the best air-travel choices.
Poverty rate: Poor
Of the 12 Western comparison cities, only El Paso had a higher poverty rate. Some 19.2 percent of Tucson residents live in poverty, more than the 16.5-percent rate in metro Phoenix. Denver had the lowest Western poverty level, at 10.9 percent
Physical health: Fair
Nearly 84 percent of Tucson residents say they’re in good or excellent health, seventh best of the 12 Western cities and one spot ahead of metro Phoenix, where good/excellent health was reported by 83 percent of residents.
Educational attainment: Fair
Nearly 31 percent of Tucson residents ages 25 and up have earned a college degree, slightly ahead of Phoenix (30 percent) and good for seventh place in the ranking of 12 Western cities.
Teacher wages: Poor
With median annual wages of $39,000, Tucson secondary-school teachers make barely half the $76,000 earned by teachers in San Diego. Of the 12 Western cities, San Diego had the highest teacher wages, and Tucson had the lowest. Pay for Phoenix-area teachers was in ninth place, at $48,000.