April 22, 2010
Host: Ted Simons
Arizona Department of Commerce
- Director of the Arizona Department of Commerce, Don Cardon, discusses plans to replace the department with a new economic development authority.
- Don Cardon - Director, Arizona Department of Commerce
Ted Simons: Governor Brewer wants to do away with the state's commerce department and replace it with an authority that would focus on job creation. Here to talk about the plan is Don Cardon, he is the director of the commerce department. Good to have you here. Thanks for joining us. What does the commerce department do?
Don Cardon: What it's done and kind of what it's doing now and where it's going are really almost three different things. In the past, it's ranged -- it was part of the problem was principally it's supposed to be about commerce. About business. And it is. But it evolved over time from everything from business attraction, which we want, and retention, but it grew into things like military installation funds, nursing programs, population statistics, at kinds of different things. Each of which is valuable, but we started to lose focus. And with that loss of focus there was a loss of credibility with the legislators. And I think with the business community.
Ted Simons: So the idea of being stretched too thin was a factor. I've also heard that it was, quote, too political. What's that mean?
Don Cardon: It was very political. What it really was, it was a place where sometimes when people would lose or move out of office, they would have keys -- key employees they wanted to play -- Plairks or preserve for their well-being. Good people, but where do you put them? They would go to commerce. Commerce would have so many different facets, that they could find legitimate role most of the time. But you would end up with two, three, four deep positions, and so the efficiencies weren't there, and it just needed to be addressed. And that was one of the goals.
Ted Simons: Seven department heads in the past 10 years. That's a lot of upheaval. What's going on?
Don Cardon: You know, a lot of it is -- it's a challenging job. It's a challenging job because you have to blend the private sector and the public sector. You have limited ability to move. It works within the tension that's intend between the legislative and the executive branch, and of course changing administrations, so new governor their ability to place people. And you had people that would do it for a period of time and go back to the private sector. So it was difficult to keep people retained.
Ted Simons: With all that in mind, how does it change? What does this new authority do?
Don Cardon: The simplest thing—the best way to share with it is , we've taken the commerce department, seven divisions, we're going to two. The only divisions that will be retained are business and energy. All other departments we're either eliminating or removing them to other areas, so in essence you takes a department, get rid of it, get rid of all the legal things, and then you create a new Arizona commerce authority. The difference being, when you create something new, you only bring back what you want to focus on. And secondly, you put it under the governance of a private sector board that's not been there in the past, and you ask the governor to come in and share that board. So you connect executives or CEO of the state, with the private sector and you get after it.
Ted Simons: So it is public-private?
Don Cardon: It's public, it's a quasi public. It's public in the sense that you can delegate out or outsource the representation of the people. But you can involve the private sector in terms of governance, in terms of envisioning, strategies, things like that.
Ted Simons: he governor had mentioned she wants to target renewable energy, aerospace, and defense, science and tech, small business ventures,. Which suggests these sorts of things weren't targeted before?
Don Cardon: No, they really were. The difference is that what I found is that we look at everything from those four areas to also things that are equally important. Health care, manufacturing, and there's a broad band of things that the global economy asks you to address. We want to address, and we want to attract. But what we had to do was say we had limited resources, and Arizona has like all states, specific areas they can globally compete right now. And we believe those areas are like you said, in the science technology and aerospace defense, renewable energies and small business.
Ted Simons: How much funding will this authority need, and I know one of the criticisms of the commerce department, it was consistently underfunded. Is that going to be changed?
Don Cardon: You know, I'm hopeful it Lynn crease. I think part of it is, we have to demonstrate credibility. In the short term we're going to take existing budget that's in place and we're going to operate under that existing budget. But what my hope is that we can demonstrate success to the degree where legislators go, you know, you're listening, and you're doing the right things we're minimizing government, we're getting focused, and look at the results. So we're going to put more money to you. That's our hope.
Ted Simons: You mentioned the legislature. What kind of reaction are you getting so far?
Don Cardon: You know, overwhelmingly positive. I think bipartisan truly genuinely, I haven't had one negative call. It's been positive, it's been nationally recognized we're getting inquiries from around the country. Wow, you guys are really doing something substantive. It's not every day you get say let's get rid after state agency.
Ted Simons: And it's not every day the department head comes on "Horizon" and says this is a great thing. I'm sure some viewers are wondering, what's going to happen to Don Cardon? Last captain on a ship that's not going back out again.
Don Cardon: I'm fortunate in the sense that I have other companies that I'm involved in, and been involved heavily in downtown in the development world, and I still have those business aspects. The thing I Campaign '08 to the cabinet for was the unique challenges facing our state. And really they allowed for great turnghts but they required a director to be if you will a change agent that can do things without a personal agenda and preservation of a position involved. It just would have been difficult. And so one of the things we're trying to do, you mentioned the seven revolving director doors we’re going to do a national search. The governor wants to pursuit best talent she can get and put that person under a contract, and so I will be with -- I the serve the governor as long as it takes to get this implemented. And I admire her greatly and I any her leadership is amazing. So I'm proud to do.
Ted Simons: Thank you for joining us. We appreciate it.
Don Cardon: Thanks.
- Economic experts deliver their mid-year forecasts for the U.S. and Arizona at the annual Economic Outlook Luncheon sponsored by the Economic Club of Phoenix. Hear what they had to say.
- Tim James - Arizona State University Economist
- John Arnold - Jan Brewer's Budget Doctor
Ted Simon: As's economy was the subject of a luncheon held today at the Arizona Biltmore. I'll talk to an ASU economist and the governor's chief budget officer about current economic conditions, but first, here are some comments from today's forecast luncheon.
The best way to look at this is to kind of, you know, visualize how this works, is to think of a trek down into the Grand Canyon. The trek down into the Grand Canyon, that's the recession. The recession then is a contraction, it's when at of your indicators are falling. When the recession is over, you are at the very bottom, all of your indicatorses are at their worst reading, and then you begin the recovery that is the other side of the cycle. You start moving up.
My point is, for those that remain employed, so out of every thousand dollars of money that's earned currently, spending is way below historical norms.
Ted Simons: Here now to talk more about the state's economy is Arizona state University economist Tim James, and governor Jan Brewer's budget Doctor, John Arnold. Good to have you both on the show. If let's start with -- there was a prediction out of U of A that the recession in Arizona is over. U of A said it's over. Seemed a little more pessimistic today. Where are we here?
Tim James: We're going to get into some economic speak here. There's a slight difference, and the difference is technically speaking, a recession ends when GDP creases to full. And the official statistics show that the overall in the United States the recession ended in quarter two of 2009. Now, we're a little behind in terms of the state in terms of economic activity in relation to the nation. So we're probably at the point where the recession is just ended, it's just about end or whatever. I think what we're talking about at ASU is kind of something which is on a more human scale. Which is really what's happening in terms of unemployment and jobs, and therefore we're defining the recession as ending when unemployment ceases to continue rising.
Ted Simons: How do you see it, looking at the state's fiscal condition is there a little light there at the end of the tunnel?
John Arnold: We certainly hope so. What we track is revenueses that come into the state, tax revenues. And we've seen a continual fall of those revenues since the recession began in the fall of 2007. We are still seeing our revenues are continuing to familiar. We have not hit bottom yet. That rate of decline has dropped significantly and we're losing 1%, before we were losing 10, 15%. We're hopeful that we're going to hit bottom in revenue collections here in the next month on so, and there are some projections that suggest April will be it. And then we'll hopefully start turning that around.
Ted Simons: As far as retail is concerned, because obviously that's a big source of revenue as far as taxes are concerned, what are you seeing with retail out there right now?
John Arnold: Retail is actual lay positive area for us. March was the first month where we had growth in revenues from the retail sector since November of 2007. So in terms of retail sales and sales tax collection off retail, we believe we have hit bottom, and bounced up about a percentage point last month.
Ted Simons: Is that what you're seeing as well?
Tim James: Yeah. We work together with john's office, so we do know a little about this. I think there are encouraging signs in terms of people's consumption, purchasing activity, particularly in the retail sector, and I think that's indicating to us that the economy has started to turn around and things are improving. And hopefully we'll see more and more taxes come inways move forward.
Ted Simons: You mentioned Arizona being different from the country in terms of recovery time, lag time. Are we different in terms of retail sales?
Tim James: To some extent, a little bit. I think it's all to do with the fact we toned lag a little behind the state of the nation in terms of its economy, because of the nature of what we actually do and the nature of the society here. We toned have a lot of -- rely a lot upon migration, people moving from the north and northeast of the state and coming to relocate here offen for retirement. And that's sort of -- that sort of died over the last couple years. And there are some signs it has improved, but it's not at the same level as it was in 2007, 2006. So what we're really happening -- what's happening with this is we're hoping the rest of the economy improves so people start moving again and that will give our construction sector and the retailing sector a boost as we go forward.
Ted Simons: I know income is difficult to calibrate, especially now, but if you put your office -- I guess maybe get an indication of where we are in terms of jobs and in terms of income. What are you seeing out there?
John Arnold: We track 90 two areas. One certainly on income tax returns, and what's been filed, and we're -- it takes us about two weeks after the final returns come in to go through that process, we're not quite done, and income tax returns appear to be a little bit below projections. So not as good as we have hoped. The other area we track is new applicants to Medicaid. How many new people are coming on to Medicaid, which is generally a pretty good reflection of where our unemployment is. And then -- the number of new members coming in to Medicaid has slowed over the last couple months, it's still climbing significantly. But slower than it was over the last year.
Ted Simons: The unemployment number, surprises, that it's not gone up or gone down?
Tim James: I think if I was being totally honest I think it's as expected. It's this lag effect. One lag, we toned lag behind the rest of the nation in terms of downturns and upswings, so we're a little behind in terms of the upswings. The other thing is unemployment is a lagging indicator of what's going on in the economy. What's happened a lot I think particularly here is businesses have restructured the way they do business. And need less employees. And therefore what we're seeing is there's an improvement in terms of sales, houses, house purchases have gone up, but that's not translating itself into a lot of extra jobs at the moment. We've got to wait until six, 12 months doubt road to see an improvement in terms of the unemployment statistics.
Ted Simons: So are we -- are you saying companies are learning to live with less and getting by now with less, as a lot of folks are, but let's face it, a lot of us are tired of getting by with less. Will companies have that same mind-set?
Tim James: It's all about confidence. Both on the part of companies and us as consumers. We need to be confident that we're going to have a job in six, 12 months' time. A reasonable level of income in order to be willing to go out there and spend amounts of money on things which at the moment we might rashed as 45 less, given our difficult circumstances. Companies are no different. They want to mike sure that when they take new workers on, it's something that they can afford, and they will still be able to make a return out of extra employment.
John Arnold: The state is in a similar position. We've driven down our state payroll about 20% overall. We still have the hiring freeze on, and even though we're expecting revenues to bottom out, we don't expect to start adding employees for probably another year or two.
Ted Simons: So last question, from where you sit, the numbers you see, when do things get appreciably better? I think we can all agree, it sounds like we're agreeing that things can't get a heck of a lot worse. When do they start becoming better?
John Arnold: That's a difficult question. The forecast we're saying and -- except for the most part suggests a fairly long, slow recovery, in another three, four years before we reach the employment levels we were at in 2007. So another three or four years.
Tim James: The -- there are lots of exists -- economists, the other two I work with are more pes Mick advertise than I was. I was worried about a double dip recession where things would have gotten better and we would go back down into the hole. I'm now more optimistic. I think there are signs of growth in the economy, I think if we can get consumer and business confidence back, I'm hoping it won't be three or four years. What we need sp for people to start spending money again.
Ted Simons: Gentlemen, thank you so much. We appreciate it.
- Phoenix Mayor Phil Gordon talks about a huge grant from the U.S. Department of Energy that will be used to launch an “Energize Phoenix” project that will save energy, create thousands of “green jobs” and transform aging homes and neighborhoods into models of energy efficiency.
- Phil Gordon - Mayor of Phoenix
Ted Simons: Vice-president Joe Biden announced yesterday the city of Phoenix will rave $25 million federal grant to improve energy efficiency along parts of the light rail. The 30 use the money to launch a program in partnership with ASU and APS. Joining me now to talk about this is Phoenix mayor Phil Gordon. Good to see you. Thanks for joining us.
Phil Gordon: Thank you.
Ted Simons: It's called energize Phoenix. What are we talking about here?
Phil Gordon: We're talking about first a $25 million grant we competed against hundreds of cities throughout the United States, in fact there was $2.5 billion worth of applications for $400 million of grants. And Phoenix received the largest grant, $25 million in a unique grant in the sense that these grants were to retrofit homes and change energy consumption and the way we act, but what we did is rather than defining a neighborhood as a traditional neighborhood, we said we are really going to make a difference. We're going to define it along the light rail line, about a half mile on each side of the 10-miles from camelback and central to the airport, and it applies to private businesses, private homes, nonprofits, and government buildings to not only change our habits, but also to help write down the cost of retrofitting those buildings to reduce energy consumption and homes by 18% before existing businesses by about 30%, and reduce over 50,000 metric tons of carbon going up into the air.
Ted Simons: Why that particular stretch, and why light rail? Why not find a community out there and retrofit there?
Phil Gordon: One, we wanted to make it large enough to really and visible enough to show people. And two, that 10-mile stretch has every conceivable economic, social, and type of building multifamily, single-family, condominium, businesses, nonprofits, government buildings, and University buildings that can all go within this core, and we also have an agreement with our partners from APS, national bank, ASU, Maricopa community college to leverage that money into about $180 million, and therefore those incentives to get everybody to do that and then to use smart meters we can see that reduction will lead to we believe further use by the city and expand throughout the.
Ted Simons: so let's say I'm a homeowner along this stretch. I would imagine that times are tough for that particular homeowner, what kind of money do I have to shell out, what kind of money do I receive, what do I get?
Phil Gordon: Well, what we're talking about is really the most efficient way to reduce energy consumption, which is not to use existing energy consumption, and reduce it, as opposed to adding solar and renewable, which gets expensive, which is great. But like you said, costs. So we're talking about first of all new doors, weatherization, insulation, fixing the holes in the ducts, plugging holes in the walls, and energy audit, and then monitoring in real time where the family can see it, or a business, the amount of usage compared to yesterday, so you can compare it. So we're talking about grants anywhere in the hundreds of dollars range, up to probably I think at this point we're estimating $10,000 or even more with our leveraging. So that people can write it down to an amount that they can afford, and it will be based on income, anybody's income, so it's not going to be limited to just certain social economic levels. It's also for private businesses. What we want to do is retrofit at least 30% of the homes and businesses along that core. And reduce that consumption. The second thing we're doing with this $25 million in the leverage is creating jobs. Jobs that can't be exported. These are green jobs, these are jobs that will be insulation, taking out equipment, putting equipment in. And they're going to be trained through the community college system on the green campus downtown. So that will be part of this plan. And then promoting and educating our community that it's simple. It's changing lights to CFLs, it's against caulking windows, you can make a big difference. Even two degrees difference in your thermostat over the month will make over a 5% difference in your utility bill.
Ted Simons: Will this be the kind of thing that folks riding light rail from 4th street up to central, will they see a difference, will it be something tangible?
Phil Gordon: Exactly. That's why the energy secretary said this is the most -- not only ambitious project that was submitted, but also the one with the most partners. Light rail is a partner, so you'll see a lot of the education, promotional along the light rail line, you'll be able to get off at a restaurant that will have qualified and will have used it and they will be promoting that. Or a home. Or, again, a government building. It's also something where the media and the University is right here, so the school's sauce Taina built will do a baseline of the amount of consumption within that core today, and then report to us to you, to the media, and to the federal government the reductions annually to show that it is working.
Ted Simons: Talk about the impact of ASU and the college of sustainability, along with APS, and the dynamic there.
Phil Gordon: Well, as the energy secretary and the vice-president said, in fact, the vice-president's words were, in talking about partnerships, this partnership that Phoenix put together with ASU, six private banks, the school of sustainability, the Maricopa County community college gateway, Rio Salado, as well as APS and other private partners that have helped and the city of Phoenix, it will make a substantial difference, number one, and number two, nobody has put the entire education, promotion, measuring and changing the way we do use of energy together like Phoenix has done.
Ted Simons: The idea, and I can hear people now saying this, sounds like the city is going to have to spend something for something here. This is a $25 million grant. Is the city going to have to spend for things and if so, can the city afford it?
Phil Gordon: The answer is no, we're not going to have to spend. In fact, we're going to be able to receive and use that money also to reduce our energy consumption, which will save taxpayers dollars. This is taxpayer money that was put forth by the Congress and the president under the recovery act that were grants, taxpayer dollars, including ours, that were going out to cities and only 25 cities qualified for it. That we will now get back in our community, create jobs that will create other revenue, and be used to help reduce the cost of this retrofitting within our community. So it's -- I don't want to see free money, because we all have paid for it, but this is money that is a triple win for the environment, for jobs, and for saving our residents money.
Ted Simons: And real quickly, plans to use another parts of sneaks.
Phil Gordon: Absolutely. As the first three years of the monitoring part of our business plan, we'll then start to take out this information to the rest of the community, take other incentives that we believe we will qualify for from the federal government, and put into other parts of the community. Most importantly, it's also things that we're going to be showing that for the cost that it does run retail, your payback is much, much quicker than, say, the large capital investments. Again, just a smart meter dashboard turning down your thermostat two degrees, we all will think of it as, I got to reduce it. But we alternate that thermostat. When you can see it in real time and you see that meter ticking and you can compare to it yesterday, then you will change your habits and you won't notice a difference. But you'll also reduce your bill significantly.
Ted Simons: All right. Mayor, good to see you.
Phil Gordon: Thank you.