September 27, 2011
Host: Ted Simons
Arizona State Treasurer
- State Treasurer Doug Ducey comments on economic uncertainties facing the state from his perspective as a businessman now working in the public sector.
- Doug Ducey - Arizona State Treasurer
| Keywords: state
Ted Simons: The state's finances have improved, but the economy still makes for challenges that can impact Arizona's cash flow. Here to talk about that and more is state treasurer Doug Ducey. Good to see you again. Thanks for joining us.
Doug Ducey: Thanks for having me.
Ted Simons: How is it going so far?
Doug Ducey: So far, so good. It certainly is a different world from the private sector, but being involved in state government, especially in the situation that we're in right now, not only statewide, but nationally has been exciting and challenge can.
Ted Simons: Let's talk about the situation we're in statewide. How are we doing?
Doug Ducey: As a state we're doing well. If you think about where we were a year ago, I was running on a platform our budget is broken, our finances are a mess and we need fresh energy and a business approach. I feel good about what we've been able to do. That budget is balanced, there's no tricks, there's no gimmicks, there's no new rollovers and there was no borrowing. That's different than other states. And the treasurer can't take all the credit for that, but you can't get that done without a responsible legislature and a strong governor. And very few other states did that. Actually balanced their budget.
Ted Simons: Critics of that balancing budget efforts are saying that costs have been pushed on to cities, on to counties, on to hospitals, on to a whole bunch of other folks, just in terms of balancing the state budget. Is that a viable argument?
Doug Ducey: The simple fact is, there just isn't any more money, and states don't print money, unlike the federal government. So the state had to tighten its belt. Just like every family and small businessman has had to tighten his belt since 2007, government was the last to do it and they were late to do it. Now state government's done it, so do counties and cities.
Ted Simons: Let's talk about some of the things you've had to deal with up to and including some of these state legislatures' actions, they tried to sweep the transit program and it sound like that quite cut the mustard. You have to make sure the money gets back to her it was originally.
Doug Ducey: I think is the of the game playing is going to be over, and this idea, even if you go to the treasurer's website, the first thing you'll see is the state's cash balance. And if you remember, the state treasurer is the state's banker and investment officer. We don't collect tax dollars, we don't spend tax dollars, we safeguard and invest them. We make money.
Ted Simons: Let's talk about what do you as far as the state money is concerned and how -- talk about Arizona's investment portfolio here. What are you concentrating on?
Doug Ducey: This is a difficult time certainly to invest and the first priority is always going to be safety. A dollar lost is not measured the same way as a dollar gained, so you want to protect the principle. And we've been very good at that in the treasurer's office. We manage about $10 billion depending on what happens in the market, over the course of a day. And we want to make sure that money is there to pay the teachers and firefighters, to fill the potholes, that we don't lose that money, and at the same time we earn interest earnings.
Ted Simons: Before you took office, did you have kind of a plan maybe a formula as far as investing the state's money now that you're in office, have those goalposts moved?
Doug Ducey: I think just because of the economy that we're in and what we're seeing in the markets with all the volatility, there is a premium on safety and preservation and capital. We want to do the right things for the permanent land endowment. This is something that will invest in perpetuity. It has a balance of $3.1 billion. As the state continues to sell state land those proceeds come in and that will be a very large endowment. That's one reason to be optimistic about the future of Arizona and Arizona's K-12 education.
Ted Simons: Talk about a moving target, talk to us about things that happened back in Washington. The debt ceiling debate. The idea of downgrading U.S. credit. Obviously a focus on D.C., but an impact on America and last I checked we were still part of Omar Al-Farouq, so it's got to impact us to a certain degree.
Doug Ducey: It does all impact Arizona. I really think Washington, DC could learn something from Arizona. If you look at what our state legislature did, we did balance that budget. We're spending less next year than we did the previous year. So this can be done. But when things like the debt ceiling happened and the debt is downgraded, that affects the state of Arizona and that can affect interest rates. It hasn't affected interest rates yet because the federal reserve is artificially pinning them down. But over the course of time I have a concern that interest rates will rise and that will hurt people and their borrowing and the purchasing of different things we need to do in terms of infrastructure for the state.
Ted Simons: How much does that change your plan something if you have that concern, how far ahead do you look, how far ahead to you plan?
Doug Ducey: We plan ahead in the endowment we want to think into perpetuity. You want an asset allocation that can navigate through the volatility. In the other part of our funds, which is daily operating cash, you want to make sure you can pay the state's bills. So you're dealing in very short-term interest that can't earn any money in this interest rate environment.
Ted Simons: As a businessman, getting into this government position, anything surprise you? Anything that didn't surprise new what are you seeing?
Doug Ducey: I think I would say I'm surprised by the state employees that I work with. I think they're incredibly competent, hard working, and their heart is in the right place. And they want to do a good job, so they'll rise to the level of expectation. And the other thing that has been surprising to me is, we were very workmanlike in Arizona in terms of what we ran on and what we did. And as state treasurer you get to meet other treasurers from other states and I'm really surprised that our neighbors like California and other places like Illinois are so incredibly irresponsible in how they handle their budget.
Ted Simons: That's the last question I want to ask you, during the campaign you talked a lot about trying to get jobs to Arizona. And some folks are wondering, treasurer can only do so much. Balance the books and that's a job in and of itself. Now that you're in office, can you see that being a more difficult thing for a treasurer to do in terms of basically saying, I helped get that company from Illinois, that company from California to Arizona?
Doug Ducey: Well, I think I would call it challenging, but not impossible. Arizona has grown as a state, and people really vote with their U-Haul and Ryder trucks and we've been beginning in that game. At the same time we have fewer public companies in the state of Arizona today than we did 10 years ago.
Ted Simons: Why is that?
Doug Ducey: That's an excellent question. I would say it's because we didn't have a strategy. We didn't have a plan to attract businesses and to retain the companies that we have here. I think what you're starting to see is the first step toward that type of strategy. We know what a great quality of life we enjoy, we know people are moving from other places and saying, I'm staying, we need to get those companies to do that, but you have to do that by building relationships. That's state leaders and business leaders standing shoulder to shoulder to bring these companies here.
Ted Simons: Thanks for joining us.
Doug Ducey: appreciate it.
ASU Edson Student Entrepreneur Initiative
- Learn more about this program that helps ASU students learn how to start a business. Guests include Brent Sebold, the initiative’s Program Manager, and ASU students Gabrielle Palermo and Susanna Young, two founders of G3Box, a company that turns steel freight containers into mobile medical clinics that has been named a finalist for Entrepreneur magazine’s 2011 College Entrepreneur of the Year award.
- Brent Sebold - ASU Edson Student Entrepreneur Initiative Program Manager
- Gabrielle Palermo - ASU Student, co-founder of G3Box
- Susanna Young - ASU Student, co-founder of G3Box
| Keywords: ASU
Ted Simons: There are five finalists for "Entrepreneur" magazine's college entrepreneur of the year award. Three of those finalists are from Arizona state University. Among the student businesses selected for the final round is G-3 Box, generating global containers for good. It's a nonprofit company founded by four ASU students that converts steel shipping containers into safe and sanitary medical clinics that can be used worldwide. G-3 Box is a product of ASU's Edson student entrepreneur initiative. It's a program that helps students develop and launch their business. Joining me to talk about it is program manager Brent Sebold, and two of the founders of G-3 Box -- Gabrielle Palermo, a junior biomedical engineering student, and Susanna Young, who is pursuing a masters degree in mechanical engineering. Good to have you all here. Thanks for joining us. Brent, give us more detail now on this particular program.
Brent Sebold: It's a great program, we're very lucky to have it at ASU. It started as a gift to the University by OREN and Charlie Edson. He started building boats in his garage as he was finishing his college degree, and became very difficult for him, and he made some great decisions in life and was very successful with his boating company, and in his success he wanted to give back to student entrepreneurs by -- through this gift to ASU. And so through the gift we're able to manage this program annually, where we bring in student teams to advance their venture.
Ted Simons: And it sounds as though this is a bit of a competition. In a variety of stages. Correct?
Brent Sebold: Correct. Yes. Entrepreneurship is huge at ASU. We promote it across all disciplines, on all four campuses. And we're based in Skysong. But we get the word out to all students that they can make an impact in people's lives through entrepreneurship. And so when we're pushing that across English majors and journalism majors, and engineering students, we drum up a lot of excitement about starting a business. So this past year these ladies are part of the seventh cohort of the program. This past year we had 250 student teams apply to the program. And we were very pleased with that.
Ted Simons: Let's talk to some of these ladies here who are doing very, very well. G-3 Box, we got the general idea here. How did this idea start?
Gabrielle Palermo: It started in a program that ASU called epics in engineering, and from there we won a couple grants, and then went on to apply for Edson.
Ted Simons: But the idea of taking these big containers and turning them from A to B, where did that come from?
Susanna Young: It actually as gabby said, started in epics, and primarily from two professors that were mentoring us in this student project had come up with this idea. The professors are Dr. Jan Snyder and Dr. PitSi KONi. They noticed in multiple ports in Africa that there are a lot of containers sitting idle because they've been decommissioned. So they thought why can't we convert these into something useful. Africa has the highest death rate in the world, so we thought, why can't we solve both problems at the same time. And have -- that's where G-3 Boxes come from.
Ted Simons: Were there challenges at first? The engineering, structural, logistical challenges? What did you run into?
Gabrielle Palermo: I start the the project as a freshman, so it's just lack of experience for me. I didn't really know too much. And so talking to people, talking to professors, made it easier that way.
Ted Simons: Yeah. And as far as the competition is concerned, they have to go through certain stages. Did they get -- let's say I come along and I've got an idea for a Hamburger shop. Who knows? Do I get seed money when I submit the idea? I do have to pass a stage?
Brent Sebold: Sure. Well, we have students from all across the University that come up with very bright ideas. In fact, we have a new initiative at ASU this year called 10,000 solutions. So if you have a solution to a problem that you're having, maybe it's a lack of Hamburgers in your case, we want to hear that. And we have a forum to present that idea. And so students will kind of vet those ideas in a web-based format and perhaps form teams and a physical space on each of our four campuses, and this is a new initiative as well, very cool, it's called change maker central. And this is where people can get together and really talk about, hey, can this venture move forward? Does this have legs? And if so, that's when we get involved in terms of the Edson program. We host entrepreneur office hours at each of the four campuses, and really chat with these students and say, hey, we think you got something here. And at that point we coach them through a process of applying to different grant opportunities at ASU, one that Gabrielle mentioned earlier is called innovation challenge. And that's supported by the Coffman foundation out of St. Louis, Missouri, I believe. And they've been fantastic to ASU over the past couple years. Beyond winning a grant like that that I believe is a little bit lower in terms of funding available, then they can ramp up and hit Edson in the spring. And Edson program does award up to $20,000 to -- in funding for the teams.
Ted Simons: When you made your presentation, what did you emphasize and what did you learn maybe should have been emphasized otherwise, or what did you find out that that emphasis actually was what clicked with whoever made the decision?
Susanna Young: I think what we really got out of the whole Edson process was that you do need to focus on your potential markets, where can this idea -- where will it be successful, making sure we do the research in that way, knowing your numbers. But what we really saw was that after we finished our presentation, the judges had questions but they also had sort of just a little feedback and we learned something as far as nonprofits go, like the overhead that you're supposed to have for your price on your product, so we learned in this process. And I think that's one of the key things about Edson is that the business plan that you submit could very well change the day after you win funding. And entrepreneurship is like that anyway, where have you this idea and it's going to evolve into things based on the customers you talk to, your advisors, your mentor, and even yourself.
Ted Simons: Is that what you found as well, you had this idea, you're going to do A, B, and C, and then the alphabet gets all mixed up?
Gabrielle Palermo: Oh, yeah. It's been changing in the past week, too. We went from being just nonprofit to now being a more than profit company. So we have a for-profit and a nonprofit foundation. So we have two separate companies instead of one.
Ted Simons: Is this the kind of thing that gets you thinking more about entrepreneurship as opposed to things like biomedical or engineering? Are you starting to think, maybe I got an idea here that could change the world?
Gabrielle Palermo: Oh, yeah. But it's fun too, because I've always been interested in medicine as well. So making medical clinics in a business is really exciting.
Ted Simons: Same thing for you? Has it changed your outlook on what you want to do the rest of your life?
Susanna Young: I think so. I think I've always seen them as being compatible. The reason I chose engineering, I wanted to have a challenge and then also to help people. And I see this as very much in line with what I wanted to do from the beginning. So I saw engineering as sort of a means to getting to where I wanted to be, which was helping people. And I never saw it necessarily as being the career I had. It was sort of getting to that point.
Ted Simons: And do you find, are you already looking for the next project, the next idea? Or is G-3 Box enough for now?
Gabrielle Palermo: G-3 Box is enough for now, but we're always thinking of ways to expand. And it's been so much fun so far.
Ted Simons: Yeah. We have about 30 seconds left. This has to be pretty inspirational.
Brent Sebold: It's fantastic. It's unbelievable. We're very happy to help them. Everyone that's involved with our Edson program, even within skysong at ASU are tremendously supportive of these teams and we're hoping that they reach the stars and create jobs, and expand the economy. And we're here to help them.
Ted Simons: When do we find out if you're the entrepreneur of the year?
Gabrielle Palermo: I think it's December 20th, the January issue of "Entrepreneur" magazine.
Ted Simons: That's a nice holiday present. Good luck to you both. Congratulations. Great program.
Brent Sebold: Thank you.
Ted Simons: Tomorrow on "Horizon," we'll talk with an organization that helps train future leaders for Arizona.
Ted Simons: And we'll find out about a digital learning seminar just held at ASU. That's Wednesday at 7:00 on "Horizon."
Phoenix-Mesa Gateway Airport
- Mesa Mayor Scott Smith discusses the latest airport expansion plans.
Ted Simons: Good evening, and welcome to "Horizon." I'm Ted Simons.
Ted Simons: For the fourth time in as many years, Phoenix Mesa gateway airport is expanding, and there's more growth on the way. Here to talk about the former Air Force base's second life is Mesa mayor, Scott Smith. Good to see you again.
Scott Smith: Great being here, thank you.
Ted Simons: Another expansion. What's going on out there?
Scott Smith: We're growing. And we're growing by leaps and bounds. We had a planned growth, and we're running five to 10 years ahead of that. It's been incredible since Allegiant came in around three years ago, and it's been constant growth. We'll run a million people through that terminal this year. From zero as recently as 2008. So we're just struggling to keep up. It's a great problem to have.
Ted Simons: I want to talk about Allegiant in a second, but as far as the expansion, that's the passenger terminal?
Scott Smith: We're adding baggage space, additional space for rental cars and for security, and we're expanding now so we can get to eight gates with the expansion we just started yesterday. Then we also got news from the FAA that they had approved a $6 million grant for the final expansion. Another expansion that will be finished in 2013.
Ted Simons: That's a final expansion for this particular operation.
Scott Smith: This site. We're on the west side of the gateway airport. All interInc. mingled with ASU Polytechnic. The ultimate plan is to move to the east side of the airport which is completely undeveloped. It was the old part of the Air Force base, and to build a big new terminal over there that will handle 3-4 million passengers a year. We'll be maxed out on the west side, but hopefully we'll be able to start construction on the east side within a few years.
Ted Simons: Where do we stand as far as this particular expansion and what you see happening here a couple years?
Scott Smith: The new expansion would be done about 2013, and it will enable us to have 10 gates and handle about 1.5 million passengers. Only 50% more than we're already doing right now. We'll grow into that, we believe, pretty quickly.
Ted Simons: FAA grants, how much have we -- have you received and are there matching funds involved? How does that work?
Scott Smith: This comes out of the transportation trust fund. It's appropriated monies, and the FAA provides 95% of the money to airport enhancements, such as terminals, and the local, state and local need to come up with the additional 5%.
Ted Simons: We have, what, close to 10 million for one of the expansions and close, to what --
Scott Smith: The other two have been 6-7 million. It's well over $20 million in federal grants.
Ted Simons: I know this last grant needs to have matching funds from local and state. I'm guessing local is pretty well taken care of?
Scott Smith: Yes.
Ted Simons: How about state?
Scott Smith: If it doesn't get appropriated, we'll figure it out. It's 2.5%.
Ted Simons: As far as convincing the feds this needs to be done, is gateway the fastest growing hub in the country?
Scott Smith: It's great to go back to Washington and sit with the FAA and have them ask you excited questions about gateway airport. It is one of the great stories in commercial aviation in the United States right now. They're excited to see how it's growing, they're excited to see the impact it will have not only on the east valley but the entire Phoenix region.
Ted Simons: You mentioned Allegiant airlines, that is still the lone airline out there. Correct?
Scott Smith: That's correct. Allegiant serves 30 cities from direct -- with direct service from gateway. They just announced yesterday they're going to commence service to Las Vegas, which will make 31 cities. There's over 80 flights a week, and as I said, a million passengers this year.
Ted Simons: OK. Let's talk about those flights. Almost daily.
Scott Smith: Almost daily.
Ted Simons: From Mesa gateway to Las Vegas. Don't we have enough flights to Las Vegas already? What's going on here?
Scott Smith: You know, with Las Vegas, it was the number one preference of passengers coming through Phoenix Mesa gateway airport. And the thing about a reliever airport, such as Gateway, it doesn't take people away from Sky Harbor. The whole purpose is to grow the market. To grow. And we've done studies, for example, in Allegiant, they found in the cities they started flying, sometimes they have increased the number of passengers coming into the Phoenix area by two or three times. So we haven't taken away any passenger traffic from Sky Harbor. We make the pipe bigger. -- we make the pie bigger. I think if we fly to Las Vegas and we're successful, I hope we cut some passenger traffic out of Sky Harbor, because we can then replace it with maybe another daily flight to London, maybe to Paris, maybe to Asia, and get -- and expand the great economic impact Sky Harbor already has on the area.
Ted Simons: What kind of response are you getting from Phoenix?
Scott Smith: Phoenix has been a great partner. They were not an original partner of the authority, but they came in a few years ago and they are an incredible resource for us. They've helped the airport authority all along the way, and I think they understand that gateway represent as real opportunity. Not only for gateway, but for Phoenix Sky Harbor. And they've been a great partner.
Ted Simons: A partner I guess to a certain degree, but what if you, and I know you're trying to get other airlines in there, what about stops to Dallas? What about stops to the West Coast? How much -- I'm trying to figure out where Mesa gateway as it grows, where it fits in the valley's dynamic in terms of air travel.
Scott Smith: Think of other areas; about about Los Angeles. I remember when you couldn't fly from Phoenix to Burbank. Or Phoenix to Ontario. LAX was your only option. Think how it is now. Where at a drop of a hat, we can fly to Burbank, Ontario, Orange County. I rarely go into LAX anymore. The market has expanded. All those airports have helped grow the overall market. We hope the gateway airport, and we think and know gateway airport will do the same thing in the Phoenix area. It's another option, and any time you can grow air travel, your economy grows, and people have more choices. And we know that creates growth.
Ted Simons: I think some people will be questioning, that's been out there for quite a while, that big piece of property and all that potential. When times were good it seemed like not much was happening. It's pretty rough economic climate right now. And all of a sudden it's boom time. I know there was a problem with leaked aviation fuel, was that clean-up -- slowing the process? It seems like this has exploded out of nowhere. Where was this years ago?
Scott Smith: Its time came. In everything you have a right time, and it happened out there. First of all, the area around it grew. Gateway used to be literally in the middle of nowhere. The most important thing is the completion of Luke. When that opened about little over three years ago, all of a sudden the entire east valley was connected with a loop system into the really great freeway system are in our valley and that wasn't so far out there. Now if you get on the 202 or 101 from the east or west, north or the south, it's not a very long jaunt, and gateway became part of the community rather than being out there. That's when Allegiant decided to start flying because they had easy access. It's interesting how a freeway creates the impetus and is really the tipping point in the growth of an airport. That's really what the final piece was.
Ted Simons: And in terms of -- last question here, in terms of the growth of the airport, how big -- this is a former Air Force base. How big can this thing get?
Scott Smith: We have only scratched the surface. The gateway planning area, including the airport, ASU Polytechnic, is the size of the city of Tempe. It's over 35 square miles. Most undeveloped. With first solar going out there, we have Cessna, Beechcraft, we have other businesses coming out, the growth of ASU Polytechnic. Even in these bad times we have barely scratched the surface of the potential of that area. And over the next 15, 25 years you're going to see some great things in the gateway area.
Ted Simons: There's certainly a lot of things happening right now. Mayor, good to have you.
Scott Smith: Thanks for having me.