Arizona Gov. Doug Ducey spoke Friday at Valley Partnership’s February Morning Breakfast for the first time since the Covid-19 pandemic began.

Ducey and Valley Partnership President and CEO Cheryl Lombard discussed his priorities for this legislative session – the last of his final term as governor – including investments in Arizona water infrastructure and security, the state’s relationship with Mexico and continued development and economic growth.

Arizona Water Authority

Ducey announced that he supports the creation of an Arizona Water Authority, which will be tasked with developing new water sources for the state as western states experience a nearly two-decade drought. He aims for the state to invest $1 billion in the authority, which he describes as a “once-in-a-generation investment.”

As Arizona’s traditional water sources provide less water each year while the state’s population continues to grow, the state will either need to reduce water use or supplement existing water sources.

Ducey has made it apparent that Arizona will continue to seek innovative water solutions rather than implement water cuts and restrictions. “We use less water today than we did in 1957,” Ducey said. Arizona’s current population is nearly seven times larger than it was in 1957.

The Arizona Water Authority will have the power to construct and own water infrastructure, store water, own and sell water, provide loans and grants, engage in public-private partnerships and negotiate agreements. The authority will not directly operate any water infrastructure.

The authority will have a nine-member board comprised of the director of Environmental Quality, director of Administration, director of Water Resources and six members appointed by the governor to serve staggered five-year terms. Only half of the appointed members can be from the same political party.

“Whomever my successor is will have ample opportunity to ensure water remains abundant in this state,” Ducey said.

Lombard of Valley Partnership says her organization supports Ducey’s efforts to shore up the state’s water supplies. 

“Water is the number one issue discussed by the real estate development community in Arizona – from the assured water supply regulations to the Colorado River shortage,” Lombard said. “Our top priority is to enact policies that will promote responsible economic development and maintain our state’s precious resources.” 

Relationship with Sonora

One such opportunity which has garnered lots of attention is desalination. Desalination has successfully been used in the Middle East by Israel and Persian Gulf states, who pioneered the technology. 

Desalination has traditionally been prohibitively expensive, however improvements in the technology have made the proposal more feasible. The proposal would see desalination plants built in Mexico along with either infrastructure to transport water to Arizona or a cross-border water-sharing agreement.

Relations with Sonora remain strong, despite Sonora Gov. Claudia Pavlovich leaving office. 

Ducey and Pavlovich maintained a strong relationship, improving ties between Arizona and Sonora. 

“That relationship [with Mexico] is at an all-time high,” Ducey said. “We wouldn’t be having the discussions that we’re having now on what’s possible with Mexico on desalination, otherwise.”

In November, Â鶹´«Ă˝Ół»­ spoke with Cheryl Lombard about how real estate developers can play a role in Arizona’s long-term water security.

The post Governor Doug Ducey discusses Arizona Water Authority, relationship with Mexico at Valley Partnership event appeared first on Â鶹´«Ă˝Ół»­.

As part of its ongoing examination of Arizona groundwater policy, Â鶹´«Ă˝Ół»­ is visiting with water experts and policy leaders about their views on groundwater and what they believe are the defining issues for one of the state’s most pressing challenges.

Today CBN visits with Cheryl Lombard, president and CEO of Valley Partnership.

This interview has been edited for clarity and length.

Â鶹´«Ă˝Ół»­: Cheryl, tell us about your job and what your organization does.

Cheryl Lombard: I’m president and CEO of Valley Partnership. We’re an advocacy organization for real estate development across the Valley and in Arizona. We have all types of real estate developers. We have masterplan developers, and we have industrial & commercial, which includes office, retail and multifamily. We advocate for responsible development, which we’ve defined in terms of certain policy outcomes, which includes working on water, infrastructure, transportation, and consistency across cities in terms of their regulations.

CBN: Let’s say you meet a new legislator, maybe you meet a new city councilperson, and they say, “Cheryl, I want to know more about water. I want to learn more, but it’s a daunting subject. Where do I start?” What are some of the guideposts that guide your work in the water space that you attempt to convey to elected officials and regulators?

Cheryl: That’s a subject that when I joined Valley Partnership six years ago that I took on. The situation then was a little more certain in terms of water. It certainly wasn’t something my members were being asked or even thinking about from their investors. But now it is a question. We have worked over these past six years in developing policies. Those policies include getting new resources of water, protecting what we have, and determining how we pay for it.

We mainly engage in the Active Management Areas. We’re looking at how we pay for water now, how we have good water policy, how we built infrastructure. Real estate development is part of the solution. Many of our masterplan developers are building wastewater treatment plants, same with even our commercial office buildings. They are building infrastructure pipelines and they pay impact fees that pay for infrastructure in our cities that build our water infrastructure and help pay for supplies. We also pay water rates in our cities.

CBN: In Arizona, we read headlines about some big new investment – a development that’s going to result in a big building where lots of people are going to work. But in some corners those developments will face criticism that the project is too water intensive. How do you respond to critics who charge your industry is exacerbating the state’s water challenges?

Cheryl: Our urban areas have been planning, our whole state has been planning for years. We have great infrastructure. We have great bones in terms of water supplies, very senior water rights in our urban areas. Those are not big concerns. Major cities have invested in that water infrastructure, and they have done great work in terms of conservation. New development actually uses less water than any type of older infrastructure, older developments, residential and commercial office space.

CBN: You are in a high-demand industry. You are in a fast-growing state. Do we have the supply of water to keep up with that demand?

Cheryl: Yes. Obviously, with the Colorado River we’re entering a tier-one shortage. The first wave is something that we’ve expected. That was part of the Drought Contingency Plan, which we just negotiated two years ago.

We have a great history in our state of coming together, which is what we did with DCP. We knew that these tier-one cuts were coming. It just came a little sooner than anticipated. Arizona is working toward finding more solutions. There are other means of water, whether it’s using Harquahala water, which is already legally enabled to be transferred from that basin into the AMA (Active Management Area). If we’re looking at other supplies, there’s de-sal (desalinization). That’s quite a ways away. We’re now looking at some really important federal legislation that’s going to be introduced by Senator (Mark) Kelly, dealing with the Colorado River Indian Tribes. That’s going to be an important source. Salt River Project is looking to expand storage. Our cities are storing water underground. We have great supplies of water as we enter not only future reductions in Colorado River water, but as we transition away to other resources.

Just last session, Speaker (Rusty) Bowers led the way in terms of creating that drought mitigation fund. That is going to be an amazing tool for new sources of water. We’re hoping next session that gets expanded in terms of funding and other opportunities.

CBN: We’ve got Pinal County farmers who are now forced to rely less on the water in the canal and more on groundwater from wells. If your members were to build a building in Pinal County, would your members be using the water that comes out of the canal or would they be using groundwater?

Cheryl: Let’s remember the purpose of the Pinal AMA has a different purpose than the rest of the other AMAs. It’s an agriculture-heavy community that was hypothetically transitioning to development. So, it has what’s called “planned depletion.” They have had the legal right to go to groundwater.

For real estate development, though, we have to meet what’s called the assured water supply to enable development in the Pinal AMA or, really, anywhere. Right now in the Pinal AMA, because of the imbalance of the aquifer, real estate development is not able to get new certificates in the Pinal AMA.

CBN: Is that only homebuilders, or also other types of builders as well?

Cheryl: Only for residential do you have to get assured water supply. But where this is important, hypothetically, are these big industries that are going down in Pinal County. We have great concern about meeting the residential demands of those new employees that are coming there. We really need to start to identify new sources for Pinal County and, again, the rest of our state, which is why the Speaker’s fund last session was so important.

But this is not unique to all our AMAs. It’s not unique to the rest of our state that we’re struggling with these issues as we grow and determine how we manage our water resources. We do have water, we just have a few regulatory hurdles to move some water around, which is going to be an interesting discussion.

CBN: Let’s say you’ve got a member who wants to build a factory in Pinal County. Should they have to meet the assured water supply the same way homebuilders do?

Cheryl: I’m co-chair of the Post-2025 Committee, which is dealing with those issues. That question as to whether we should be strengthening the groundwater code — specifically in AMAs — in this time of crisis has come up.

It has been the majority sentiment of those on the committee that we need to first address additional supplies before we go amending the Groundwater Act. We need to have that certainty in place before we start adding new limitations to the Groundwater Management Act.

CBN: You are a development and growth booster, but you’ve also talked about the need for responsible growth. On a scale of 1 to 10, 1 being totally pessimistic, 10 being optimistic, do you believe Arizona can meet this desire and demand to grow?

Cheryl: We already have a great basis. We do have the Groundwater Management Act. The most immediate struggle will be down in Pinal County and what the future looks like in terms of agriculture, responsible development, and industry in those areas, as well as across of all the AMAs. We’re really going to have those discussions.

Also, cities want to be responsible users of their water sources and determine the best type of businesses to attract. I think we’re going to see more of that in our cities. Those are good discussions for us to have.

How do we strike the right balance? What are some of those criteria for us to really look at so that we can have homes and jobs in one area?

CBN: In the years you’ve worked on water policy, what’s a misperception or something that gets reported that you hear over and over again that you most want to correct?

Cheryl: It’s all of these out-of-state news organizations starting with the perception that nothing is sustainable in Arizona. Whether it be that we’re too hot, or we don’t have water. Now we have other states that are trying to take our good fortune in terms of what’s going on with our economy and trying to leverage water against us. That is just really frustrating because, frankly, Arizona has been planning. We’ve had the Groundwater Management Act much longer. California just got it. So, getting those facts out to outside of our state is important. That’s my biggest pet peeve at this point.

There is a way to do all of this. There is a way for us to work with flowing rivers, agriculture, mines and development & industry, and all work together.

CBN: Do we need to revisit the Groundwater Management Act, or is it satisfactory the way it is?

Cheryl: It is satisfactory the way it is right now. We need to utilize the tools that are within the Groundwater Management Act, such as certain exceptions to transfer groundwater outside of the AMAs. Now is the time we’re going to need that. Now’s not the time to take those away.

We need to also actively work with tribal partners. Once that certainty is established, we can look at what’s next in terms of the Groundwater Management Act.

CBN: You’re an optimist in in that regard?Cheryl: Yes. I feel very strongly about that. We already have very good bones, much better than most states across the West. We need to demonstrate our ability to pull together so that we can have more certainty and then examine all of our regulations.

The post When it comes to long term water security, commercial real estate developers say they’re part of the solution appeared first on Â鶹´«Ă˝Ół»­.

Arizona’s new high income tax from Proposition 208 is bound to discourage new investment, harm thousands of small businesses, and is unconstitutional, two of the state’s leading economic and legal experts told the real estate community last week. 

While the tax is intended to provide funding for education, it is flawed in many aspects and will hurt education in the long run if measures aren’t taken to mitigate its impacts, said Jim Rounds, an economist and policy analyst who spoke at a virtual breakfast meeting of the nonprofit , the voice of the real estate industry in the metro Phoenix region.

“We’re not debating education funding. We’re talking about the best way to fund education,” Rounds of Rounds Consulting in Tempe told a group of more than 175 attendees. “We want to make sure the gains are bigger than the economic losses.”

Rounds was joined by constitutional attorney Jon Riches of the Goldwater Institute, which is challenging the tax in Maricopa County Superior Court. Riches detailed why the measure is unconstitutional on several fronts. 

Businesses seeking solutions 

Cheryl Lombard, president and CEO of Valley Partnership, said the organization invited the two experts so members could get more information about the controversial measure. 

Lombard said her organization supports a “well educated workforce” as part of its strategic plan and is joining with other business organizations to determine what is the best path moving forward. If Prop. 208 is not going to deliver as promised or is invalidated by the courts, the real estate community wants to know that there is a path forward that businesses can support.

“As a business community, we need to come together as a collective voice, one voice,” she said. 

Highest income tax hike in state history

Proposition 208 almost doubled the marginal income tax rate for individuals who earn $250,000 or more, and couples earning $500,000 or more, from 4.5 to 8.0 percent, a 77.7 percent increase.

It also will impact thousands of small businesses with 500 or fewer employees that file their taxes as individuals, not corporations. Meanwhile, the measure does not affect large companies that file under the corporate tax code.  

At the breakfast meeting, Rounds discussed economic implications while Riches outlined the legal problems with the new tax. 

Here are highlights from each:

What are the economic impacts of Prop. 208?

Rounds, who conducted an analysis of the new tax with the Goldwater Institute, said that any benefits to education will be offset by the damage it will do to the overall economy.   

For one, high income earners are not a stable funding source, he said. Their income flow tends to be more “volatile.”  

To determine the potential impact of the ballot initiative, the analysts calculated the damage including job losses, suppressed wage growth, dampened business recruitment, and harm to the state’s economic base. 

Among the key findings: 

A minimum of $2.4 billion in state and local tax revenues will be lost As more businesses fail under the weight of the tax hike, job growth and wages will suffer. A conservative economic modeling of the financial impact indicates that a minimum of $2.4 billion in tax revenues will be lost over the next decade. 

Cuts to social services, public safety, and higher education The new mandate will cause a minimum of $120 million in lost revenues annually to the state’s general fund. Since the proposition requires any decrease in state revenue to be made up from other sources, this will likely put critical services on the chopping block.

Substantial job losses Under the most conservative scenario, job losses will reach a minimum of 124,000 over the course of 10 years. 

A drop in new business expansion The risk to new business attraction and expansion could be as large as a 25 percent reduction.

About half of those affected are small business owners Fifty percent of those whose tax rates are expected to be directly targeted are small business owners. 

Why is the new tax unconstitutional?

Riches, of the Goldwater Institute, discussed the that is being heard in Maricopa County Superior Court. RIches said the measure is flawed constitutionally for a number of reasons including:

Arizona’s constitution requires limitation on school spending The law illegally exempts itself from expenditure limitations for school districts as set forth in the Arizona Constitution.

The proposition violates constitutional requirement The new law violates the state’s constitutional requirement that any new tax must be approved by a two-thirds majority of the legislature, which it did not. 

“No legislation, whether passed by the people or the legislature, can override or supercede the constitution,” Riches said. 

The Goldwater Institute is joined by many others in its legal challenge including the leaders of the Arizona Senate and House, Sen. Karen Fann (R-Prescott) and Rep. Rusty Bowers (R-Mesa); several other Republican legislators; Montie Lee, the owner of Lee Farms; cardiologist Francis Surdakowski; and the Arizona Free Enterprise Club. 

A separate lawsuit also was filed by small business owner Ann Siner, CEO of My Sister’s Closet, and John Buttrick, a retired Superior Court judge and federal magistrate. 

Both experts said Â鶹´«Ă˝Ół»­ust find a better way to fund education. Legislative leaders in both the Arizona Senate and House are seeking ways to do just that.

Among the solutions under discussion are mitigating the damage from Prop. 208 with tax reforms. No concrete proposals have been introduced but committee chairs in both houses said mitigation is one of their top priorities this year.

The post Real estate community hears legal and economic implications of Proposition 208 appeared first on Â鶹´«Ă˝Ół»­.

From open spaces to open minds, Arizona has the “highest potential” of any state in the nation to successfully move into the new economy, said Arizona State University (ASU) president and innovation trailblazer Michael Crow. The university’s “enterprise” model will help lead the way.

“The potential index for Arizona is off the charts. Off the charts. You can still build here and build well. You can design communities here. You can do new things here, and ASU is really representative of that,” said Crow, who spoke last week at a virtual breakfast meeting of the nonprofit , the voice of the real estate in the Phoenix metro region. “We have all the pieces. We have all the components. We still have small government. We still have a willingness to accept new ideas.” 

About 150 real estate professionals and business and community leaders attended the event to hear Crow speak. He talked about what is needed to take Arizona’s economy to the next level, ASU’s response to COVID-19, and the school’s transformation into a leading global institution that has amassed vast real estate holdings and leases to attract tenants, corporate partners and startups.

Today, the university relies little on public funding, bringing in hundreds of millions of dollars each year from corporations, donors and organizations, and tuition from students worldwide.

ASU now exceeds top research institutions 

Since becoming president in 2002, Crow’s vision and hard driving personality have positioned ASU as one of the top research universities in the country. 

The university has been named the most innovative university in America by U.S. News and World Report every year since the category was created six years ago.

ASU now rivals and exceeds institutions like Cambridge, MIT, Oxford, Stanford, UCLA and USC for research in both medical and non-medical innovation, Crow said. 

COVID-19 leader in testing, research 

ASU took a leading role when news surfaced in December that a new virus had surfaced in China. 

Since then, more than 200 COVID-19-related research groups have been created at ASU. Among its successes is one of the fastest saliva-based PCR (polymerase chain reaction) tests for COVID.

In April, an ASU research team expects to complete a new microchip fluidity device that will allow anyone to spit into a microchip containing an internal “laboratory” that can produce a quick result and send an alert to an individual’s phone. 

As the world rushes to create a vaccine for the coronavirus, ASU will continue to develop new tools to protect lives in the coming years and build profit-making enterprises around it, he said.

Building recovery in fiercely competitive world 

Moving forward, Arizona’s number one challenge will be how to build an economy that grows faster than population growth. With per capita growth on the decline in recent years, this will be critical to its global standing, Crow said.

“Arizona’s new economy is going to require us to leapfrog into an understanding that the world has become ever more competitive,” he said. “In Singapore, in Korea, in Europe, in Indonesia, in China and other places, are rising competitors, and significant competitors, on every possible level.”

If Arizona and the nation do not stay in front of the pack, they will be overwhelmed by the scale of all the other competitors, he said.

“So the only way to be successful is to always be in the lead, to always be in front, to always be the most innovative, always to be the most creative.” 

Knowledge-driven enterprises will lead the way    

Knowledge-driven enterprises with more technological underpinnings are necessary to push the economy higher here, Crow said.

Towards that end, ASU has been undergoing massive of its research, teaching and real estate operations to advance industry and high paying jobs, create tens of thousands of jobs over the next two decades, and to attract new students from around the globe.   

Expansion of 10 innovation corridors in Phoenix metro

Among its many projects, the university is expanding its global presence including building a new headquarters in Los Angeles and satellite campuses across the world to attract new investment and students. 

In Arizona, the university is building and expanding a host of facilities and projects including in its 10 “innovation corridors” including:

Health Futures Center ASU and Mayo Clinic are building a 150,000-square-foot building next to Mayo Clinic in North Phoenix that will feature a MedTech Accelerator, biomedical engineering and informatics research labs, nursing programs and an innovative education zone. Through the project, Phoenix expects to see $3.5 billion in capital investment over the next two years, an additional 4.4 million square feet of advanced facilities, creating more than 7,000 jobs. 

Entrepreneurship Residence Center This will be the first new residential space on the ASU Downtown Phoenix campus since 2008. It will house more than 1,200 students including 500 student entrepreneurs who will be launching their own companies. It is set to open next year. 

Mesa City Center Also under construction, this state-of-the-art project will jump-start the revitalization of downtown Mesa and train students in one of the biggest industries in the U.S.:  media production. Set to open in spring 2022, it will offer programs in the Herberger Institute for Design and the Arts in digital and sensory technology, experiential design, gaming, media arts, film production, and entrepreneurial development and support.

Polytechnic Research Park This facility near Phoenix-Gateway Airport and ASU’s Polytechnic campus in Mesa will specialize in hands-on exploration of solutions in aviation, alternate energy, human-technology integration, comprehensive commercial printing and design services, and on-demand digital manufacturing.

Phoenix Biomedical Campus A new biomedical campus is underway that is part of a development in downtown Phoenix that is owned by a public-private partnership that includes Phoenix, ASU, Wexford and Ventas. The Wexford Innovation Center is part of the $1.5 billion research and innovation pipeline with Ventas. Ventas is investing $800 million in four university-related developments totaling more than 1.3 million square feet. Upon completion, the campus will include seven buildings totaling more than 6 million square feet of research, academic and clinical facilities.

Novus Innovation Corridor This public/private partnership between the ASU and Catellus Development Corporation is under construction adjacent to the Tempe campus and has been dubbed the nation’s “most progressive,” urban, mixed-use developments for introducing leading-edge technologies into an urban landscape. Built in phases, it will house more than 11 million square feet of offices, residences, hotels, retail stores and restaurants throughout 355 acres.

A successful diverse student population is a must

In addition to research, ASU has not forgotten its mission as a public teaching institution, Crow said. Data backs that up.  

For example, the  engineering class went from 6,000 students with low retention rates their freshman year to 25,000 engineering students with a 90 percent retention rate today. This year, ASU is graduating four times more students than it did in 2002.

While geniuses are essential to any research university, ASU is focused on reaching down into high schools to make sure not only A and B students make it to college but lower performers as well. Recruiting in-state students, particularly Latinos, has been a major effort that has paid off. 

“For the first time in the history of the institution, the student body is completely representative of the population of the state, economically and ethnically,” Crow said. 

Continuing that trend will be key to raising per capita income and building the economy, he said.

“We don’t want to build an economy that’s growing at 1 percent or 2 percent or 3 percent a year. We want an economy that’s growing at 4, 5 and 6 percent every year.” 

The post ASU’s “enterprise” model to drive Arizona’s new economy appeared first on Â鶹´«Ă˝Ół»­.