Governor's commerce advisory council report

              Acknowledgements
We thank the hundreds of Arizona stakeholders who provided information and insight to the development of
these recommendations. We also thank the many state officials and other public and private sector experts
who generously committed their time, knowledge and expertise. A special thanks to the Arizona Economic
Resource Organization (AERO) for their early support of this project.
Governor's Commerce Advisory Council
Jerry Colangelo
Advisory Council Chair
Partner, JDM Partners; Chairman, USA Basketball
Paul Bonavia
Chairman, President and CEO, UniSource Energy Corporation
Don Brandt
Chairman of the Board, President and CEO, Pinnacle West Capital Corporation
Bob Campbell
President,W.L. Gore and Associates, Inc.
Donald E. Cardon
Director, Arizona Department of Commerce
Brad Casper
CEO, Dial Corporation/Henkel
Linda Hunt
Service Area President, CHW Arizona; President/CEO, St. Joseph’s Hospital and Medical Center
Roy Vallee
Chairman and CEO, Avnet
Project Team
Sara Dial, Sara Dial & Associates, Team Leader
Denise D. Resnik, Denise Resnik & Associates
Alisa Lyons, SLOAN LYONS Public Affairs
Contributors to Research on England, Singapore and Ireland
Tim James, Ph.D
L. William Seidman Research Institute, W.P. Carey School of Business, Arizona State University
TABLE OF CONTENTS
Executive Summary ................................................................................................................................................ 1
Project Approach: Outreach, Research and Analysis of Results ............................................................................. 7
The Role of Statewide Economic Development Organizations ............................................................................... 8
Stakeholder Outreach Results: Engaging Arizona Leaders ................................................................................... 12
The Arizona Department of Commerce: Its History and Status ............................................................................ 14
State and Global Economic Development Models: Common Elements of Success .............................................. 22
Recommendations: A New Statewide Economic Development Model for Arizona............................................. 33
Appendices ............................................................................................................................................................... 38
A. Legislatively Mandated Programs and Executive Order Activities
B. Stakeholder Outreach Participant Organizations
C. U.S. and Global Research
D. Sources
1
Executive Summary
Arizona needs a game change and a team effort like it has never seen before. Our state’s massive population
influx has masked its lackluster performance in job creation, economic diversification and global
competitiveness. Today's economic realities underscore how Arizona can no longer rely on population growth
as its primary industry.
Arizona's 20th century approach to economic development needs to be revamped and modernized. To be
competitive in this 21st century economy and provide Arizonans with high quality, well paying jobs and
career opportunities, we need a new game plan. And we need it now.
For the past several years, the State of Arizona has suffered the consequences of the absence of a clearly
defined economic development vision, reduced investment in economic development and persistent cutbacks
to its Department of Commerce while mandated programs have multiplied.
Today, Arizona is at its most serious economic crossroads in recent history. It is therefore essential that we
immediately build a stronger and more effective economic development delivery system – one that withstands
political and fiscal vagaries that have plagued this vital function for many years, and one that improves our
state’s performance and helps to regain our competitive edge. This requires leveraging Arizona’s assets and
current job base to focus on industries with the greatest potential for our state, the creation of a competitive
tool kit to attract and retain those industries and jobs, and a steadfast and long-term commitment by leaders to
set aside partisan politics, intra-state economic development competitiveness and headline attention grabbing.
History has proven that when we come together with a collaborative team spirit in Arizona, we do, in fact,
achieve extraordinary results.
In response to concerns related to leadership, focus, productivity and dwindling state funding, Governor Jan
Brewer created the Governor’s Commerce Advisory Council to recommend a new statewide economic
development delivery structure to advance Arizona’s global competitiveness and provide much needed
leadership. She appointed Don Cardon as Commerce Director, knowing his experience as both an economic
developer and successful businessman would align with her vision, and charged him to focus on an economic
advancement strategy for the state. Governor Brewer called on Arizona business leader Jerry Colangelo to
chair the Council, empowering him to act swiftly but in a calculated manner considering the importance of
this task for the future of Arizona’s economy. Further, Governor Brewer and the Council engaged Sara Dial,
former Commerce Director (1993-96) and current international site location specialist, and retained her firm to
conduct the research and stakeholder outreach for the eight-member Council.
The Council reviewed the current Arizona Commerce Department structure; studied best practices around the
globe involving privately led, publicly mandated and public-private collaborative organizations; and engaged
more than 320 Arizona leaders through focus groups and stakeholder meetings representing 180 public and
private sector organizations from rural and urban areas throughout our state.
The results of this work validate the need for Arizona to make dramatic shifts to its economic development
leadership and delivery structure in both focus and function that is long-lasting, impactful and laser-focused to
grow Arizona businesses and attract new companies to our state.
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Key Findings
Arizona Department rizona of Commerce Findings
The Arizona Department of Commerce is currently charged with 57 statutorily mandated initiatives and 16
Executive Order assignments (see Appendix A), backed by minimal state funding support. The agency’s focus
on economic development matters has been diluted and its ability to maximize economic development
opportunities in today’s global business environment has been weakened. No business can thrive or, in most
cases, survive under these circumstances. Additional findings include:
  Total state funding for the Arizona Department of Commerce has been reduced by 31%, from
$9,178,400 in FY 2008 to $6,083,500 in FY 2010.
  As a politically appointed position, turnover of the Commerce Director has resulted in seven
individuals serving in the past 10 years, creating a significant lack of continuity.
  While the agency has created numerous economic development strategic plans, they have not received
broad based support or been fully implemented.
  Governor Brewer’s direct involvement in recent new business locate negotiations has resulted in the
creation of thousands of quality jobs for Arizonans.
Statewide Focus Group Findings
Through the focus group process, we identified areas where Commerce stakeholders strongly recommend
improvement:
  The Department’s emphasis on retaining and growing our existing business base needs to be
strengthened and sharply focused on key growth industries.
  While there are many knowledgeable and dedicated professionals who work at the Department, the
environment is too political, resulting in constant leadership and policy changes.
  The Department of Commerce is no longer considered the leader in economic development policy,
lacking the expertise and resources to analyze Arizona’s competitive position and set forth policy
recommendations.
  Limited funding and the bureaucracy imposed on the agency do not give the Department of Commerce
the flexibility to serve as the state’s marketing leader nor the agility to capitalize on important
economic development opportunities.
  While the agency has developed and facilitated the creation of thoughtful strategic plans, these efforts
are not supported by sufficiently funded implementation capabilities.
  With unfunded mandates and minimal budget for implementation, it is extraordinarily difficult to
effectively advance the Department’s full scope of responsibilities as well as to focus on core economic
development initiatives.
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Economic Development Model Findings
States that consistently rank high in business climate rankings and who have had successful economic
development programs include Georgia, North Carolina, Texas, Florida, Utah and Virginia.
These states have strong economic development records and share the following key features:
  A collaborative culture, with support at all levels (local, regional, state, public sector and private
sector).
  An actively engaged Governor who serves as the state’s business development CEO, a formally engaged
legislature and leading business executives, and a qualified economic development executive who
serves as the organization’s president, executive director or commerce secretary through a long-term
contract.
  An economic development organization that operates outside of political influence but is still
accountable to the Governor’s Office and state legislature through mandated deliverables. Or, an
organization that operates inside of government and maintains formal partnerships with the private
sector.
  An accountable and transparent demonstration of a return on investment of state dollars.
  Statewide strategic plans and implementation initiatives supported by a coalition of statewide interests,
and monitored and measured annually.
  The State takes the economic development marketing lead, primarily using private sector funds.
  The State leads the public policy agenda to ensure global competitiveness.
  Special emphasis is placed on providing support to rural communities through economic development
programs.
Recommendations
Based on this research and analysis of alternate statewide economic development agency structures throughout
the United States and the world, we recommend the following framework for Arizona’s statewide economic
development delivery system that drives industry forward and maximizes the state’s investment in economic
development. The proposed framework must be empowered by six key guiding principles:
  Transparency and Accountability: The new organization must be transparent and accountable to all of
its investors and stakeholders.
  ROI: A “performance based funding model” needs to be created to demonstrate a return on state dollars
invested in the organization.
  Leadership: The Governor of Arizona must serve as the state’s economic development leader,
supported by professionals with the qualifications required to advance the state’s plan.
  Public-Private Engagement: Arizona’s economic development efforts must successfully demonstrate a
strong government and private sector collaboration.
  Long-Term Vision/Short-Term Action: Arizona urgently needs short-term fixes to its current
economic woes. While immediate action is required, we must remain focused on rebuilding for the
long-term future with consistent strategies and communications.
  Collaborative Effort with No Duplication: All constituencies must come together to advance this
model, which will not duplicate existing economic development efforts.
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A New Framework for Arizona
The Arizona Commerce Authority (ACA)
Based on the Council’s outreach to Arizona stakeholders, analysis of successful economic development
organizations nationally and globally, we recommend the following:
1. The creation of a new organization, the Arizona Commerce Authority (ACA), a quasi-public state
authority which is responsible for leading Arizona’s statewide economic development efforts. ACA
replaces the Arizona Department of Commerce, but does not assume all of its current functions.
2. The mission of ACA is to grow and diversify Arizona’s economy and create quality jobs for its citizens by
supporting and attracting businesses in targeted, high growth clusters, with an emphasis on base industries
and rural communities.
3. ACA is governed by a Board of Directors, with the Governor of Arizona serving as its Chairman. The Vice
Chairman of the Board is also given specific Board leadership responsibilities. The Speaker of the Arizona
House of Representatives and the President of the Arizona Senate are Ex-Officio members of the Board.
The Board is comprised of 14 additional CEO-level business, education and community leaders
representing all areas of the state. The Governor selects and appoints Board members, from a qualified slate
submitted to her/him by the Board of Directors, when positions are vacant. Board members require Senate
confirmation and serve staggered terms. The Board is subject to open meeting laws and public records
requests.
4. The Board of Directors of ACA hires the president of the Authority under a long-term contract. The
president and employees of ACA are employees of the Authority and are compensated at levels
commensurate with those economic development professionals at other similar organizations. They are
exempt from state procurement and personnel system regulation. They have the ability to be members of
the Arizona State Retirement System and to receive other state benefits.
5. As Arizona’s lead economic development organization, ACA is charged with the following duties and
responsibilities:
- Assist new and existing companies in Arizona in creating quality jobs and generating new
investment in the state, through business attraction, expansion and retention programs.
- Create, monitor and help execute a comprehensive economic development strategy for the state
and advance economic development public policy that will ensure Arizona creates a business
friendly, globally competitive environment.
- Manage and administer Arizona economic development and workforce programs, including
existing tax credit and job training programs and new programs being proposed by the state
legislature.
- Provide statewide marketing leadership to establish, build and maintain a pro-business image for
the State of Arizona and promote the state’s unique competitive advantages.
6. In partnership with the state legislature and the Office of the Governor, ACA creates a “Performance-
Based Funding Model” with performance criteria and associated deliverables.
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7. ACA is appropriated a lump sum budget from the state each year and submits the following to the
Governor’s Office and State Legislature by November 1 of each year:
- A detailed operational plan and budget for the upcoming fiscal year
- An annual report which will contain audited financial statements for the prior fiscal year
8. Funding for ACA comes from state and private sector funds.
- State Funding: State funding will come from the State General Fund or from a business-related,
dedicated funding source such as incremental payroll tax revenues (the payroll tax paid by
businesses) generated from targeted industry clusters.
- Private Sector Funding: Private sector funds will support the marketing efforts of ACA. The private
sector funds will come from a 1.5 percent fee, up to $100,000, charged to companies accessing
specific current and proposed economic development tax credit and grant programs (incentive
programs) in Arizona. These funds will be deposited into a marketing and jobs development
account and used to fund marketing programs used by ACA.
About the Future
Our efforts are neither passive nor political. They reflect our concern for the future of our state and
commitment to help Arizona find ways to lead us out of these economic challenges, not just react to them.
While no single new initiative can immediately remedy the state’s budgetary and fiscal challenges, the creation
of aggressive public policy and an economic development tool kit combined with a new statewide economic
development delivery model are urgently needed to improve Arizona’s economic performance and ability to
successfully compete in the global market.
6
Stakeholder Outreach Participant Organizations
House Commerce Chair
Consulate of Canada/Consulat du Canada
Covance Laboratories
Cox Communications
Cushman & Wakefield
Delmastro + Eells
Deloitte
Denise Resnik & Associates
Desert Fleet-Serve, Inc.
DHR International
Diamond Ventures
DMB Associates
Dorn Policy Group
Downtown Phoenix Partnership, Inc.
East Valley Chamber of Commerce Alliance
EDGE Eloy
Embry-Riddle Aeronautical University
Empire Southwest LLC
Falcon Field Area Alliance
Fennemore Craig
Flagstaff Chamber of Commerce
Flinn Foundation
GHD
Governor’s Office of Equal Opportunity
Grand Canyon Minority Supplier Dev. Council
Great Impact, Inc.
Greater Phoenix Chamber of Commerce
Greater Phoenix Economic Council (GPEC)
Greater Phoenix Leadership, Inc.
Green Valley Sahuarita Chamber of Commerce
Hamilton, Gullet, Davis & Roman
Hecker & Muehlebach, PLCC
Hensley Company
HKS, Inc.
Hornaday Development LLC
HUB International
Humana of Arizona
IBM
ILX Resorts
iMemories
Integriguard
Intel
Kinetic Muscles, Inc.
Klute Communications
Lake Havasu Area Chamber of Commerce
Lake Havasu Partnership for Economic Development
League of Arizona Cities and Towns
Local First Arizona
Loven Contracting
Maricopa County
Maricopa County Community College District
Mayo Clinic
McKenney and Monroe
Medtronic, Inc.
Mesa Chamber Commerce
MGT Associates, LLC
Mohave County
Motorola
National Assoc. Independent Office Properties AZ
National Federation of Independent Business
Nichols Precision, AZ Tooling/ Machining Assoc.
Nogales Community Development Corporation
Northern Arizona Building Association
Northern Arizona Center for Emerging Technologies
Northern Arizona University
Northern Trust Bank
Phoenix Children's Hospital
Phoenix Community Alliance
Phoenix International Raceway
Pinnacle Business
Pinnacle West Capital Corporation
Prescott Valley Economic Development
Foundation
Quarles & Brady
Ratheon
Republic Services
Rodel Foundation
Salt River Project
Science Foundation Arizona
Scottsdale Chamber of Commerce
Scottsdale Healthcare
SenesTech
Sierra Vista Economic Development Foundation
Snell & Wilmer L.L.P.
South Mountain Laveen Chamber of Commerce
SouthEastern Arizona Governments Organization
Southern Arizona Leadership Council
Southern Arizona Technology Council
Southwest Gas
St. Joseph's Hospital and Medical Center
Sulphur Springs Valley Electric
Sunbelt Holdings
SunCor Development
Sundt Construction
Systems Technology Staffing
Tempe Chamber of Commerce
The Critical Path Institute
The Human Element LLC
The Molera Alvarez Group
The Symington Group
The University of Arizona
The University of Arizona College of Medicine-
Phoenix in partnership with Arizona State
University
Town of Bowie
Town of Florence
Town of Fountain Hills
Town of Maricopa
Town of Oro Valley
Town of Payson
Town of Sahuarita
Translational Genomics Research Institute (TGen)
TriWest Healthcare
Tucson Metro Chamber of Commerce
Tucson Regional Economic Organization (TREO)
University of Arizona
Vestar Development Co
Viad Corp
Vision Alignment
Waste Management of Arizona
Wells Fargo
Westcor
WESTMARC
Western Arizona Economic Development District
Yavapai County Cooperative Extension
Yuma Economic Development Foundation
Ahwatukee Chamber of Commerce
Alliance Bank of Arizona
American Indian Chamber of Commerce
Apache Junction Chamber of Commerce
Apache Nitrogen
Arizona Association of Economic Development (AAED)
Arizona BioIndustry Association
Arizona Board of Regents
Arizona Chamber of Commerce and Industry
Arizona CURE
Arizona Department of Commerce
Arizona Department of Education
Arizona Economic Research Association (AERO)
Arizona First
Arizona Mexico Commission
Arizona Minority Business Enterprise Center
Arizona Public Service
Arizona Rural Development Council
Arizona Small Business Association
Arizona Small Business Development Center
Arizona State University
Arizona Technology Council
Arizona Tooling and Machining Association
Associated Minority Contractors of America
AVR
Banner Sun Health Research Institute
Barclay Communications
Battelle
Benson Chamber of Commerce
Benson Visitor Center
BioAccel
Blue Cross Blue Shield of Arizona
Brown Family Foundations
Buckeye Valley Chamber of Commerce
Bullhead Regional Economic Development Authority
California Association for Local Economic Development
Campbell & Mahoney Law Firm
Carondelet
Catholic Healthcare West
CB Richard Ellis
Center for the Future of Arizona
Central AZ Regional Economic Development Foundation
Chandler-Gilbert Community College
City of Apache Junction
City of Benson
City of Chandler
City of Glendale
City of Globe
City of Kingman
City of Mesa
City of Nogales
City of Phoenix
City of Prescott
City of Safford
City of Scottsdale
City of Sedona
City of Tempe
City of Tucson
City of Willcox
Cochise Community College
Cochise County
Coconino County Career Center
Coe & Van Loo Consultants
Senate Commerce/ Economic Development Chair
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Project Approach
In recent years, the role of the Arizona Department of Commerce as the state���s economic development leader
has been hotly debated by both the public and private sectors. The agency has been charged with a myriad of
programs backed by minimal funding support. Many believe that as the agency’s focus on fundamental
economic development matters has been radically diminished, its ability to maximize economic development
opportunities in today’s global business environment has equally been weakened.
In response to the lost confidence in the Department of Commerce as it relates to leadership, focus,
productivity and dwindling state funding, and the economic challenges facing the state today, Governor Jan
Brewer created the Governor’s Commerce Advisory Council to recommend to her a statewide economic
development structure/framework that advances Arizona’s global competitiveness and provides the much
needed leadership our state needs and deserves.
This project had two outreach/research tasks to accomplish the goal set by the Governor and her Commerce
Advisory Council. First, stakeholder meetings and focus groups were conducted statewide with more than 320
public and private sector leaders, representing more than 180 public and private organizations (see Appendix
B). During these sessions, feedback and ideas were generated by urban and rural Arizona stakeholders engaged
in economic development along with representatives from small businesses, industry cluster groups and
current Arizona Department of Commerce staff.
Second, focusing on those states that were consistently ranked high in business climate rankings, and those
states with strong economic development records, research was conducted to assess successful statewide
economic development agency structures throughout the U.S. Consistent elements of successful state economic
development organizations were identified to create a framework for a new Arizona model. Global economic
development models were also studied and analyzed.
The Governor’s Commerce Advisory Council reviewed and analyzed the results of the focus groups and
research and is making their recommendation for a new statewide economic development structure for the
state of Arizona in this report.
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The Role of Statewide Economic
Development Organizations
Every state in the nation is represented by a statewide economic development organization. There are typically
four varying structures that states use to advance their economic development agendas: 1) traditional, publicly
funded commerce agencies, 2) public-private partnerships, 3) quasi-public agencies and 4)
combinations/variations of the three.
The fundamental premise of public-private partnerships and quasi-public agencies is that activities aimed at
economic development and marketing a state or region can be more successful if the public and private sector
work together, rather than on their own. Additionally, these organizations typically remove politics from the
day-to-day activities of the organizations and allow them to operate on a nonpartisan basis, with the long-term
interests of the state as their top priority, versus short-term political agendas. Public-private partnerships and
quasi-public agencies also give states greater flexibility to respond quickly and decisively to job creation
opportunities.
Some states have reorganized their economic development delivery systems to engage the private sector in
their efforts and give them more flexibility to act, while strengthening their accountability to the state
governments that fund them. States have also adjusted their traditional economic development strategies in
response to changes in the 21st century global economy.
Competition for jobs is no longer focused solely on quality of life, business costs and regulatory friendliness.
The ability of a state or country to demonstrate that it is committed to developing its own knowledge-driven
economy, supported by a qualified workforce, is increasingly important in this new economy. States that are
competitive from a business climate perspective and demonstrate a commitment to creating an innovation-driven
economy are distinguishing themselves in the 21st century.
As states compete globally, they must use every resource, tool and asset they have to recruit new companies,
retain existing ones and help them grow. State economic development organizations have become increasingly
important in their roles as leader, facilitator and collaborator in this increasingly complex corporate
relocation/expansion/retention process.
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The following table compares the role of state economic development organizations in the 1990's compared to
their new role today:
Source: Sara Dial & Associates
Role of Statewide
Economic Development
Agency
In the 1990’s In the 21st Century
Business
Recruitment/Expansion
Focus on regional competition Focus on global competition
Business Retention
Focus on attracting new companies “Economic Gardening” or greater focus
on retaining and growing existing
companies
Business Prospect
Process
Leading business recruitment, very
hands-on
Leading business recruitment, but
deferring to and partnering with regional
economic development groups
Strategic Partnerships Partnering with local and regional
economic development groups
Partnering with local and regional
economic development groups, higher
education, scientific groups, research
institutions, and nonprofit foundations
Workforce Development Granting of job training funding Workforce development programs
aligned with targeted growth industries to
develop and maintain a prepared
workforce
Public Policy Focus on business costs, regulatory
friendliness and quality of life
Alignment of taxes and regulatory
functions, and promotion of policies and
programs that support innovation and
entrepreneurship to advance the state’s
long-term vision
Small Business Support Small business start up support and
advocacy
Focus on fostering an entrepreneurial
environment to maximize growth
opportunities for small business
Rural Economic
Development
Providing community development and
local planning grants and support
Integration of rural economic
development into all state programs with
benefits targeted to regional collaboration
efforts
Incentive and Financial
Program Management
Administration and coordination Administration and coordination
Marketing and
Communications
Utilization of traditional forms of
marketing, with a domestic focus
Development and utilization of new,
online and social media forms of
marketing, with a domestic and global
focus
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There are six key functional areas of focus which are common among most statewide economic development
organizations today:
1. Domestic and Global Business Recruitment/Expansion/Retention:
Most site selection consultants and corporate relocation decision makers who use economic development
organizations in their site selection processes rely on a statewide organization to assist them. State business
development representatives are the state’s key sales persons. They provide business prospects a single
point of contact to deliver the information needed for making a relocation/expansion decision. The state
partners with local and/or regional economic development groups to work with the prospect to a successful
close.
Of growing importance to state economic development organizations is their role in retaining existing
businesses and working with them to expand. States and local communities are using the term “economic
gardening” which is the recognition that there must be a balance in a state's focus to assist existing
businesses in expanding in addition to helping new businesses create jobs, a strategy that is rapidly gaining
traction in the U.S. 1
In today’s global economy, states’ roles in foreign direct investment and global marketing have grown.
Local economic development groups don’t have the resources, know-how or the state-level prestige
associated with international business expansion. While there is sometimes confusion in domestic business
development roles between state and local entities, the role of the state in international business
development is clearly defined.
Most states have foreign trade and investment offices to focus their limited resources in those markets
where they have the greatest potential for success. Typically, these offices align with the states’ largest
export markets as well as opportunities to attract direct foreign investment.
2. Statewide Marketing and Communications:
Statewide economic development organizations act as the state’s leader in branding and positioning the
state to generate new business leads. States market themselves on a global scale through many approaches
including brand development and messaging, online marketing, social media, and aggressive and ongoing
public relations. And, they do so in cooperation with state tourism agencies in order to leverage very
limited state resources.
According to the 2008 research site selection survey 2 by Development Counselors International (DCI), the
leading information sources that influence executive perceptions of a community’s business climate are:
- Dialogue with industry peers (61%)
- Articles in newspapers and magazines (53%)
- Business travel (43%)
- Meetings with economic development organizations (32%)
- Online Sources (28%)
Through strategic communications, statewide economic development organizations can positively
influence these sources. Results of the DCI survey also showed the importance of a state’s online marketing
presence. Sixty-four percent of respondents indicated a strong likelihood they would use an economic
development organization’s website in their next site location search.
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3. Strategic Planning and Public Policy:
Statewide economic development organizations take the lead in developing, implementing and monitoring
economic development plans and initiatives that are supported by all stakeholders. States also undertake
targeted industry-specific research, making the business case for state-level policies that leverage existing
economic development assets in growth industries. States provide leadership, advocacy and legislative
support for the creation of new initiatives.
4. Rural Economic and Community Development:
Rural regions offer diverse resources and opportunities for job creation. States provide technical planning
assistance and critical infrastructure funding to enable local communities to develop the assets they need to
retain and attract employers. Strategies and tools are tailored to protect existing assets while addressing
each community’s unique needs for improvement. Some states have created agencies specifically focused
on rural community development while others integrate a rural focus into every economic development
activity to ensure these nonurban communities receive the resources they need.
5. Workforce Development:
Workforce development is closely aligned with economic development activities because a top priority for
every business considering a new location or expansion is a qualified workforce. State workforce
development programs provide support to focus industry clusters to help prepare a ready workforce. To
meet the changing needs of business, states and institutions of higher education collaborate to design
training programs that ensure the availability of a ready workforce.
6. Management of Financial Programs
States that offer job retention and creation incentives are required to act as administrators and fiduciary
agents. They provide instruction and direction to clients to satisfy program regulations as well as report
critical outcomes to government agencies and legislative leadership. The clarity and flexibility of a state’s
financial program administration is key to “closing the deal” on many quality job retention and attraction
projects.
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Stakeholder Outreach Results
While economists are saying that growth will eventually return, Arizonans represented in our outreach efforts
agree that we can no longer rely on real estate construction to grow our way out of this economic crisis. As
stated in the Arizona Economic Resource Organization (AERO) Strategic Plan 3, the state must move “…from
an over reliance on growth as an economic driver to an economic diversification strategy.” The state must
prepare itself for the post-recession economy, one that is designed to be different than the growth economy of
the past.
Focus group sessions and stakeholder meetings that addressed the role of a state-level economic development
agency were held from December 2009 through early March 2010. Input was secured from more than 320
Arizona stakeholders, representing over 180 organizations (see Appendix B). Recurrent themes emerged,
which included enlisting professional leadership, removing politics to the greatest degree possible, serving as
the state’s chief marketing agency, maintaining the agency’s focus on primary economic development matters,
leveraging the state’s resources and collaborating with existing local and regional economic development
organizations, and treating the state’s existing businesses with good customer service and care.
The urgent cry for change, combined with an optimistic outlook that the state is now poised to reinvent its
economic development delivery system, reinforced the need for this project. One focus group participant
echoed many others when he commented, “This is the most important effort we’ve had in a long time. Let’s
quit bashing Commerce and do something about it.”
Focus group participants were requested to provide feedback about what is working and what is not working at
the Department of Commerce. Participants were asked to focus on the past decade. They were also asked to
provide suggestions for structure modifications. The results are summarized below:
What is working at the Arizona Department of Commerce?
  Strong strategic planning efforts. However, execution is limited due to budget constraints.
  New business lead generation and an unbiased role in projects.
  A strong resource center with quality research and reports.
  Key staff members who are knowledgeable and helpful.
  The workforce development programs, especially the Arizona Job Training Program (when funded.)
  Recent focus on industry cluster areas.
  Innovation programs, such as the tax credits for innovation and venture capital investments.
  Rural programs and the connectivity the Department brings to small communities throughout the
state.
What is not working at the Arizona Department of Commerce?
  A highly politicized culture, resulting in inconsistent leadership, plans, and policies.
  Short-term directors who are politically appointed and lacking qualifications to lead a strong economic
development organization.
  No reported return on investment of state dollars. No demonstration of the agency’s value.
  Not enough private sector engagement/partnership.
  Bureaucratic systems, protocols and processes that hinder the agency’s ability to be flexible, creative
and strategic.
  Not enough focus on the retention and expansion of Arizona’s existing businesses.
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  Lack of stable funding of the agency and economic development tools.
  No unified marketing/communications effort within or outside of the state.
  Too many mandated programs that are not properly funded.
What are your recommendations for change?
  Collaborative Culture: A new economic development organization that receives the financial support
and public backing of state leaders. This new organization should serve as catalyst, facilitator and
statewide leader in economic development.
  Leadership: The Governor must continue to be engaged with/lead the new organization. Strong, bold,
aggressive leadership is required at all levels. A multi-faceted Board of Directors with statewide
representation should oversee the organization. It should be led by a qualified economic development
executive that is hired by the Board with a multiyear contract.
  Structure: A partnership between the public and private sectors, independent of election cycles, with
both government and the private sector at the table. Collaboration with existing economic
development organizations and business/advocacy groups. Focus on primary economic development
matters including business retention, expansion and recruitment.
  ROI: In order to earn trust and credibility, the organization must be effective. Accountability and
transparency are critical.
  Clear Strategic Focus: New statewide organization must create, own, and implement the state’s long
term economic development strategy. Do a few things extraordinarily well. Focus all efforts on
supporting base industries/strategically defined clusters.
  Domestic and Global Marketing: Chief marketing agent and economic development ambassador for the
state. Statewide marketing agency with funding to create meaningful, impactful programs.
  Public Policy and Global Competitiveness: New organization should act as the state’s lead economic
development public policy group. Monitor and measure Arizona’s competitiveness position.
  Rural Programs: Economic development programs to assist rural communities are needed.
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The Arizona Department of Commerce
History
The Arizona Department of Commerce (Commerce) was created in 1985 when the function was moved out of
the Governor’s Office to become its own stand alone agency. Additionally, in the late 1980’s, the Arizona
Economic Council (AEC) was created after private sector leaders expressed concerns that Commerce was not
an effective economic development organization. The AEC was a privately funded nonprofit corporation
working in an informal partnership with the Department to provide statewide economic development services.
The AEC was disbanded in the early 1990's when the AEC private sector leaders determined that the
Commerce Department, under Governor Fife Symington’s leadership, was once again an effective leadership
organization.
Since that time, while the agency has been through several internal reorganizations to better align resources
and create efficiencies, most of the programs and structure remain unchanged and a significant number of
additional programs have been added to the department’s purview. By statute, today the agency is responsible
for supporting more than 57 legislatively mandated programs and 16 Executive Order activities (see Appendix
A) with reduced funding levels to manage them.
Leadership
The director of the Arizona Department of Commerce is selected by the Governor, and is often replaced
shortly after each new Governor has taken office. In past years, gubernatorial administrations have selected
business leaders with experience in various industries such as banking, law and real estate to run the agency. In
the past 10 years, there have been seven Commerce Directors.
Business executives and site selection consultants build relationships with economic development leaders that
deepen and grow over time, and ultimately bear the fruit of new quality jobs and capital investment. In
Arizona, however, those relationships rarely have the opportunity to solidify before the Department leadership
is changed again.
The Department of Commerce has also struggled to maintain a reputation as an excellent employer for front-line
staff. The Department has attracted talented employees with its perceived leadership role in the area of
business attraction. Unfortunately, many professionals who are initially attracted to the Department are not
compelled to stay, due to lower than market pay scales and lack of support for the agency, resulting in
significant turnover.
The private sector has played an advisory role on Arizona’s many business-focused Boards and Commissions.
Some of these groups, while active initially, have lost support either internally or by whatever new
administration takes charge at the time. Business leaders have voiced their frustration of being asked to engage
with the Department, only to find their time and resources underutilized.
Currently, the Department of Commerce is tasked with staffing the following stakeholder groups, which were
created over the years to advise policy makers and the agency in their work within particular sectors:
  Aerospace & Defense Commission
  Arizona's Data Estimates and Projections Task Force
  Arizona Military Affairs Commission
  Commerce and Economic Development Commission
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  Governor’s CANAMEX Task Force
  Governor’s Council on Innovation and Technology
  Governor’s Council on Workforce Policy
  Governor’s Film and Television Commission
  Governor’s Forest Health Council
  Governor’s Council on Small Business
  Greater Arizona Development Authority
  Solar Energy Advisory Council
  State Energy Code Advisory Commission
Each of these advisory groups is established with its own unique mission, reporting structure, and list of
gubernatorial or legislatively required deliverables. They are designed to inform policy and program activities
with expert, stakeholder-derived input.
The commitment of time and resources invested by the members of these advisory groups is significant.
Unfortunately, the deliverables of these groups are not delineated and organized according to a statewide
economic development strategic plan. The lack of strategic alignment has diluted the effectiveness of the
agency’s day-to-day work. For example, the Governor’s Forest Health Council is a forum for forest industry
leaders to analyze and formulate policy options related to their industry. However, the only tie the
Department of Commerce has to forestry is a narrowly focused tax incentive program which can only be
accessed by a small handful of Arizona businesses.
Arizona Economic Resource Organization
Arizona Economic Resource Organization (AERO), a 501(c)(6) corporation, was created by Governor
Napolitano in 2007 to provide policy direction to several economic groups, including the Arizona Department
of Commerce. The Board, which was initially chaired by Governor Napolitano, is made up of leaders from
colleges, universities, economic development entities, and business interests. The Board has no formal
affiliation to the Department, other than that of an advisory role. AERO was modeled after Forfas in Ireland, as
described in Appendix C. However, unlike Forfas, AERO receives no state funding and is not statutorily
created.
The creation of AERO was an attempt to provide collaborative public-private direction to the Department, and
to align all economic development resources in the state. There was also recognition that the Department was
not equipped to create economic development policy to support a broader statewide vision and plan.
AERO has had some success during its short existence, including creating a statewide economic development
strategic plan. The “AERO Strategic Plan: Priorities for Arizona’s Economic Future” incorporated research and
recommendations from nearly 100 local, regional and industry-specific plans created by different groups across
the state. AERO also developed a strategic framework to guide Arizona's efforts to become a world leader in
the solar industry. The resulting report recommended strategies the state can employ to reach this goal as well
as next steps for implementation. Most recently, AERO established an Arizona Fund of Funds to raise
investment capital from private and public sector investors and reinvest those funds in targeted venture funds.
Through the Fund of Funds, AERO aims to increase the size and diversification of the state's venture capital
industry to equip Arizona-based science and technology contenders with an additional source of revenue to
commercialize their innovations.
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Despite some early success, AERO has not met the expectations of many of its stakeholders. Private sector fund
raising goals were not close to being realized and therefore, the organization has had little resources to support
it. While the concept of creating a statewide economic development policy leadership organization was a
much-needed initiative, AERO has not met the expectations of those involved due to the lack of formal
connectivity to the Department and the lacking statewide stakeholder support.
Strategic Planning
Much of the feedback collected through our focus group sessions suggests that Arizona had no grand vision or
plan to diversify our economy. Most participants were unaware that the responsibility for setting Arizona’s
statewide economic plan lies with the Commerce and Economic Development Commission (CEDC) which was
established in 1989 to provide research and strategic direction to the Department’s activities. Along with the
Commerce director, the CEDC is led by an eight-member private sector board and is tasked by statute as the
state entity responsible for developing the state’s 10-year economic development strategic plan. According to
the Department of Commerce, since 2002, the CEDC has directed numerous targeted strategic plans, including:
  Solar Electric Roadmap for Arizona (2007)
  Moving Arizona Forward: Strategies For Success (2006)
  Benchmarking Arizona Economic Development: Creating More Strategic Governance and Investment
Policies (2005)
  Arizona Community Economic Base Studies (2004)
  Building from a Position of Strength: Arizona Advanced Communications & Information Technology
Roadmap (2004)
  Development & Investment Prospectus to Create A Sustainable Systems Industry in Arizona (2004)
  Evaluation of the Arizona Small Business Opportunity Credit Using the Regional Economic Model
(REMI) (2004)
  Statewide Economic Study: Public Outreach, Local Plan Integration & Strategic Findings (2003)
  Positioning Arizona and Its Research Universities: Science and Technology Core Competencies
Assessment (2003)
  Arizona's Economic Future (2002)
Each of these strategic plans was developed with a high level of stakeholder input and peer review. However,
the resources available for strategic planning were fully invested in the development of the plans, with
minimal resources allocated for implementation.
Structure from 2000-2009
Until very recently, the agency was organized into six main functional areas: Marketing and Business
Attraction, Workforce Development, Energy, Community Development, Finance and Investment, and
Research Administration. Each area was led by a division director, who reported to the agency Director.
Marketing and Business Attraction Division: Arizona’s proactive Marketing and Business Attraction efforts to
date have followed a traditional model to attract new employers to the state, utilizing trade shows and prospect
tours, cold calling, as well as proactive marketing through print, web-based and social media campaigns. The
Department is the first point of contact for most site selectors and corporate decision makers who are looking
for nonbiased information about a state and its local communities. Commerce works with each municipality
and regional economic development organization to distribute site selection leads and to facilitate responses
from qualified communities. After a community is placed on a company’s short list, there is the expectation by
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the company that Commerce will stay engaged, either to provide information on state incentives or to
advocate on behalf of the company with other Arizona state agencies.
In years past, the Department has also dedicated resources to proactively attract foreign direct investment
(FDI) and to develop export opportunities for Arizona-based companies. These activities were often facilitated
through contracts with international trade offices in key international markets in Canada, Mexico, Japan,
England and Germany. However, recent budget cuts have forced the Department to discontinue most of these
contractual agreements. As a result, Arizona no longer has a proactive FDI or export-assistance footprint to
contend with its many competitors.
Success in Marketing and Business Attraction is measured by the number of companies located, expanded or
retained, the total capital investment generated, the projected number of new jobs created by year three, and
the total payroll and average annual salary generated from those jobs. The following table reports the results of
the Department’s business attraction efforts.
Year Companies Located
or Expanded
Capital Investment New Jobs Annual Payroll
20074 47 $1.639 billion 9,814 $483 million
2008 5 39 $521.46 million 7,050 $286 million
2009 6 24 $255.17 million 2,649 $124.6 million
Additionally, the Department reports specifically on the location of the new business development, noting
whether the project is located in rural or metro parts of the state.
The Film Office is the division of Business and Attraction that works to attract television and film production
projects to Arizona, bringing work to Arizona's talent industry and an infusion of new dollars to Arizona
communities. In addition to providing location selection services and liaison assistance to TV and film projects,
the Film Office, until very recently, administered the state's Motion Picture Tax Incentive Program. The
Program ran for four years and, in 2009 alone, the Office worked with 23 Program participants to bring
investment to the state 7. The Office and its functions were eliminated in early 2010 due to lack of funding for
administration.
Workforce Development Division: The Commerce Workforce Development division promotes programs that
help prepare a skilled workforce for Arizona employers. State-level policy for workforce development is set by
the Governor’s Council on Workforce Policy which represents business, labor, public education, higher
education, economic development, youth activities, employment and training. This policy is put into practice
through two main workforce development programs currently administered by the Department: the Arizona
Job Training Program and the Registered Apprenticeship program.
The Arizona Job Training Program, which was created in 1993 8, provides grant monies to the private sector to
train existing and new employees. Employers pay into the Job Training Fund, a tax equal to one-tenth of one
percent on the first $7,000 of an employee’s wages or $7.00 per year, whichever is lower. In 2008, the Program
granted $14 million, leveraging $10.6 million in private sector job training investment and training 14,550
existing and new Arizona employees with an average annual wage of $55,200. Twenty-one of the businesses
receiving grants were from rural communities and 37 were small businesses (fewer than 100 employees) 9. No
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grants were made during the 2009 calendar year, as the program was put on hold by the legislature who later
swept the Program funds, effectively shutting down the program.
Arizona’s nationally accredited Registered Apprenticeship program provides on-the-job training and classroom
instruction in the skilled labor arena. Workforce Development has worked with private sector companies to
establish 140 registered apprenticeship programs, training more than 5,000 apprentices in areas including
agriculture, forestry, and fishing; mining; construction; manufacturing; transportation, communications,
electric, gas and sanitary services; services; and public administration. The program is partially supported with
federal Workforce Investment Act funding.
Like the outcomes listed above, success in Workforce Development is measured by the number of companies
assisted, and specifically small businesses assisted and those located in rural Arizona, the number of new and
existing employees trained, and the average annual wage of employees pre-training compared to post-training.
Community Development Division: The Community Development division is considered a “lifeline” by many
of Arizona’s small and rural communities. Programs such as the Greater Arizona Development Authority
(GADA), the Rural Economic Development Initiative (REDI) and the Main Street Program provide the
building blocks that growing communities require to be attractive to high quality employers. State-level
funding is used to leverage local investments in non-urban communities, in particular those that demonstrate
broad-based community support for the revitalization of their commercial districts.
Success in Community Development is measured primarily by the number of contacts made to provide
assistance to local communities. Additionally, the leverage ratio of state funding to local funding is a key
measureable that is closely analyzed prior to approval being granted for funding requests.
Finance and Investment Division: This division administers the agency’s many business finance and incentive
programs, some of which are aligned with the state’s economic development goals. Commerce has a well-established
reputation as an excellent program administrator despite regularly being assigned fiduciary
responsibilities of new incentive programs without additional funding to administer them. According to the
Department of Commerce, current statutorily mandated incentive programs the agency is responsible for
include:
  21st Century Fund (partnership with Science Foundation Arizona)
  Angel Investment Tax Credit Program
  Arizona Innovation Accelerator Program
  Arizona International Development Authority
  Defense Contractor Restructuring Tax Credits
  Economic Strengths Program
  Enterprise Zone Program
  Environment Tech Tax Credit
  Greater Arizona Development Authority
  Healthy Forest Tax Credit Program
  Local Communities Fund (Prop 200)
  Military Reuse Zone Program
  Motion Picture Tax Incentives Program
  Private Activity Bond
  Process Commercial Solar Tax Credit
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  Renewable Energy Tax Incentive Program (commonly known as Arizona’s “Solar Bill”)
  Small Business Innovation Research Matching Program
Each program has been crafted with its own unique reporting and success metrics. Some are closely tied to an
increase in average employee annual wages or short-term and long-term capital investment. Some are scored
based on the local match to state funding ratio. Others are measured from a regulatory standpoint only, with
the directive to act as a compliance agent. Only one of these programs was appropriated a full time employee
(FTE) and state operating funds to administer it.
Energy Division: The Commerce Energy division utilizes Federal funding to assist the planning and
conservation efforts of Arizona communities through training, technical assistance and grant making. While
the agency is responsible for investing these Federal dollars in local communities, program regulations do not
always allow these investments to be strategically aligned with state-level goals and objectives. The budget for
the Energy Department was $5,660,100 in FY 2009. A vast majority of these dollars were Federal funds that
were restricted from being used for non-Energy Department related activities.
Success in the Energy Department is measured by Federal metrics, including the number of homes that receive
Low-Income Weatherization Assistance each year and the number of grants awarded to local communities
with less than 70,000 people to implement long-term energy plans.
Research Administration: This division was moved from the Department of Economic Security to the
Department of Commerce in late 2007. The Research Division is federally funded and provides employment
statistics, occupation and industry estimates. Population statistics (4 FTEs) is partially funded with State
dollars. Primarily, this function is a collection and reporting mechanism for U.S. Census Bureau data. It does
not generate research or information that meets the needs of economic development practitioners, which
would include research of industry best practices or competitiveness of the state and its programs.
2010 Appropriated and Other Funds
With the budget cuts that have affected all state agencies, the Department of Commerce has been forced to
eliminate staff positions and eliminate and reduce job creation programs. The impact of these budget
reductions has resulted in the following:
  The number of business development staff has been reduced resulting in new business customer service
being weakened. Arizona may have lost job creation projects due to unresponsive and unavailable staff.
  The state job training program has been swept, taking Arizona’s best economic development tool away
at a time when it is needed most.
  Some of the agency’s strongest business development staff have left to other economic development
organizations, seeking better career opportunities in states and communities where economic
development organizations are supported and respected.
  There is no proactive marketing program.
  Responsiveness to businesses considering incentive and other business finance programs has been
weakened.
  Certain international trade and investment offices have been closed and there is no proactive program
to attract direct foreign investment to the state.
  The Film Office has been eliminated.
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  Rural programs have been cut and there is a very limited budget for agency employees to travel to rural
communities.
According to the Arizona Department of Commerce, the agency has 93 employees: 21 are state-funded
employees supporting Commerce state mandated programs and 73 are federal-funded employees supporting
federal mandated programs (refer to breakdown of funds that follow). The FY 2010 Arizona Department of
Commerce-appropriated state and Federal funds can be summarized as follows:
State Funds
$6,083,500 state funds used for programs and operations which support:
  Business Recruitment, Expansion, Retention Programs
  International Trade and Investment Offices ($1.7 million)
  Small Business Offices
  Rural Development Programs
  Management of Financial Programs/Incentives
  Workforce Programs
  CEDC Administration
  Bond Fund (no funding available)
Federal Funds and Pass Through Funds
$4,732,600 Federal funds used for Energy Division (Federally mandated programs)
$1,344,900 Federal funds used for Research Division (Federally mandated census programs)
$1,193,400 Federal funds used for Workforce Division (Federally mandated programs)
$4,957,000 pass-through funds
  Nursing Education Demonstration Project
  Military Installation Fund
  National Law Center
  Arizona Sonora Trade Office
As demonstrated by the employment and funding figures above, a majority of the Commerce Department
focus is on Federally mandated/funded programs that are not core economic development functions of a
statewide economic development organization.
Status
Arizona’s business climate rankings continue to fall which makes the job of the Commerce Department much
more difficult. According to Forbes Magazine’s “Best States for Business” ranking, Arizona has fallen to #36 in
2009, compared to #18 in 2008 and 2007, and #15 in 2006. National and local headlines that report Arizona’s
woes are seen by site selection consultants and corporate decision makers around the world. And, the recent
Turken v. Gordon Arizona Supreme Court decision sends a message of economic development instability and
business uncertainty to businesses considering expanding or relocating to or from Arizona.
With Arizona’s broader image challenges, the Arizona Department of Commerce is facing its own identity
crisis. As summarized in Stakeholder Outreach Results section of this report, many in the business and
economic development community have lost confidence in the agency. Due to inadequate funding, too many
mandated programs, and inconsistent leadership over the past several years, the agency has been set up to fail.
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One of the positive outcomes of the state’s budget crisis has come from today’s leadership at the Commerce
Department. With the most recent budget reductions, the agency has been forced to find its focus, returning to
core economic development programs that create quality jobs for Arizona. Under the leadership of Director
Don Cardon, focus is now on supporting those clusters that have the greatest opportunity to help diversity the
Arizona economy: Aerospace and Defense, Science and Technology, Renewable Energy, and
Entrepreneurship/Small Business. This positioning can jump start the creation of a new statewide economic
development organization that is recommended in Recommendations section of the report.
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State and Global Economic
Development Models
State models selected by the consulting team included those states that are consistently ranked highest in
business climate rankings as well as those that economic development professionals identify as having best
practices. The team also looked at successful states with varying models and assessed how they were created,
how they are working and the lessons they have learned.
While state business climate rankings typically only tell part of the story, they are a useful tool to determine
the competitive status of a state. Additionally, these data sets are regularly reviewed by corporate decision
makers and the rankings can strongly influence their perception of a state and their economic stability and
competitiveness. The states that typically rise to the top of the business climate rankings also have successful
statewide economic development models.
Elements of Successful State Economic Development Models
No matter how their economic development organizations are structured, states with strong statewide
economic development efforts have similar elements in their delivery structures. The consulting team has
identified nine elements of an effective statewide economic development delivery model. These include:
1. Collaborative Culture: A collaborative culture that recognizes that investment in results-oriented and
focused economic development, is an appropriate use of public funds.
2. Leadership: A highly engaged Governor that acts as the state’s CEO and the formal engagement of
legislators and business leaders. A qualified President (Director/Secretary) that is committed to the
organization.
3. Structure: An organization that operates outside of political influence but is still accountable to the
state legislature through mandated deliverables. Or, an organization that operates inside of government
and maintains formal partnerships with the private sector. Also, an organization that acts as a business
advocacy organization and provides coordination with other state agencies.
4. ROI: An accountable and transparent demonstration of a return on investment of state dollars and an
accountable, results-oriented organization.
5. Clear Strategic Focus: Statewide vision and strategic plans supported by collaboration of statewide
interests. Implementation of goals monitored and measured annually. Retention and expansion of
companies in targeted industry clusters.
6. Innovation Focus: Programs that support the growth potential of innovation based clusters.
Partnerships with higher education institutions, science and technology groups, and R&D institutions.
7. Domestic and Global Marketing: State leader in marketing and communications strategies to advance
the state’s strategic vision.
8. Public Policy and Global Competitiveness: State leader in public policy to assure state is competitive.
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9. Rural Programs: Special emphasis on providing support to rural communities through economic
development programs.
The information that follows provides a summary overview of varying statewide and global economic
development models. Additional detail can be found in Appendix C.
All of the state structures reviewed have some type of private sector engagement and/or funding in the
activities of the states’ economic development framework. Included in the review are the following three state
structures:
1. A traditional Commerce Department Structure with a public/private partnership that funds state
marketing programs: Georgia, North Carolina and Texas
2. A public/private partnership that is responsible for statewide economic development efforts with
state agency oversight and management of certain programs: Florida and Utah
3. A quasi-public state authority that is responsible for statewide economic development efforts:
Virginia
The international economic development entities were selected for review based either on their overall
characteristics and similarities possessed in relation to Arizona (South East England), the high level of
economic development activity recently experienced (Singapore), or a globally-recognized innovative
structure (Ireland).
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Summary: GEORGIA
Business Climate Rankings
2009 Forbes “Best States for Business” #6
2009 CEO Magazine “Best and Worst States” #4
2009 Site Selection Magazine “Business Climate” #8
Structure and Leadership
The state of Georgia’s lead economic development agency is the Georgia Department of Economic
Development, a traditionally structured commerce agency. The agency is supported by the Georgia Allies, a
privately funded 501(c)(3) corporation which funds and initiates economic development marketing programs
used by the Department of Economic Development.
The state of Georgia engages the private sector through various advisory boards that support economic and
workforce development. The Department of Economic Development is supervised and directed by a Board of
Directors made up of one representative from each of the 13 congressional districts and nine members at large.
All members are appointed by the Governor, subject to State Senate confirmation. Workforce programs are
managed by the Governor’s Office of Workforce Development and the State Workforce Investment Board
advises the office on workforce policy. Rural financing programs are run by One Georgia Authority with
oversight from a Board that is chaired by the Governor.
The Georgia Department of Economic Development is led by a gubernatorial appointed Commissioner who is
considered the “Chief Marketing Officer of the State.” The current Commissioner has been in his position for
three years. There have been three Commissioners leading the agency in the past ten years.
The Georgia Department of Commerce’s 2009 budget was $39,601,916. The agency had 208 FTEs. 10
The Georgia Allies, a public-private partnership, supports the Department’s marketing efforts through
marketing events and online tools. Georgia Allies focuses on growing Georgia based companies and
implements marketing retention and growth strategies targeted specifically at its existing industries. The group
leads global trade missions and marketing outreach activities. The partnership also commissions studies to
identify new and growing recruitment markets.
Strategic Focus
The Georgia Department of Economic Development stays focused on core economic development programs
since it does not manage rural and workforce programs. The agency focuses its global marketing efforts into
targeted industry clusters including: aerospace, defense, and advanced manufacturing; agribusiness, bioenergy,
food processing and logistics; health sciences and advanced technologies; corporate solutions – headquarters,
data center, financial and insurance; innovations, emerging and small enterprise/Centers for Innovation
program; and community and external alliances/entrepreneur and small business.
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Summary: North Carolina
Business Climate Rankings
2009 Forbes “Best States for Business” #5
2009 CEO Magazine “Best and Worst States” #2
2009 Site Selection Magazine “Business Climate” #1
Structure and Leadership
The state of North Carolina’s economic development efforts are led by the North Carolina Department of
Commerce, a traditional statewide economic development organization, and the Friends of North Carolina, a
non-profit 501(c)(6) organization that helps market the state globally and nationally. The Department of
Commerce staffs and receives policy direction from the North Carolina Economic Development Board, the
North Carolina Board of Science and Technology and the Commission on Workforce Development. The
Department is organized into eight major focus areas and it includes the state’s tourism efforts.
The state of North Carolina engages private sector leaders, the state General Assembly, university Presidents,
community colleges, and other economic development organizations throughout the state through the
esteemed 37–member, North Carolina Economic Development Board. The Board oversees state economic
development research and planning and makes policy recommendations to the Governor and the General
Assembly. The Board also recommends biennial and annual appropriations for economic development
programs.
The Friends of North Carolina, a non-profit 501(c)(6) organization that helps market the state globally and
nationally, is an advisory council to the North Carolina Commerce Trade and Development Fund. The
organization is funded through sponsorship levels of $500-$25,000 annually.
The Secretary of Commerce is appointed by and serves at the pleasure of the Governor of North Carolina and
he/she also sits on the Governor’s cabinet.
The agency had a budget of $54.9 million in FY 2008-09 and 455 FTEs. 11
Strategic Focus
The North Carolina Economic Development Board is charged with creating a comprehensive economic
development plan for the state. The Board is also responsible for holding the state economic development
entities accountable for implementation of the economic development plan. This approach assures that the
plan created does not sit on a shelf somewhere, rather, there is accountability that the plan is successfully
executed. The state’s Strategic Plan was updated most recently in 2007. In 2006, the state compared the
original plan goals to the actual progress made.
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Summary: Texas
Business Climate Rankings
2009 Forbes “Best States for Business” #8
2009 CEO Magazine “Best and Worst States” #1
2009 Site Selection Magazine “Business Climate” #2
Structure/Leadership
In 2003 Governor Rick Perry created the Governor’s Office of Economic Development and Tourism and
brought the state’s economic development programs into his office. That same year, TexasOne was created
which is a 501(c)(3) public-private nonprofit corporation charged with marketing the state globally and
domestically.
The Governor engages private sector industry leaders through appointments to economic development related
Boards and Councils including the Texas Workforce Investment Council, the Aerospace and Aviation Advisory
Committee, and the Governor’s Competitiveness Council.
TexasOne is the primary funder of state-level economic development marketing with the goal of attracting and
retaining high-value jobs. TexasOne is led by a nine-member, private sector board appointed by the Governor
and the assistance of two ex-officio public sector board members, the Secretary of State and the Executive
Director of the Office of Economic Development and Tourism. Membership in TexasOne ranges from an
investment of $1,000 per year for three years to $50,000 per year for three years, with escalating benefits and
decision-making authority associated with increased investment levels.
The Executive Director of the Governor’s Office of Economic Development and Tourism is not a gubernatorial
appointed position. Rather, the Executive Director is a state employee and staff member of the Governor’s
Office. There have been three Executive Directors in the past ten years.
According to the Governor’s Office of Economic Development and Tourism, the agency had a budget of
$44,757,106 in AY2010. This did not include funding for the Texas Enterprise Fund, nor the Emerging
Technology Fund. Total support and revenue for TexasOne in 2009 was $2,185,254. 12
Strategic Focus
Governor Perry created the Texas Cluster Initiative in 2003 to identify the clusters that would be the engines
of job creation in the 21st Century in Texas, and to develop economic development strategies to support the
sustained growth of six clusters: advanced technologies and manufacturing; aerospace and defense;
biotechnology and life sciences; information and computer technology; petroleum refining and chemical
products; and energy. To build on the efforts of the Texas Cluster Initiative, the Governor created the
Governor’s Competitiveness Council in 2008 to create an agenda to increase the state’s competitiveness and
eliminate or minimize weaknesses in the state’s six targeted industry clusters.
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Summary: Florida
Business Climate Rankings
2009 Forbes “Best States for Business” #11
2009 CEO Magazine “Best and Worst States” #3
2009 Site Selection Magazine “Business Climate” #13
Structure/Leadership
The state of Florida, under Governor Jeb Bush’s leadership, restructured its statewide economic model in 1996.
Governor Bush’s experience as a former Commerce Secretary for the state afforded him the experience to
recognize that involvement from the private sector could make Florida more competitive. The Governor
created two new economic development agencies – the Governor’s Office of Tourism, Trade and Economic,
Development (OTTED) and Enterprise Florida, a public-private partnership that acts as the state’s leading
statewide economic development agency. Enterprise Florida contracts with the Governor’s Office to perform
its role with specific performance requirements in place. Enterprise Florida is a nonprofit, public-private
corporation with approximately 10% of its funding coming from the private sector. Enterprise Florida’s Board
Directors is made up of 62 business, government, and community leaders. All appointees are subject to Senate
confirmation. The Governor is the Chairman of the Board and the Vice Chairman is an elected private sector
leader. OTTED oversees the state’s public private economic development and tourism partnerships and also
manages the state’s incentive programs, advocacy programs, community and rural development programs, and
Scripps Florida.
The President and CEO of Enterprise Florida is hired under a multiyear contract by the Board of Enterprise
Florida but also serves at the pleasure of the Governor.
The Enterprise Florida annual budget in 2008-09 was $13.8 million. $1.24 million (9%) came from the private
sector and the remaining source of funds were from program revenues (10%), state trust funds (51%) and state
general funds (30%). 13 Leveraging the work of Enterprise Florida, the Florida Office of Tourism, Trade and
Economic Development budget for FY2008-9 was $211 million, which is invested in business development and
job creation-related incentive programs and operations. 14
Strategic Focus
Enterprise Florida is required by law to create a strategic plan for economic development every five years. This
plan, “Roadmap to Florida’s Future: 2007-2012 Statewide Strategic Plan for Economic Development”, is also
updated every three years. The Roadmap sets out clear and distinct goals that Florida has embarked upon to
strengthen and diversify its economy.
Enterprise Florida focuses its business recruitment efforts on targeted industries: aviation/aerospace, clean
energy, financial/professional services, information technology, life sciences, homeland security/defense,
manufacturing and emerging technologies.
According to an Ernst and Young report, the return on public investment in economic development in Florida
was $4.96 for every $1 invested or 4.96:1 in FY2008-09. 15
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Summary: Utah
Business usiness Climate Rankings
2009 Forbes “Best States for Business” #3
2009 CEO Magazine “Best and Worst States” #15
2009 Site Selection Magazine “Business Climate” #21
Structure/Leadership
In 2005, Utah’s division of Business and Economic Development and the division of Travel Development were
merged to create the Governor’s Office of Economic Development (GOED). The GOED contracts with the
Economic Development Corporation of Utah (EDCUtah), a nonprofit public-private corporation that manages
the state’s business recruitment efforts.
Private sector leaders are heavily engaged in economic development in Utah. Through both the GOED and
EDCUtah, private sector executives play key leadership roles. The GOED is advised by a 15-member Board of
Directors appointed by the Governor for four-year terms and requiring Senate approval. Board makeup is
restricted to less than nine members from one political party and requires regional diversity. The Board advises
the office on funding allocation and economic development strategies. The Director of GOED is appointed by
the Governor and serves on his cabinet. The GOED contracts with the Economic Development Corporation of
Utah (EDCUtah) to manage the state’s business recruitment efforts. EDCUtah is a nonprofit public-private
partnership that is funded by private and public sector contributions. The organization is led by a 100+ person
Board of Trustees with representatives from the public and private sectors.
Strategic Focus
The Governor’s Office of Economic Development focuses its efforts on seven industry clusters, including
Aviation and Aerospace, Defense and Homeland Security, Energy and Natural Resources, Financial Services,
Life Sciences, Outdoor Products and Recreation, and Software Development and Information Technology. The
Office of Economic Development provides business incentive programs including post-performance refundable
tax credits and cash grants. The incentives are all designed to generate a measureable economic development
outcome such as the number and salary of jobs created, amount of new state revenue, long-term capital
investment, competition with other locations, and if a company is within a targeted Utah cluster industry. The
state reports that it generated $13.65 in tax revenues for every state dollar spent on promoting Utah in FY
2008. 16
29
Summary: Virginia
Business Climate Rankings
2009 Forbes “Best States for Business” #1
2009 CEO Magazine “Best and Worst States” #7
2009 Site Selection Magazine “Business Climate” #3
Structure/Leadership
The Secretary of Commerce and Trade oversees the economic, community, and workforce development of the
Commonwealth. Unlike most states, the Secretary oversees 13 agencies, including the Virginia Economic
Development Partnership (VEDP), a quasi-public state authority with responsibility for statewide economic
development in Virginia. Created in 1995 to take politics out of statewide economic development, the agency
is governed by a 21-member Board made up of private sector/chamber members with the Secretary of
Commerce, the state’s Finance Secretary and the Chancellor of community college system as ex-officio
members. All board members are appointed by the Governor and General Assembly. The Board governs
VEDP, and the staff reports to the Governor through the Secretary.
The VEDP is run as a quasi-public state authority, which gives it greater flexibility than that of a state agency.
The employees of the VEDP are employees of the authority and the agency is not required to operate under
the state procurement process. The VEDP does participate in the state’s retirement system. The Executive
Director of the VEDP is hired by the Board under a long term contract.
The 2010 budget for the VEDP was $15,982,457 from the state’s general fund. 17
Strategic Focus
Every Governor is required by statute to create a statewide economic development strategic plan during
his/her first year in office. The VEDP is required by statute to report on the status of the Governor’s Plan every
year. The state’s targeted cluster areas have been consistent over the past 7-8 years and they include: corporate
headquarters, IT, data centers, government related technologies, manufacturing, and medical/pharma.
The VEDP measures its performance by the new jobs and investment created by companies it worked with as
well as the number of companies it counseled or that participated in trade events. The VEDP reports to its
Board quarterly, an ROI calculation that measures the public money spent on economic development to the
projected new revenue stream generated by the new jobs created. In FY2008, the VEDP reported that for
every $1 dollar spent on economic development, there was a $9 return in 10 years and a $12 return in 20 years.
30
Summary: South Eastern England
Structure/Leadership
England established its Regional Development Agencies (RDA) in 1999 to promote economic prosperity
throughout the country's nine regions. Each RDA develops a strategic economic plan, working to create
opportunities for job creation and capital investment by leveraging unique regional assets.
The South Eastern Economic Development Authority (SEEDA) is overseen by the Secretary of State, and is
managed by a CEO. The organization is governed by a 16-member public-private sector board which includes
members of SEEDA's management team. The Board is appointed by the Secretary of State and independent
assessors are involved in the short listing process and during interviews. The Board brings business perspective
to inform the strategy and activities of the Agency and is responsible for ensuring the Agency achieves the
goals set out for it by the Secretary of State.
Strategic Focus
A key responsibility of the Authority is development of a five to 10-year strategic economic development plan
for the region that takes into consideration the region's global competitiveness and opportunities for
sustainable prosperity. The Authority's shorter term plans lay out strategies for setting priorities, creating
regional partnerships, and preparing to integrate the five to 10-year plan into a corporate plan incorporating
the country's nine economic development authorities.
SEEDA works with its regional partners to improve access to finance for new businesses and business that want
to expand. SEEDA also invests in internationally competitive sectors that lie within its region. They invest in
cluster strategies which attempt to link organizations in related industries to assist with developing high value-added
activities, improve overall productivity and identify future high growth opportunities.
SEEDA's performance is regularly assessed by the National Audit Office as well as independently by
PricewaterhouseCoopers. The independent report evaluates SEEDA based on the number of jobs it creates and
retains, number of companies assisted, jobs trained and brownfield land developed/remediated.
31
Summary: Singapore
Structure/Leadership
The Singapore Economic Development Board (EDB) is a state-sanctioned agency that works to develop and
execute strategies to promote economic development, providing support to local and foreign investors in their
operations in Singapore. Government and EDB are one and the same. EDB has latitude to design and execute
the state’s economic development strategies, awarding custom tax incentives for international corporations, for
instance. The EDB is governed by a 15-member Board of Directors, including mostly business community
CEOs. Other Board members include EDB management, and regional heads of state. The EDB also has a 17-
member International Advisory Council, composed of prestigious CEO/Chairman level representatives of the
international business community.
Singapore recently established an Economic Strategies Committee (ESC), charged with developing and
recommending strategies for 2010, with a goal of fostering “Singapore’s future as a global city.” 18 The 25
members of the ESC represent Government, the labor movement, and private enterprise. The ESC engaged
with more than 1,000 advisers, representing private companies, business chambers and associations,
universities, think tanks, and the general public to identify and discuss Singapore’s economic growth and the
issues that hinder it. Shortly after it was established, the ESC submitted a report to the Singapore Prime
Minister. The Government is expected to develop policy based on the ESC’s recommendations.
Strategic Focus
EDB focuses on developing the country into a “compelling global hub for business, investment and talent,” and
marketing it as such to foreign investors, attracting labor-intensive, export-based business. EDB works to
attract new investment from companies in a set of target industries, including Alternative Energy, Biomedical
Sciences, and Information Technology. EDB has the authority to design and award custom tax incentives for
international corporations, and, as needed, coordinates efforts with other government agencies to address the
specific needs of each prospect company
32
Summary: Ireland
Structure/Leadership
Economic development activities in Ireland are managed by three organizations: IDA Ireland, Enterprise
Ireland and Forfas. IDA Ireland is organized to attract global business and foreign direct investment. Enterprise
Ireland focuses on developing domestic, indigenous industries. Both IDA Ireland and Enterprise Ireland board
members are appointed by the Minister for Enterprise, Trade and Employment and are responsible for
oversight of operations and the strategy of the organization. Implementation of these strategies lies in the
hands of executive management. The boards are responsible to the Minister for Enterprise, Trade and
Employment, who is able to provide funding and issue policy directives on the agency’s activities. The average
size board size is 12 and the Board members are compensated for their service.
Forfas, due to its position as an independent and rigorous research provider, acts as a data source for the private
sector as well as the public sector and provides overall strategy for economic development. In addition, the
organization provides research and administrative support for independent advisory groups in the fields of
science, technology, and enterprise. Forfas board members are appointed by the Minister for Enterprise, Trade
and Employment. They typically include a senior management representative from IDA Ireland, Enterprise
Ireland, Science Foundation Ireland, and the Department of Enterprise, Trade and Employment. Board
members are involved in strategy and management selection.
IDA Ireland is supported largely from Exchequer allocations each year. The remaining funding comes from
property sales, grant refunds and a small amount of funds from the EU. In 2007, IDA Ireland received 186.8
million Euros in income. Enterprise Ireland is supported from Exchequer allocations along with smaller
amounts of funding from their own resources and third parties. Enterprise Ireland received income of 362.5
million Euros in 2007. Forfas is supported from Exchequer allocations along with professional fees, department
programs, and deferred funding. Forfas received 79.2 million Euros in 2007.
Strategic Focus
In January, 2007, after the conclusion of the first national development plan (2000-2006), the Irish government
released their second national development plan for the years 2007-2013. These plans are designed to respond
to the changes that Ireland has undergone over the past 25 years. Their roadmap for the future includes
strategies for developing infrastructure that encourages regional development and environmental
sustainability, education and workforce skills development, and quality job creation and retention. 19
Part of the Forfas mission is to interact directly with the national government, advising the legislature and
executive branch on developing industry and coordinating policies between IDA Ireland and Enterprise
Ireland.
33
Recommendations
Arizona Department of Commerce stakeholders have overwhelmingly requested that changes be made to
create a focused and accountable 21st century economic development organization that is governed and
administered outside of politics.
Based on the focus group results and national and global research, it is clear that the Arizona Department of
Commerce must reinvent itself in order for the state to maximize its global competitiveness. Arizona, like
other states have discovered, can be more effective if it formally partners with the private sector to further the
state’s economic development.
The proposed Arizona economic development framework must be empowered by six key guiding principles:
  Transparency and Accountability: The new organization must be transparent and accountable to all of
its investors and stakeholders.
  ROI: A “performance based funding model” needs to be created to demonstrate a return on state dollars
invested in the organization.
  Leadership: The Governor of Arizona is the state’s economic development leader, supported by
professionals with the qualifications required to advance the state’s plan.
  Public-Private Engagement: Arizona’s economic development efforts can be most successful only if
government and private sector representatives work together, versus the two working independently
of each other. This includes both the traditional state economic development agencies as well as post-secondary
education institutions.
  Long-Term Vision/Short-Term Action: Arizona urgently needs short term fixes to its current economic
woes. While immediate action is required, we must remain focused on rebuilding for the long-term
future.
  Collaborative Effort with No Duplication: All constituencies must come together to advance this
model, which will not include duplication of existing economic development efforts.
A New Framework for Arizona
The Arizona Commerce Authority (ACA)
The following framework is recommended for a statewide economic development delivery system that drives
industry forward, maximizes the state’s investment in economic development, and sets forth an effective and
accountable delivery system. It is modeled after different aspects of other successful states and countries and it
takes into account the consistent feedback received from the hundreds of individuals represented in the focus
groups conducted.
Like several of the researched states have determined, Arizona can have greater economic development success
if it takes politics out of its statewide economic development delivery system and creates a professionally run
organization to lead the state’s economic development efforts. However, unlike those states that have dual
economic development state organizations (Florida and Utah), Arizona’s new effort will provide public-private
sector oversight and management in a single state authority.
34
Structure Recommendation
The Arizona Commerce Authority (ACA), a quasi-public state authority, replaces the Arizona Department of
Commerce as the state’s lead economic development organization, but does not assume all of its current
functions. ACA is governed by a Board of Directors appointed by the Governor and confirmed by the State
Senate. The Governor serves as Chairman of the Board. The Speaker of the House and President of the Senate
are Ex-Officio members of the Board.
Lessons learned: The global examples studied and the state of Virginia all use quasi-public or “semi-state”
structures in their economic development delivery systems, allowing them to be connected to
government while partnering with private sector leadership. This connection to government is more
critically important in today’s globally competitive environment – international companies especially,
look to government representatives to take the lead in assisting them in their site selection process.
Those states with public-private partnerships as lead economic development organizations (Florida,
Utah), also maintain government-run economic development organizations. Because the public-private
partnerships are privately run organizations, the states’ incentive and finance programs are not
administered there. This creates dual roles, dual approval levels, and confusion by some about the roles
and responsibilities of the groups. By maintaining a quasi-public authority in Arizona, we can keep all
economic development programs in a single agency, while bringing greater private sector leadership to
the organization.
Focus Recommendation
The mission of ACA is to diversify Arizona’s economy and create quality jobs for its citizens by supporting,
attracting, and helping businesses in targeted, high growth clusters, with an emphasis on base industries. Like
other successful states and countries studied, the new organization is responsible for creating the necessary
strategic plans and focus areas, in collaboration with the many economic development stakeholders throughout
the state. ACA is also tasked with monitoring the successful implementation and execution of the plans.
Lessons learned: In addition to the creation of plans and initiatives, the economic development
organizations are responsible for reporting on the execution activities of the plans and initiatives. They
also focus their efforts on targeted industry clusters.
Board Leadership Recommendation
ACA is governed by a Board of Directors, with the Governor of Arizona serving as its Chairman. The Speaker
of the Arizona House of Representatives and the President of the Arizona Senate are Ex-Officio members of
the Board. The Board is comprised of 14 additional CEO-level business, education and community leaders
representing all areas of the state. The Governor selects and appoints Board members, from a qualified slate
submitted to her/him by the Board of Directors, when positions are vacant. Board members are confirmed by
the State Senate and serve staggered terms. The Vice Chairman of the Board has significant Board leadership
duties, knowing that the Governor may not have the time to devote to daily management issues. The Board is
subject to open meeting laws and public records requests.
Lessons learned: All states/countries reviewed recognized the importance of engaging private sector
leaders in the work of the economic development organization. We recommend a limited number of
board members for ACA so the organization can be flexible, nimble, focused and entrepreneurial. Like
35
other states, we recognize the importance the Governor plays in leading the state’s economic
development agenda.
Executive Leadership Recommendation
The Board of Directors of ACA hires the president of the Authority under a long-term contract. The president
and employees of ACA are employees of the Authority and compensated at levels commensurate with those
economic development professionals at other similar organizations. They are exempt from state procurement
and personnel system regulation. They have the ability to be members of the Arizona State Retirement System
and other state benefits.
Lessons learned:
The highly ranked economic development states that hire their executive leadership through
gubernatorial appointments are also those states with cultures that have supported economic
development for decades. The Executive Director or Secretary of these states are prestigious and sought
after positions.
Other states recognize that using private sector Boards to help hire experienced executive leadership
take politics out of the organization and puts into place an experienced leader with a long term
commitment to the success of the organization. However, having final support and direction from the
Governor is critical to creating a strong partnership.
The Role of ACA
As Arizona’s lead economic development organization, ACA is charged with the following duties and
responsibilities. All programs have an emphasis on producing statewide results.
1. Business Retention/Expansion/Recruitment: Assist new and existing companies in Arizona in creating
quality jobs and generating new investment in the state. ACA manages the statewide business recruitment,
expansion and retention efforts which include global business development. ACA provides support to
Arizona companies seeking to export their products globally, resulting in new jobs and capital for the state.
2. Strategic Planning and Public Policy: Create, monitor and help execute a comprehensive economic develop
strategy for the state. Advance economic development public policy that assures Arizona creates a business
friendly, globally competitive environment.
It is recommended that ACA create a Competitiveness Council to assure Arizona is regularly reviewing its
competitiveness position and strategically supporting public policy that supports job growth in Arizona’s
focused industry clusters. Like Forfas in Ireland and the Texas Competitive Council, Arizona's Council
includes members of key collaborative organizations that represent Arizona’s commitment to becoming a
21st century economic development model, such as Science Foundation Arizona and other innovation and
industry cluster groups, rural and urban regional economic groups, universities and community colleges.
3. Management of Financial Programs: Manage, operate and market Arizona’s economic development and
workforce programs that align with the state’s comprehensive economic development strategy, including
existing tax credit and grant programs and new programs currently being proposed by the state legislature.
36
4. Marketing and Communications: Provide statewide marketing leadership to establish, build and maintain a
pro-business image for the State of Arizona and promote the state’s unique competitive advantages. ACA is
the “Arizona Economic Development Ambassador” and works collaboratively with all economic
development organizations throughout the state to leverage the limited marketing dollars available. ACA
uses private sector funds for marketing programs.
Lessons learned:
The states and countries reviewed are focused on core economic development programs and public
policy that create stable, competitive environments for their focused industry clusters.
Funding and Accountability
In partnership with the state legislature and the Office of the Governor, ACA creates a “Performance-Based
Funding Model” with performance criteria and associated deliverables. Included in the Model is an annual
calculation to determine the state’s return on its investment of public funds.
Funding for ACA comes from state and private sector funds. It is the Council’s expectation that, through the
legislative process, a dedicated funding source may be identified to fund the organization. ACA receives a lump
sum budget from the state each year and submits the following to the Governor’s Office and State Legislature
by November 1 of each year: 1) A detailed operational plan and budget for the upcoming fiscal year, and 2) An
annual report which contains audited financial statements for the prior fiscal year.
State Funding: State funding comes from the state general fund or from a business-related, dedicated funding
source such as incremental payroll tax revenues (the payroll tax paid by businesses) generated from targeted
industry clusters.
Private Sector Funding: Like other states, Arizona recognizes that using public sector funds for state marketing
programs can be a contended use of taxpayer dollars. Therefore, the private sector helps support the marketing
efforts of the organization. The private sector funds comes from a 1.5 percent fee, not to exceed $100,000
charged to companies accessing certain current and proposed economic development tax credit and grant
programs (incentive programs) in Arizona. These funds are deposited into a marketing and jobs development
account and used to fund marketing programs used by ACA.
Lessons learned from other states:
Some states successfully demonstrate their value through a return on investment each year. This helps
give credibility to an organization and uses business principles to demonstrate value. Most states use
private sector dollars to fund marketing programs, supporting those efforts that are critical to be a
successful marketing organization, yet can be a politically sensitive use of public funds.
Alignment with Other State Investments
For Arizona to be most competitive in the 21st century, it must align and leverage its investments in partner
organizations to maximize their effect. ACA aligns closely with the work of Science Foundation Arizona
(SFAz) to leverage the work of both groups, including engaging SFAz in business recruitment, expansion and
retention strategies. SFAz is an asset in Arizona’s economic development framework and ACA partners more
closely with SFAz to maximize its impact.
37
ACA establishes a strategic relationship with the state's universities to leverage their research capabilities in
support of job retention and creation efforts and to maximize opportunities for marketing our state's highly
educated workforce to global industry leaders. ACA also creates a link with the job training capabilities of
Arizona's 10 community college districts to meet the unique workforce development needs of existing and new
businesses. Like other successful states, promotion of a strong higher education system is critical to establishing
and maintaining a strong economic development position for Arizona.
Other states are very successful at integrating their limited tourism and business development marketing
resources. They also collaborate statewide with regional and local economic development groups to leverage
those limited funds. ACA provides the statewide leadership to maximize the limited resources available to
market the state and its regions.
Transition of Other State Programs
States have recognized that being focused on core economic development programs that create quality jobs for
its citizens provides measureable success and a return on the investment of state funds. To maintain this focus,
we recommend that an Agency Transition Team is established to analyze and relocate existing programs that
do not clearly fall under the mission of the ACA. For example, the following existing Arizona Department of
Commerce functions should be moved to other state agencies:
  Energy Division (Federally funded programs)
  Research Administration (Federally funded census tracking programs)
  Population Technical Advisory Committee
  Arizona Partnership for Nursing Education Program
  Healthy Forests Tax Credit
  Forest Health Oversight Council
Remaining programmatic changes should be recommended by the Agency Transition Team.
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Appendix A
Legislatively Mandated Programs and Executive Order Activities
Arizona Department of Commerce Statutorily Mandated Programs 20
Business and Workforce Assistance:
  Export Promotion
  Co-Operative Advertising
  Advisory Committee on Recycled Materials
Markets
  Recycled Materials Market Development
Program
  Foreign Investment
  Mexico Office
  Canada and Japan Office
  New Business Attraction
  Business Retention & Expansion
  Job Training Fund
  Apprenticeship
  Aerospace and Defense Commission
  Women and Minority Business
  Small Business Advocate
  Nursing Program
  Centralized State Permitted
Community Assistance:
  General and Comprehensive Plan Review
  Develop Land Use Plans for Active Military
Airports
  Arizona Military Affairs Commission
  Military Installation Fund
  Main Street Program
  Rural Economic Development Initiative
  Small Community Planning Assistance
  Growing Smarter Planning Grants
Finance Programs:
  Economic Strengths Program
  Environment Tech Tax Credit
  Healthy Forests Tax Credits
  Angel Tax Credit
  Enterprise Zones
Finance Programs Continued
  Defense Contractor Restructuring Tax Credits
  Military Reuse Zones
  Process Commercial Solar Tax Credit
  Private Activity Bond
  Motion Picture Tax Credits
  Greater Arizona Development Authority
  Commerce and Economic Development
Commission
  Commerce and Economic Development
Commission Bonding
  21st Century Fund
  Renewable Energy Tax Incentive Program
  Local Communities Fund (Prop 200)
  Arizona International Development Authority
  Small Business Innovation Research Matching
Program
Energy Mandates (Federal Funding):
  Weatherization Program Assistance
  Solar Energy Advisory Council
  Oil Overcharge Fund
  Power Plant Transmission Siting
  Energy Conservation Standard for Public Buildings
  Appliance Standards
  Solar Energy Devices/Standards
  Technical Assistance
  Energy Emergency Plan
  State Agency Energy Efficiency Report
  Average Retail Prices of fuel
  Hydrogen Grant Program
Research (Federal Funding):
  Population and Employment Statistics
  Economic Research Clearinghouse
  Economic Analysis
39
Arizona Department of Commerce Implementation Initiatives to Support Agency Mandates 21
Business and Workforce Assistance:
  State Branding and Promotion
  Collateral Materials including Industry
Directories
  Liaison with Regional and Local Economic
Development Partners
  Lead Generation and Distribution
  Arizona Film Tradeshows
  Film Transaction Privilege Tax Exemptions and
User Tax Exemptions
  Film Location and Support
  Film Photo Library
  Film Permit Coordination
  Job Training, Small Business and Rural
Outreach
  Small Business Resource Guide and Check List
  Small Business Directory
  Small Business Market and Sell to State
  Tech Business Development Resource Center
  Tech Commercialization Coordination
  Arizona Innovation Connection
  Capital Formation Coordination
  Arizona Workforce Connection
  Tech Industry Development Roadmap
Coordination
  Innovation Tech and Market Assessments
  Arizona Innovation Accelerator
  Arizona Fast Program
  Innovation and Technology Business
Development Support
  Special Projects - i.e. Wi-Fi Superior
  Special Projects - DOL IT Grant (IBM)
Community Assistance:
  Governor’s Rural Development Conference
  Rural Economic Development Assistance
  Regional Managers
  Boards and Commissions Conference
  Local Elected and Appointed Official Workshops
  Asset Inventory
  Planning and Zoning Handbook
Administration and Operations:
  Communications: articles, editorials, e-clips,
business and community outreach, news
releases, media outreach, KFNN Radio Show,
website, graphic arts (banners, posters, ads)
  Community, County, Tribal Profiles
  Arizona Business and Community Financing
Guide
  Annual Funding Fair
  REMI and IMPLAN
  Legislative Affairs
  Technical Expertise: Incentives, tax programs,
statutes
  Operations: HR, Accounting, IT, Procurement
Energy (Federal Funding):
  AzURE
  Tribal Energy Liaison
  CREPC
  Western Climate Initiative
  Western Governors Association
  Renewable Energy Zones
  Building Science
  Energy Grant Administration
  ESC
  Wildlife corridors
  WIEB
  Affordable Housing Tax Credit Inspection
NASEO
  Database of State Incentives for Renewable Energy
  WIRAB
  Demand-Side Management
  Energy Performance Contracting
  Community Energy Planning
  Tribal Rural Electrification
40
Arizona Department of Commerce Executive
Order Activities 22
  Population Technical Advisory Committee
(State)
  Forest Health Oversight Council
  Governor's Council on Small Business
  Border Governors
  Smart Growth Scorecard
  Smart Growth Interagency Committee
  Office of Smart Growth Coordination
  Governors Military Affairs Commission
  Tribal Liaison
  Tribal Consultation Policies
  Efficiency Review
  Growth Cabinet Citizens Advisory Board
  Establish REC Standards for State Agencies
  Governor’s Film Commission
  Governor’s Council on Workforce Policy
  Governor’s Council on Innovation and
Technology
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Appendix B
Stakeholder Outreach Participant Organizations
Ahwatukee Chamber of Commerce
Alliance Bank of Arizona
American Indian Chamber of Commerce
Apache Junction Chamber of Commerce
Apache Nitrogen
Arizona Association of Economic Development (AAED)
Arizona BioIndustry Association
Arizona Board of Regents
Arizona Chamber of Commerce and Industry
Arizona CURE
Arizona Department of Commerce
Arizona Department of Education
Arizona Economic Research Association (AERO)
Arizona First
Arizona Mexico Commission
Arizona Minority Business Enterprise Center
Arizona Public Service
Arizona Rural Development Council
Arizona Small Business Association
Arizona Small Business Development Center
Arizona State University
Arizona Technology Council
Arizona Tooling and Machining Association
Associated Minority Contractors of America
AVR
Banner Sun Health Research Institute
Barclay Communications
Battelle
Benson Chamber of Commerce
Benson Visitor Center
BioAccel
Blue Cross Blue Shield of Arizona
Brown Family Foundations
Buckeye Valley Chamber of Commerce
Bullhead Regional Economic Development Authority
California Association for Local Economic Development
Campbell & Mahoney Law Firm
Carondelet
Catholic Healthcare West
CB Richard Ellis
Center for the Future of Arizona
Central AZ Regional Economic Development
Foundation
Chandler-Gilbert Community College
City of Apache Junction
City of Benson
City of Chandler
City of Glendale
City of Globe
City of Kingman
City of Mesa
City of Nogales
City of Phoenix
City of Prescott
City of Safford
City of Scottsdale
City of Sedona
City of Tempe
City of Tucson
City of Willcox
Cochise Community College
Cochise County
Coconino County Career Center
Coe & Van Loo Consultants
Senate Commerce/Economic Development Chair
House Commerce Chair
Consulate of Canada/Consulat du Canada
Covance Laboratories
Cox Communications
Cushman & Wakefield
Delmastro + Eells
Deloitte
Denise Resnik & Associates
Desert Fleet-Serve, Inc.
DHR International
Diamond Ventures
DMB Associates
Dorn Policy Group
Downtown Phoenix Partnership, Inc.
East Valley Chamber of Commerce Alliance
EDGE Eloy
Embry-Riddle Aeronautical University
Empire Southwest LLC
Falcon Field Area Alliance
Fennemore Craig
Flagstaff Chamber of Commerce
Flinn Foundation
GHD
Governor’s Office of Equal Opportunity
Grand Canyon Minority Supplier Dev. Council
Great Impact, Inc.
Greater Phoenix Chamber of Commerce
Greater Phoenix Economic Council (GPEC)
Greater Phoenix Leadership, Inc.
42
Green Valley Sahuarita Chamber of Commerce
Hamilton, Gullet, Davis & Roman
Hecker & Muehlebach, PLCC
Hensley Company
HKS, Inc.
Hornaday Development LLC
HUB International
Humana of Arizona
IBM
ILX Resorts
iMemories
Integriguard
Intel
Kinetic Muscles, Inc.
Klute Communications
Lake Havasu Area Chamber of Commerce
Lake Havasu Partnership for Economic Development
League of Arizona Cities and Towns
Local First Arizona
Loven Contracting
Maricopa County
Maricopa County Community College District
Mayo Clinic
McKenney and Monroe
Medtronic, Inc.
Mesa Chamber Commerce
MGT Associates, LLC
Mohave County
Motorola
National Assoc. Independent Office Properties AZ
National Federation of Independent Business
Nichols Precision, AZ Tooling/ Machining Assoc.
Nogales Community Development Corporation
Northern Arizona Building Association
Northern Arizona Center for Emerging Technologies
Northern Arizona University
Northern Trust Bank
Phoenix Children's Hospital
Phoenix Community Alliance
Phoenix International Raceway
Pinnacle Business
Pinnacle West Capital Corporation
Prescott Valley Economic Development Foundation
Quarles & Brady
Ratheon
Republic Services
Rodel Foundation
Salt River Project
Science Foundation Arizona
Scottsdale Chamber of Commerce
Scottsdale Healthcare
SenesTech
SenesTech
Sierra Vista Economic Development Foundation
Snell & Wilmer L.L.P.
South Mountain Laveen Chamber of Commerce
SouthEastern Arizona Governments Organization
Southern Arizona Leadership Council
Southern Arizona Technology Council
Southwest Gas
St. Joseph's Hospital and Medical Center
Sulphur Springs Valley Electric
Sunbelt Holdings
SunCor Development
Sundt Construction
Systems Technology Staffing
Tempe Chamber of Commerce
The Critical Path Institute
The Human Element LLC
The Molera Alvarez Group
The Symington Group
The University of Arizona
The University of Arizona College of Medicine-Phoenix
in partnership with Arizona State University
Town of Bowie
Town of Florence
Town of Fountain Hills
Town of Maricopa
Town of Oro Valley
Town of Payson
Town of Sahuarita
Translational Genomics Research Institute (TGen)
TriWest Healthcare
Tucson Metro Chamber of Commerce
Tucson Regional Economic Organization (TREO)
University of Arizona
Vestar Development Co
Viad Corp
Vision Alignment
Waste Management of Arizona
Wells Fargo
Westcor
WESTMARC
Western Arizona Economic Development District
Yavapai County Cooperative Extension
Yuma Economic Development Foundation
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Appendix C
U.S. and Global Research
The following questions are asked and answered to analyze the states and countries and their
economic development frameworks. These questions take into account the successful elements of
state economic development organizations.
1. How does the state/country engage the private sector and select executive leadership?
2. How does the state/country maintain strategic focus and demonstrate an ROI?
3. What programs support the state’s/country’s economic development efforts?
4. What role does the state’s/country’s lead economic development organization play in public
policy and how do they engage the legislature in their efforts?
5. What resources does the state/country use to market itself nationally and globally?
6. How does the state/country support its rural areas through economic development programs
and services?
North Carolina
The North Carolina Department of Commerce is a traditional statewide economic development
organization. It staffs and receives policy direction from the North Carolina Economic Development
Board, the North Carolina Board of Science and Technology and the Commission on Workforce
Development. The Department is organized into eight major focus areas and it includes the state’s
tourism efforts.
Question #1: How does North Carolina engage the private sector and select executive leadership?
The state of North Carolina engages private sector leaders, the state General Assembly, university
Presidents, community colleges, and other economic development organizations throughout the state
through the esteemed 37-member, North Carolina Economic Development Board. The Board
oversees state economic development research and planning and makes policy recommendations to
the Governor and the General Assembly. The Board also recommends biennial and annual
appropriations for economic development programs. The Governor appoints the Chair and Vice Chair
of the Board. The Board is staffed by the Interagency Economic Development Group which is
coordinated by the Department of Commerce. The Interagency Economic Development Group
includes the Department of Administration, Department of Agriculture and Consumer Services,
Employment Security Commission, Department of Labor, and Department of Transportation.
The North Carolina Economic Development Board does not oversee the Department of Commerce,
however, it does work to analyze North Carolina’s global competitiveness through aggressive
economic development policy recommendations. The Board is composed of state government
officials, private sector leaders, representatives of non-profits and economic development
organizations, and eight members of the North Carolina House of Representatives and Senate.
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The Friends of North Carolina is an advisory council to the North Carolina Commerce Trade and
Development Fund, a non-profit 501(c)(6) organization that helps market the state globally and
nationally. The organization is funded through sponsorship levels of $500-$25,000 annually.
The Secretary of Commerce is appointed by and serves at the pleasure of the Governor of North
Carolina and he/she also sits on the Governor’s cabinet.
Question #2: How does North Carolina maintain strategic focus and demonstrate a return on
investment?
The North Carolina Economic Development Board is charged with creating a comprehensive
economic development plan for the state. The Board is also responsible for holding the state
economic development entities accountable for implementation of the economic development plan.
This approach assures that the plan created does not sit on shelf somewhere, rather, there is
accountability that the plan is successfully executed. The Department of Commerce’s strategic plan
focuses on:
1. Keeping North Carolina competitive through the recruitment and expansion of
technologically advanced companies.
2. Increasing economic opportunities for the state by making sure the state is recognized
globally as a desirable business location.
3. Improving economic opportunities for all citizens through programs targeting people and
places that need assistance.
The state’s Strategic Plan was updated most recently in 2007. In 2006, the state compared the original
plan goals to the actual progress made.
Question #3: What programs support the North Carolina’s economic development efforts?
The North Carolina Department of Commerce manages all economic and community development
programs as well as tourism. It is a large, well-funded, and respected agency which results in a high
degree of success.
Programs: The Department is organized into eight major focus areas:
  Business and Industry Development (business attraction and expansion)
  International Trade: The agency maintains international offices in Canada, Mexico, Germany,
China, Korea, Hong Kong and Japan.
  Community Assistance
  Workforce Development
  Commerce Finance Center: Administration of incentive programs
  Policy, Research and Strategic Planning
  Energy Office
  Tourism, Film and Sports Development
The Department also staffs the 19-member North Carolina Board of Science and Technology which
was created to promote scientific, engineering, and industrial research applications in the state.
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The agency had a budget of $54.9 million in FY 2008-09 and 455 FTEs.
Question #4: What role does the North Carolina’s lead economic development organization play in
public policy and how do they engage the state legislature in their efforts?
The North Carolina Economic Development Board has played a key leadership role in advancing
aggressive and competitive economic development programs in the state. The collaborative
engagement of all levels of government, higher education leaders, economic development groups, and
private sector leaders has provided consistent and supportive economic development agendas over
the years.
Eight members of the state legislature sit on the Economic Development Board.
Question #5: What resources does the state use to market itself nationally and globally?
The Friends of North Carolina is a 501(c)(6) non profit corporation that helps the Department of
Commerce market the state with private sector funds. The group engages the private sector in the
Department’s efforts through a membership funded marketing program. The program supports
marketing events, trade missions, site selection consultant events, economic development
conferences, and other global marketing activities that support the retention and attraction of new
jobs and businesses and the promotion of North Carolina as a leader in manufacturing and technology
industries. Private sector membership ranges from $500-$25,000 with corresponding benefits
associated with the various levels.
Question #6: How does the state support its rural areas through economic development programs and
services?
The state has a division in the Department of Commerce that is committed to providing assistance to
small communities. With 40.5 FTEs and a budget of $2.9 million in 2008-09, the state demonstrated
its commitment and significant role it plays in helping rural communities develop and create jobs.
Texas
In 2003 Governor Rick Perry created the Governor’s Office of Economic Development and Tourism
and brought the state’s economic development programs into his office. That same year, TexasOne
was created which is a 501(c)(3) public-private nonprofit corporation charged with marketing the
state globally and domestically.
Question #1: How does Texas engage the private sector and select executive leadership?
In 2003 Governor Perry called on the private sector to create TexasOne as a complementary effort to
the Governor’s Office of Economic Development and Tourism. TexasOne is the primary funder of
State-level economic development marketing with the goal of attracting and retaining high-value
jobs.
TexasOne is led by a 9-member, private sector board appointed by the Governor and the assistance of
two ex-officio public sector board members, the Secretary of State and head of Office of Economic
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Development and Tourism. Membership in TexasOne ranges from an investment of $1,000 per year
for three years to $50,000 per year for three years, with escalating benefits and decision-making
authority associated with increased investment levels.
Additionally, the Governor engages private sector industry leaders through appointments to other
economic development related Boards and Councils including the Texas Workforce Investment
Council, the Aerospace and Aviation Advisory Committee, and the Governor’s Competitive Council.
The Executive Director of the Governor’s Office of Economic Development and Tourism is not a
gubernatorial appointed position. Rather, the Executive Director is a state employee and staff member
of the Governor’s Office.
Question #2: How does Texas maintain strategic focus and demonstrate a return on investment?
Governor Perry created the Texas Cluster Initiative in 2003 to identify the clusters that would be the
engines of job creation in the 21st Century, and to develop economic development strategies to
support the sustained growth of six clusters: advanced technologies and manufacturing; aerospace and
defense; biotechnology and life sciences; information and computer technology; petroleum refining
and chemical products; and energy. To build on the efforts of the Texas Cluster Initiative, the
Governor created the Governor’s Competitiveness Council to create an agenda to increase the state’s
competitiveness and eliminate or minimize weaknesses in the state’s six targeted industry clusters.
The state of Texas measures its economic development return on investment by reporting new jobs
and capital investment created as well as the impact on the state’s gross state product. The state
measures the Texas Enterprise Fund (TEF, Governor’s Closing Fund) impact by calculating new job
creation, new capital investment, and annual gross state product. To date, total TEF new jobs created
have been 56,002, new capital investment totals over $14 billion, and $383 million in grants have
been disbursed.
Question #3: What programs support Texas’ economic development efforts?
The Department is organized into five major focus areas:
1. The Economic Development Bank: Known as The Bank
The Bank targets capital to growth industry business opportunities that attract, retain and expand
high-value jobs in Texas. Created in 2005, The Bank’s Emerging Technology Fund was
established with General Fund and “rainy day fund” surplus monies. Under the leadership of the
Texas Emerging Technology Advisory Committee, the Emerging Technology Fund has
established seven Regional Centers for Innovation and Commercialization (RCIC) and one Texas
Life Science Center. RCIC regional leaders provide recommendations to the Advisory Committee
regarding targeted investments of the fund.
The Bank administers tax incentive programs such as the Enterprise Zone, Federal Empowerment
Zone, and Defense Economic Readjustment Zone programs. The Bank also provides access to
capital through its Loan Assistance program, with preference given to high-value job creation in
the semiconductor, nanotechnology, biotechnology and biomedical sectors.
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2. Business Development: Attraction, retention and expansion, works to eliminate obstacles to
business growth, with a particular focus on exports as opposed to foreign direct investment. The
division also manages the state’s renowned Texas Enterprise Fund which acts as a deal closing
incentive program. Its source of revenue is one-tenth of 1 percent of taxable wages paid by
businesses to the Texas Unemployment Trust Fund. The state has one foreign trade office in
Mexico City.
3. Small Business Assistance: Acts as a single point of contact for information related to business
permits and licensing. Priority assistance is given to historically underutilized businesses
(minority and woman-owned) to provide access to the state procurement process.
4. Office of Aerospace and Aviation: Established in 2003, works to retain and grow the state’s base
of aerospace-related employment assets. A 7-member Governor-appointed Aerospace and
Aviation Advisory Committee provides industry-based leadership and recommendations to the
Office.
5. Tourism: Advertising, marketing, public relations and travel research.
The Texas Workforce Investment Council is not located in the Governor’s Office of Economic
Development and Tourism. The Council links workforce development, economic development and
education efforts to develop a trained workforce for potential employers. The Council is made of 19
members, 14 of whom are appointed by the Governor and five of whom represent state agencies.
Question #4: What role does Texas’ lead economic development organization play in pub