Brice Wallace
Fresh off a record-setting fiscal year, Utah’s recruitment-and-retention organizations are finding it difficult to repeat that success.
Three-quarters of the way through its July-though-June fiscal year, the Governor’s Office of Economic Opportunity (Go Utah) and the Economic Development Corporation of Utah, contracted by the state for corporate recruitment and expansions, are seeing most of their project numbers way off from those of the 2021-22 fiscal year.
For example, the number of jobs expected to be created as a result of projects incentivized by Go Utah in the 2022 fiscal year totaled 20,478. However, with only three months left, the job-creation total in the 2023 fiscal year has reached only 1,958.
Job creation through projects taking place in rural Utah totaled 8,972 last fiscal year but the figure through March of the current fiscal year is only 558.
Other figures are off the record marks, with the possible exception of project capital expenditure (capex), boosted by a Texas Instruments expansion in Lehi. Project capex in fiscal 2022 totaled $1.97 billion, including $1.27 billion for rural projects. The capex number so far for fiscal 2023 is $790 million, including $555.6 million in rural Utah.
“Especially when you look at the capex numbers, I think it shows that we’re experiencing higher capex but lower job numbers across the board,” Daniel Royal, Go Utah’s director of business incentives, told the Go Utah board at a recent meeting. “I think it’s just a national trend that we are seeing these days.”
Other Go Utah figures falling short of the fiscal 2022 pace are new state tax revenue, currently $410 million, including $252.8 million in rural Utah. The overall figure in fiscal 2022 was $942.4 million, including $577.4 million from rural projects.
“This year is a lot less than we had last year,” Royal said about tax revenue projections. “Compared to previous years before that, I think we’re on a better pace than those years, but of course last year was a pretty good year for us, so I’m not surprised that our new state revenue is off from last year. We had more projects at this point last year than we are having this year.”
New wages from incentivized projects are expected to be nearly $1.3 billion for the current year, including $397.2 million in rural Utah. The fiscal 2022 total was $12.7 billion, including $5.28 billion in rural areas.
Royal did see a positive in figures related to incentivized projects’ wages as a percentage of the overall county wage. The figure was 157 percent in fiscal 2022. So far this year, it is 152 percent, in the form of 161 percent for urban projects and 146 percent for rural projects. By statute, incentivized jobs must be at least 100 percent of the county average wage for rural projects and 110 percent for urban projects.
“Glad to see, even though we are experiencing lower jobs, less new state revenue, our average wage as a percent of county wage is well above what we’re supposed to do,” Royal said.
Without citing exact figures, Colby Cooley, vice president of business development at EDCUtah, said that organization is experiencing the same trends as Royal spelled out for Go Utah.
“We are indeed seeing the same thing that he has said,” Cooley told the Go Utah board. “So, significantly higher capex on a lot of our projects … and our average project size has consistently gone down over the last three years. We think that that tracks with our manufacturing pipeline that has taken off.”
Hints of a tough fiscal year could be seen at the halfway mark. EDCUtah’s goal for the year were for the creation or retention of 12,000 jobs, but at the halfway point it stood at only 1,776. EDCUtah had only 11 wins by that point, off the pace to reach its goal of 35 this fiscal year. The capex goal of $1.5 billion was only $314 million along. Square footage on project wins totaled only 891,600, off the pace to reach its goal of 2.5 million.
The past few years, EDCUtah has seen a significant uptick in interest in manufacturing projects, which typically have high capex numbers but sometimes lower-than-expected job counts. At the end of the fiscal 2022 year, EDCUtah had 127 “active” projects, including 73 in manufacturing and 17 in information technology.
Cooley said a meeting with site selectors earlier this year revealed that those officials “are starting to identify a gap between headcount-based incentive programs nationally, many of which function a lot like the EDTIF, and what their projects are bringing to the table … which is significant, huge capex, and job numbers that are starting to get harder to qualify for incentives nationwide.”
EDTIF is a state incentive that allows companies to receive a portion of the new, additional state taxes the company pays to the state as the result of their project. Typically, the incentive is tied to the creation of high-paying jobs.
EDCUtah’s capex numbers, even without the Texas Instruments announcement, “have really blown out over the last couple of quarters,” Cooley said. “The job numbers are not even a quarter of where our goal was for the [fiscal] year. Obviously, we’ve got to look into why that’s going on.
“I think we’ve identified it just as our projects look way different than they have previously, where we used to have low capex numbers [and] high job numbers with a lot of our tech, software and financial services projects.”
EDCUtah’s numbers from fiscal 2022 included 37 project announcements, 21,600 new or retained jobs, capex of $2.2 billion, and square footage of 3.5 million.