The Growth Industry – Formula for Failure

Since Arizona became a state in 1912, the power that guided the State has been concentrated in a few hands.  Historically, that power has resided with the beneficiaries of growth.  Consequently, the focus of the Arizona economy has been primarily growth.  There are a few problems with this concept;

For decades, we have been reminded during both good and bad times that Arizona’s over-reliance on growth is suicidal.  Recently reported by the Arizona Republic, “It has been 22 years since Baron’s ran the national story “Phoenix Descending – Is Boomtown USA going bust”.  It was a scathing indictment of an economy that proudly proclaimed growth as its top industry and presciently forecast its demise.”  Experts all know and are not shy about publicly proclaiming that growth is an industry that is not a wise or stable foundation for an economy.  Yet year after year, decade after decade, we march on with no change of direction.

Oh yes, every time the growth industry goes bust, in panic, we admit the obvious and recognize that we have to stop relying on growth and develop other industries.  So we circle the best minds and develop grand plans for change.  But, just about that time, the real estate industry picks up and its party time, happy days are here again.  For example, when boom turned to bust in 1991, Governor Fife Symington enlisted 4000 participants to develop the 1991 Arizona Strategic Plan for Economic Development.  Though it was a sound plan and still applicable even today, everyone lost interest as soon as the hammering resumed and houses again grew from the dirt. 

To illustrate the control that this industry has on the State government, current residents are silently asked to pay for growth.  This is in the form of building infrastructure to support new development.  When the existing citizens pay to build new roads, utilities, schools, emergency services, etc to serve the residents that haven’t arrived yet, we are subsidizing the profitability of the development industry.  Given that a new home will sell for X dollars, the cost of producing that house consists of the land purchase, house construction and infrastructure impact costs.  As long as the taxpayers will pick up the cost of infrastructure, that means that more cash can be channeled to the purchase of the land.  Hence, in Arizona, impact costs to developers are low and land prices are high.  In contrast, California charges substantial impact fees to cover the costs of serving development.  Consequently, the prices of land in Arizona are much higher than in California.  Any idea who wins in Arizona and who pays the bills?  Guess who has historically controlled the power in Arizona government.

In spite of the numerous recent articles in the editorial section of the Arizona Republic and elsewhere re-telling us the obvious wisdom about suicidal reliance on growth, the powers that run this State are chomping at the bit to start building again.  Just flip to the articles concerning the real estate industry.  The authors plead for the federal government to spend money to put people in the 80,000 vacant houses in the Phoenix metropolitan area.  Why?  So that the industry can start building more houses again.  Do they have no conscience?  What do they propose that those 80,000 people are going to do for a living in a state that has no jobs and is loosing jobs more rapidly than any other state in the country?  Welcome to the same old mentality that has buried us in the past and will not change until we have a governor that is independent of political parties and not obligated to the interests that presently control the state.

Water, the lifeblood of the West.  This candidate has a long history of working with matters of water resources and participated in the formulation of the current Department of Water Resources Management Plan.  It is a fact that we currently have no problem of inadequate water quantity in this state, although one of water quality is developing.  Rather, inadequate water quantity will become a problem when we grow into the problem.  I am in no way suggesting a growth moratorium but our growth must be a product of smart planning, not the present system of maximized land prices.

When this State was created, the federal government placed a large portion of the land into State ownership.  By the State constitution, the State Land Department must auction this land in a fashion that results in the highest sales price per parcel, the proceeds then used to support the education system.  At a quick glance, it appears that the goal of maximum price is accomplished.  However, this system greatly hampers the ability to strategically master-plan land use and preservation.  To change this system will require an amendment to the State Constitution, which I propose.  I propose that enterprise zones, transportation corridors and environmental conservation zones will designated throughout the state before the land is sold in a fashion that will maximize sustained economic and life-quality results.  Indirectly, that will even further enhance the revenue generated for education from the sale of residential land.