"We need to create companies, not just jobs." – High-tech leaders unveil Arizona economic development plan – It focuses on tax credits, firms’ growth

High-tech business leaders unveiled plans Thursday that would use tax credits and private investments to spur technology companies and create high-paying jobs.

Jane Larson
The Arizona Republic

http://www.azcentral.com/arizonarepublic/business/articles/1219Techfuture19.html

Gov. Janet Napolitano called for the plan earlier this year to better diversify Arizona’s economy. Arizona is falling behind tech powerhouses like California and even rivals Utah and Colorado in growing the high-tech share of its economy. Arizona had more than 161,000 high-tech workers as of 2001, about 8 percent of the total private-sector employment, according to the most recent study by Arizona State University. Their average pay was $54,400 a year, about 77 percent higher than the private-sector total of $30,700.

To create more such jobs, the Governor’s Council on Innovation and Technology, comprising business leaders, legislators and academics, made the following draft recommendations:

• Tax credits for those who invest in technology research and companies.

• A fund, financed by private and state sources, to encourage venture capital investments in Arizona.

• Passage of a constitutional amendment that would allow universities to take stock in small companies licensing university-created inventions.

• Plans to develop a brand or slogan that paints Arizona as a technology leader.

The recommendations are not the first ever developed. The Arizona Partnership for the New Economy drafted a technology-oriented plan in 2001 that ended up shelved and unfunded.

Council leaders say this time is different.

They cite a governor interested in the tech industry’s future, a business community engaged in the economic efforts and universities energized by new leaders.

"Those three things are very present, and they have a great deal of momentum," council Chairman Ed Zito said. "We need to seize the opportunity."

Council leaders say they have been working behind the scenes to gain support for the touchier issues. They are eager to avoid the fate of the Citizens Finance Review Commission, whose draft recommendations suffered swift attacks earlier this fall. Napolitano ultimately decided not to push for tax changes for next year.

Council leaders say the most important set of recommendations centers on the difficulty small tech companies have raising money in Arizona.

Arizona typically gets less than 1 percent of the venture capital invested nationally, due in part to the limited number of experienced entrepreneurs and investors knowledgeable about technology.

Noting this week’s sale of Scottsdale-based Dial Corp. to a German firm and Wal-Mart’s replacement of Motorola Inc. as Arizona’s top employer, council member Quinn Williams said the financial recommendations are important to developing good companies in the state.

"We need to create companies, not just jobs," he said.

The recommendations for capital formation include state tax credit to attract out-of-state investors, a program that exists in other states.

The panel also calls for the continuation of the state’s research-and-development tax credit, due to end this year. The tax credit should also be expanded to encourage investments in the emerging area of biotechnology, and to encourage corporations to sponsor research at state universities, the group said.

The second set of recommendations focuses on technology commercialization, in which businesses license inventions developed at the state universities and turn them into successful products.

The constitutional amendment, which the Legislature and Napolitano have approved for the November 2004 ballot, is just one step, council member Bill Hardin said.

The third set of recommendations is aimed at building up infrastructure for technology businesses, with a focus on growing local companies.

Suggestions include a more business-friendly tax structure, a stronger relationship with federal policy makers, and a campaign to brand Arizona as a tech-savvy state.

Napolitano praised the plan as very integrated and overarching, but said some legislative proposals will be a challenge. She will use the recommendations as a basis for a technology agenda she will present at a Feb. 10 forum.

Reach the reporter at [email protected] or (602) 444-8280.