In Utah, strategy means business

The Olympics are two years gone, the recession claimed jobs, but the Beehive State is strategizing a climb to join its eastern neighbor, Colorado as a peak destination for business

By Tom McGhee
Denver Post Business Writer

http://www.denverpost.com/Stories/0,1413,36~33~1969706,00.html

SALT LAKE CITY – This city at the base of the towering Wasatch mountains is planning an escape from Denver’s shadow and a lunge forward in the race for jobs, business, capital and tourism.

It is an aspiration that could require moves as bold as the city’s successful bid for the 2002 Olympic Winter Games, which boosted Utah’s visibility worldwide but has not provided long-lasting economic benefits.

This time, the pitch is an ambitious $540 million public works project that would link a string of 18 cities along the Wasatch Front with a high-speed, digital telecommunications network.

In Provo, a prototype of the optical fiber network known as Utopia already connects about 300 homes and businesses to the Internet with speeds typically faster than any commercial offering available in Denver.

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Opponents say Utopia, an acronym for the Utah Telecommunications Open Infrastructure Agency, is costly, unnecessary and a ticket to obsolescence. Those on the fence, including the Salt Lake City Council, are hopeful that studies now underway will help them make a decision.

If the plan does get off the drawing board – and there is no guarantee that it will – residents in cities from Tremonton in the north to Payson 125 miles to the south would have access to fiber-optic connection straight to the home or business.

"That is a pretty powerful market statement, and it could be a magnet to people who want to start software and other companies," said Tom Clark, executive vice president of the Metro Denver Economic Development Corp.

Utah has made some other market statements recently, and there are signs that the state’s efforts will bear fruit:

Utah lawmakers approved the formation of the Utah Fund of Funds, a $100 million pool of venture capital that becomes available July 1. The money will be invested in Utah’s high-growth ventures, and the state is guaranteeing at least 5 percent profit. In the event the investments don’t meet that minimum return, the state will make up the difference in tax credits.

Utah’s venture capital industry – which three years ago consisted of two funds with a total of $75 million under management – now includes 14 funds that manage a total of more than $1 billion, said Bradley Bertoch, president of the Wayne Brown Institute. The nonprofit organization helps early-stage high-technology companies get capital.

For the first time, Utah has at least 11 technology companies doing about $100 million in sales each with the potential to grow to $1 billion in five years, Bertoch said.

A second tier of 40 firms with $10 million each in sales is expected to run revenues up to $100 million each in the next three to five years, Bertoch said.

The Salt Lake region ranked No. 5 in 2003 on Entrepreneur.com’s list of Best Cities for Entrepreneurs, up from No. 21 the previous year. Denver was 27th in 2003.

Finding a competitive edge

The Salt Lake region, where about three-quarters of Utah’s 2.35 million people live, competes for jobs with Denver, Phoenix, Boise, Idaho, and other Western population centers.

Print company AlphaGraphics looked at Denver and Salt Lake City when considering a 2001 move of its headquarters and more than 70 employees from Tucson.

Salt Lake won hands-down, said Kory Kogon, AlphaGraphics’ executive vice president of operations.

As in Denver, the Wasatch Front workforce is highly educated. But Salt Lake has a lower cost of living, less traffic and is closer to a hub airport, Kogon said.

Salt Lake officials made sure that AlphaGraphics’ then-chief executive Michael Witte knew they wanted the company, Kogon said.

"Salt Lake was falling all over themselves."

When it comes to technology – perhaps the richest source of high-growth ventures – Utah frequently finds itself in head-to-head competition with Denver and the Front Range.

"We are never going to overcome Denver as a regional center. But we are positioning ourselves to give them a run for their money," Salt Lake City Council member Carlton Christensen said.

Like Colorado and the rest of the country, Utah suffered through a recession that swamped its technology sector, cutting almost 10,000 jobs and wiping out a multitude of technology businesses.

For all the pain caused by the downturn, there has been some healing as well. The recession slowed growth and limited the breakneck competition with Denver and other cities for business.

"It gave us breathing room to think and strategize," Bertoch said.

Utah’s tech industry is heavy with small- and medium-size businesses, mainly in computer systems design, medical equipment and aerospace.

Development officials see Utah increasing a technology job base that now makes up about 5.3 percent of the state’s nonfarm workers but accounts for 15 percent of its $74.3 billion gross state product, said David Harmer, executive director of the Utah Department of Community and Economic Development.

While Denver is headquarters for Qwest Communications, First Data Corp. and four other companies valued at more than $5 billion each, Salt Lake has one Fortune 500 headquarters, Zions Bancorp.

But in the jobs race, size isn’t everything, Bertoch said.

High-growth companies such as AlphaGraphics, which has more than 340 stores worldwide, aren’t huge, but they are highly desirable.

Bertoch wants Salt Lake to continue aggressively courting business – and to look for advantages among niche players like life sciences firms and companies that provide Web services.

"If we are going to be a high-tech community, we will be a niche community that grows in Denver’s shadow until one day Denver says, ‘Oh, my God, what happened to Salt Lake City? Where did all that stuff come from?"’ he said.

A natural attraction

Like Denver, Salt Lake City has an ally in Mother Nature. The ridges and peaks that soar outside each city beckon those hungering for an outdoor lifestyle and contribute to that great intangible – quality of life.

Business recruiters courting chief executives tout the rugged beauty along with infrastructure and other, more mundane, selling points.

The mountains are also a magnet for skiers and other tourists who glide into Denver and Salt Lake and spend freely before leaving.

Some of the competitive tension between Utah and Colorado to attract skiers dates to the 1996-97 ski season, when Utah’s Snowbird ski resort bought billboards on Interstate 70 in Colorado, proclaiming, "If you were in Utah, you’d be skiing by now."

Over the past six years, Colorado resorts have struggled, losing 1.23 million foreign and out-of-state skiers, threatening the state’s signature industry.

Conversely, Utah resorts have experienced a 12 percent increase in destination business since 1999.

"Colorado is a much bigger state with much greater resources, and we will always be the little brother," said Fred Ball, senior vice president of Zions Bancorp. "At the same time, it is always nice to take business away from Colorado."

Even with a dwindling number of visits over the past six years, Colorado had 11.6 million skier days last season compared with 3.14 million for Utah.

Colorado’s appeal has irritated those who promote the sport in Utah, said Ball, who was involved in recruiting the Olympics to Utah.

"Years ago ski people would say ‘Colorado has done a superb job marketing an inferior product,"’ Ball said. "People used to think that the only place to ski in the Rocky Mountains was in Colorado."

The televised images of Olympic champions flying down Utah’s heart-thumping runs brought even more international exposure to the state and improved Utah’s image as a snowy mecca, said Michael Sears, budget and policy analyst with the Salt Lake City Council.

The exposure so far hasn’t brought the big boost to the ski and tourism business that some had hoped for.

"We always think of our competition, and we take that seriously," said Kristin Rust, a spokeswoman for Colorado Ski Country USA. "But Colorado is the leader in skiing and snowboarding."

Even in the midst of a sour economy, with Americans avoiding air travel in reaction to the Sept. 11, 2001, terror attacks, and a lackluster 2003 snow season, Utah’s slopes did log an increase in skier visits, said Fraser Bullock, managing director of Sorenson Capital, a leveraged buyout firm.

Salt Lake’s bid for international prominence as a ski destination included a multi-year effort to win the 2002 Olympic Winter Games. The price tag was $1.9 billion, including $342 million from taxpayers. The Games turned a profit of $101 million.

The Olympics left Salt Lake with increased name recognition and some infrastructure improvements. Roads were widened and improved, cellular towers erected and a light-rail system built that would otherwise have taken years, said Don Adams, development director of the Downtown Alliance, a Salt Lake nonprofit created to boost business and culture in the city’s central business district.

Uncongested roads, public transportation and the other upgrades all help when recruiters talk to prospective businesses, Adams said.

Whether or not the Utopia telecom project becomes reality, Salt Lake officials say they will continue looking for ways to increase the area’s competitive edge.

"It is ingrained in our culture to want to be a major player," Adams said. "Incredible amounts of capital flow in and out of Denver and Phoenix, and it’s hard not to look up to them and learn from them. But we think we can be as good without being as big."

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Utah’s growth pushes need for new industries

By Tom McGhee
Denver Post Business Writer

http://www.denverpost.com/Stories/0,1413,36~33~1969722,00.html

The clock is ticking on Utah’s economic development quest.

The state has the highest annual birthrate in the nation and is anticipating a major balloon in its primary and secondary education population in the next decade.

Without new businesses to broaden the tax base, economic development officials say Utah could face a major strain on municipal and state budgets that could lead to tax increases or an overcrowded and deteriorating school system.

Utah records about 21.7 births per 1,000 people per year. The student population is expected to grow by 145,000 in 10 years, said Fraser Bullock, who chaired a committee that studied the state’s education needs.

But Utah’s conservative image could be an obstacle to attracting businesses it needs to swell the tax rolls, said David Harmer, executive director of the Utah Department of Community and Economic Development.

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Salt Lake’s soaring Mormon temple is as much a symbol of the state as the desolate beauty of its canyons and deserts.

Common misperceptions about Utah – that the state is controlled by Mormons who have little use for divergent thought, that polygamy is rampant or that there is little diversity in the population – are a challenge to development officials, Harmer said.

"There are still people out there who think we are strange," he said. "They think this is some kind of monolithic culture."

In fact, the face of Utah is changing rapidly. A 2000 survey of American religious identification by the City University of New York found that only 57 percent of Utah’s population belonged to the Church of Jesus Christ of Latter-day Saints, down from 71 percent in 1990.

Utah also grapples with environmental woes that activists say will be exacerbated by more growth.

The high-desert landscape is too dry and fragile to support the densely packed towns that already line the Wasatch Front, said Ivan Weber, a past chairman of the Utah chapter of the Sierra Club. And environmentalists say they are anxious to avoid the type of sprawl and congestion that has characterized Denver’s boom.

The current population strip winds through a deep valley that becomes a trench choked with smog and haze that can linger for days. Over the course of two recent days, Salt Lake City was mired in a thick, gray haze that hid the mountains looming over the town.

"Ecologically, we should probably reduce the size, but that isn’t going to happen," Weber said.