Business Elevated Podcast (Episode 1)
This podcast, a production of the Utah Governor’s Office of Economic Development, is the first in a series featuring business and government leaders discussing what it’s like to live and work in the great state of Utah
The Business Elevated podcast is also available on Apple Podcasts, Spotify and Stitcher.
Welcome to the Business Elevated Podcast, where we discuss what it’s like to live and work in the great state of Utah. Did you know Utah is frequently ranked the best state for business by Forbes? This podcast is a production of the Utah Governor’s Office of Economic Development. Thanks for joining the conversation.
Val Hale (0:22): Hello, this is Val Hale. I’m executive director of the Governor’s Office of Economic Development. This is our initial broadcast of Business Elevated, a new podcast that we’re going to be doing on a regular basis highlighting some of our business and government leaders and some of the exciting things happening in the state through economic development. I’m really honored to have as our first guest Mr. Jerry Oldroyd who is currently chair of the GOED board and has been involved with the GOED board for many years and probably has the best background and institutional knowledge of economic development of anyone in the state. Jerry, it’s great to have you here.
Jerry Oldroyd (1:05): Well, thank you, Val. I’ve been involved for a long time as you know and all that really means is I’ve been hanging around. I’m old is what that really means I think Val. I was appointed by Mike Leavitt back in October of 1999 to sit on the board of business and economic development for the state. I considered it a real honor, I didn’t know what I was doing for the first year. It took a while, but over a period of time I’ve had an opportunity to really look at economic development and how the economy of Utah has changed, how Utah has changed, and how GOED, what’s now GOED, how involved they’ve been and how instrumental [they’ve been] in bringing companies to the state.
Val Hale (1:49): Well, we owe you a debt of gratitude because, for our listeners, Jerry is an attorney here, locally, and the amount of time that he’s donated to the state, he could’ve billed to the tune of a lot of money, and we certainly owe him for the time and effort that he’s put into the state of Utah and its citizens.
Jerry Oldroyd (2:10): That’s also a testament about Ballard Spahr. Ballard Spahr not only encourages public service, it’s really almost mandatory. So they’ve been fully supportive of all the time I’ve spent and, no question GOED has been my largest client over the last, at least the last 10 years.
Val Hale (2:29): Well, very impressive. You mentioned the GOED board. Can you tell me what role that plays here in the state in economic development?
Jerry Oldroyd (2:38): It plays a significant role. It was originally formed as the DBED board, what we called the DBED board — the Board of Business and Economic Development. And it was given broad authority by the legislature to be heavily involved in economic development to advise the governor, to advise the state in terms of what we should be looking at in terms of economic development. That has changed, I think more now, it was at one time it was a board that actually made real decisions, the decisions went through the board, the board made final decisions. That’s been changed it’s now an advisory board, it’s an advisory board to you as you know, you’re the executive director. But does a lot of, it’s still heavily involved in advising the governor and working on economic development issues through the entire state of Utah. The board consists of business people that are recognized authorities in their own field, it’s geographically diversified and it comes together once a month to evaluate companies that are being potentially given incentives, they make the decision on the incentives or at least make a recommendation to Val on the incentives, and it plays a very very active role in determining where we should be looking, what policies we should be looking at, what we can do in rural Utah versus what we do on the Urban, what areas we should be involved in and how we should be functioning as a State in the economy.
Val Hale (4:19): And I might add it’s a bipartisan board.
Jerry Oldryod (4:22): That’s right, it’s a bipartisan board and you can see that in our discussions, we have a very interesting board and any of you that want to attend those board meetings they’re public meetings and you’re more than welcome to attend.
Val Hale (4:37): Well, thank you very much for that explanation, we do have a fantastic GOED board, some amazing business leaders, very smart individuals and we’re fortunate that they’re willing to give their time and effort to the state. You know economic development, I’ve often said, is a journey not a destination. You never arrive to a point where you say “Hey! We’re done with economic development, hallelujah,” and I know the evolution of economic development in our state has been rather interesting. How has it changed over the years that you’ve been involved? How have you seen it change?
Jerry Oldryod (5:10): Before Mike Leavitt and the Industrial Assistance Account economic development was primarily done by norms raiders, groups like that. These were business people who would go around to various states and meet with various businesses to try to entice them to come to the state of Utah. There were no real incentives that could be offered other than just persuasion. That changed with the Industrial Assistance Account. The Industrial Assistance Account was primarily a program created by the legislature to attract a large aerospace company to expand its operations in Utah and it created a fund of money that was used then to give incentives to companies that would come in to the state. It was basically a grant program. A grant would be given to a company, that company would then hire people and they would actually pay off, it was stated as a loan but that loan was paid off by the number of employees that they hired, so it was basically a grant program. And that got the state into trouble, to be honest with you Val, I mean, we had American Stores that came in and, America Stores was the old scaggs group out of Utah that moved to California. They wanted to move their headquarters to Utah, interesting, everybody was excited. They built what was now the Wells Fargo building downtown, they hired a number of employees and brought them in. Albertsons bought them out within a year or so and they were gone. And the state had invested that money as a grant and then tried to claw that money back and it ended up in litigation that the state lost. What we got out of that whole thing was a building and the right to pay a lot of lawyers. So everything then moved to post performance. The primary vehicle that we used was the economic development tax increment financing, which is basically a post performance, it’s an earned incentive. We realized early on that we couldn’t give large grants anyway, we’re not like Texas with a 300 million dollar fund to close transactions. It’s relatively small. But the one way we can do that by giving an EDTIF, which is based upon the company’s ability to generate new state revenue, and a portion of the new state revenue can be given back to the entity. That means if they don’t bring new state revenue to the state, if they leave they don’t get anything. If they fail to meet their obligations the amount that they receive is less. But what it does, it allows for every single, in every incentive we can show and demonstrate what the return on that investment is. If we give a 10% incentive that means we keep the state revenue, 90% of it is left by the state, only 10% goes back to the company that’s moving in. It’s a tool that was used and it changed dramatically. What’s also changed is the fact that we’ve gone from the state trying to figure all this out to a whole bunch of site selectors and other people to get involved in economic development and a lot more of it now is based upon very clear data as to what companies need, very clear data as to what areas that they’re looking at and how we can best facilitate that.
Val Hale (9:00): Well, Utah over the last decade has just been doing phenomenally well. By any measure, probably the best in America. Certainly Forbes magazine thinks so, six in the last nine years the best place for business and careers in America. Why are we doing so well? You get a chance to hear these CEOs that come in and talk and hear their messages. Why do you think Utah’s been doing so well?
Jerry Oldroyd (9:28): I think there about three reasons. One, I think we have a very strong middle class. Unlike a lot of states where you have a week middle class, Utah doesn’t fit that mold and I think as we’ve had a strong middle class, it’s been able to keep the American dream alive, so to speak, people can advance and companies come in here and they like that because that means we have got an educated workforce, by and large, we also have a very very diverse economy. Up until, I think a year or so ago we were the most diverse economy in the country and that helps because then when there’s a recession or there’s a slow down it doesn’t hit one industry. And that’s new to Utah, because at one point Utah was very much dependent upon mineral extraction, it was dependent on Kennecott Copper but that’s not the case any more. So we can ride out a recession, I think, a lot better than we could before. That’s one reason we came out of the Great Recession as well as we did. At the same time, we have a very educated workforce and we speak multiple languages, by and large, and companies that are coming into the state of Utah are looking for that. I think we have a very very entrepreneurial environment which I think stems from the history of this state, it goes right back to our basic roots. And that creates a real opportunity for small businesses, it creates an opportunity for new technologies, new patents, new intellectual property and by and large I think Utah has been very very successful as a result of that.
Val Hale (11:02): And one of the other new opportunities is investors. We’ve seen some incredible investment recently in the state, most recently the 8 billion dollar acquisition of Qualtrics. Those things were unheard of before.
Jerry Oldroyd (11:15): Let me tell you, a few years ago we sat in a D-bed board meeting and we looked around and said, you know the tech sector, Utah is basically fly-by state for venture capital. What I mean by that is you get people flying from the east coast to the west coast, the west coast to the east coast, and they passed Utah at 30,000 feet. And so the investors, we just didn’t have that much venture capital. There were three venture firms that did basically the same type of product, and it was just really hard, if a company invested, an out of state investment firm invested in a company that meant one thing, that the company would leave the state of Utah. And so we sat around as a board and thought what can we do, you know, what should we do? And the conclusion that we reached was we needed to create a, we needed to build a synergy. We needed to be able to have a critical mass of companies because that way employers, you know, we could hire people. When those people lose their job they could go out and find another job with another company, which we didn’t have before, and we went at it as a group and we very systematically looked at a couple of incentives. I think IM Flash is probably the start of it. We wanted to build a technology center, we needed a company that was heavily involved in the IT sector, and a large investment. And so we gave a big incentive, or large incentive, largest at the time, to IM Flash Technology. Because of that, according to the company, or what I’ve heard and I cannot independently verify it, but close to one hundred companies moved into the state of Utah to support IM Flash Technology.
Val Hale (12:57): It’s true.
Jerry Oldroyd (13:02): Another company that we very carefully went after was Adobe. When Adobe bought Omniture we were afraid as a board, and I think everybody in the state was afraid that Omniture would go just like every other company, it would move its headquarters to California. But we sat and worked with Adobe to keep them here and gave them an opportunity, worked with them to help them build the campus, to sell the state of Utah, and Adobe came, they built their campus, they continued to grow and we just recently gave them another incentive and they’re in the process now of possibly doubling in size aren’t they?
Val Hale (13:42): Yes, another twelve hundred employees, very impressive.
Jerry Oldroyd (13:45): But because of Adobe other companies, because of it’s high profile, started looking at Utah’s tech sector and I think as a result of that we had more activity, more companies moving in, and when we had more companies moving in the venture capital just flowed right along with it. And those kind of decisions that we made back then made a huge difference I think in the tech sector which is now really a primary driver of our economy.
Val Hale (14:11): You know, nothing has shone the spotlight on corporate recruitment like the Amazon HQ2 headquarters announcement. That was very unorthodox because it was so public and open. Do you see that changing the way businesses do site selection and the way they choose their locations of where they’re going to locate?
Jerry Oldroyd (14:33): What was unique about it was the fact that it was so public. I mean, Amazon announced it to the world that they were going to find a second headquarters and they had every state then participate, every state that wanted to, to participate to present a proposal. It was very, very public. And I don’t know how well it worked out for them now that they’re settled on New York, I don’t know that they’re fully settled on New York anymore because a lot of the criticism. Yeah, it has changed site selectors, and the way that companies select. I think we’re seeing more and more of what Amazon is doing and it’s all basically, a lot of it is incentive driven. It’s where are we going to get the best deal for our investment? Who’s going to help pay for it? And I think you’re going to see a lot of states back away from that sort of demand, but we’re seeing more and more of it. We see a lot of companies are now talking about a second headquarters or expanding, and you know Utah, we’re just not going to play that kind of a game. We would love to have, you know, 40,000 employees in the state but we’re not going to invest the kind of money that New York was willing to, to get an Amazon headquarters.
Val Hale (15:48): Are site selectors less relevant than they have been in the past? I mean they used to drive a lot of corporate decisions. Is that going a way a little bit?
Jerry Oldroyd (15:57): I think site selectors are still very important, when you have site selector project come in it’s a legitimate project, by and large it gives a lot of credibility to the company that’s coming in. But site selectors are becoming less and less important. Don’t get me wrong Val, they’re still very very important but probably less important because right now you can go to the internet and get most of the information you need about a state. You can go in and look at the sites that are available, you can go to companies like EDCUtah for example and contact them directly and you can tailor what you want and not necessarily what the site selector wants in terms of what they choose for you. So I think you’re seeing less involvement with site selectors, I think that field is probably a lot smaller than it used to be, but they still play a critical role. And that’s why I think GOED is sponsoring, or heavily excited, very excited about the guild that’s coming to the state of Utah, is that in April?
Val Hale (16:57): Yeah it’s coming up here in a month or two, and the Site Selectors Guild is probably 40 or so, maybe 40 to 50 of the top site selectors in the world really. And this is a by invitation only event and they will be here in Utah, we’ll be able to show them around and let them see first hand, many of them have probably been here already, but it really is kind of the distinguished group of corporate site selectors out there so we’re excited to host that coming up. And speaking of site selectors, you mentioned incentives. How important are incentives in the recruiting process?
Jerry Oldroyd (17:37): Incentives in the recruiting process are essential. There are companies that will move to Utah without incentives and that happens all the time, don’t get me wrong, it’s not the only reason companies move, but incentives are important because, if nothing else it’s one of those check the box kind of things. When a company, a large company is moving they’re looking at places to go, there are a couple of things they need to look at and incentives is always on that list. If it’s not there it doesn’t happen. Every state competes for this type of business and so every state, virtually every state has incentive programs. So if I’m a company I’d be remiss if I didn’t look at how I could get state support incentives if I was trying to move if I’m a big company with a lot of employees. And so it’s critical and you’ll notice in our legislation and the way we handle that, it’s critical that a company looks at incentives if they want to come in the incentives is one of the drivers and we’ve analyzed that, EDCUtah has analyzed it and it’s clear that incentives are a critical component of it. It may not be the only component but its a significant factor in companies that make decisions to move to the state of Utah.
Val Hale (19:02): And not just to move to the state of Utah but to stay in the state of Utah. I think it’s important for our listeners to know that two thirds of the incentives that we provide companies are for businesses already in Utah.
Jerry Oldroyd (19:16): Yeah, I think it’s important to realize that because that’s a big distinction. I mean, a lot of people think that we’re just out recruiting out of state companies but that’s not the case, you know you can use Merit Medical as a good example. They buy businesses and we want those businesses to say in, for them to move those businesses to the state of Utah for example. And we just recently did this, they could move those, they’ve got options to move them elsewhere, out of state to other facilities, but you know through the incentive process we were able to keep them here and move those operations here. So it really is a lot of local companies that are taking advantage of it as well as out of state companies.
Val Hale (19:57): You know, I’m from Utah county and, you know, I tell the story about Novell and WordPerfect, two of the companies that really kind of paved the way for the tech scene here in Utah. Both of them flourished and did really well for a number of years, and both ended up being purchased and moved out of state. So all my neighbors who were working for Novell ended up looking for jobs elsewhere or else they had to move to Boston or wherever. WordPerfect ended up moving, being purchased by Corel, moving to Canada and so we weren’t able to keep those businesses in Utah. And one of the nice things was many of those people who worked for those companies who chose to stay ended up creating these businesses that have now grown into Silicon Slopes, but that’s why we have the incentives for our local companies to keep them from moving their operations and jobs out of state. Because these companies have an opportunity to go anywhere they want to go. So anyway that’s an important distinction. Jerry we really appreciate your time today, for sitting down and talking economic development with us. Again, thanks for your great service to the state and the many many many hours you’ve donated and your expertise and helping us grow our economy. Thank you very much.
Jerry Oldroyd (21:19): Well I appreciate it. May I make one final comment? The economic development programs are creations of the legislature and are administered by GOED and that’s one thing that I think has been really helpful has been the ability of the legislature, the Governor’s office, and GOED to be able to coordinate efforts to be able to try to look at potential problems where we need to build the economy, and it’s been a mutual effort. The one thing Utah does better than any other state that I’ve seen, and I’ve looked at a lot of states over the last almost 20 years, the one thing we do is collaborate with our legislature, with Val, people like you, and with the Governor’s office, and that’s made a big difference in how our economy has functioned.
Val Hale (22:04): Very well said. I couldn’t agree more. So, thank you very much – our first episode of Business Elevated. You can find this on the website at buisness.utah.gov [and] we’ll put it on our social media. We’ll have these regularly featuring some great business, government, civic leaders and I think it’ll be very interesting. Thank you very much.
Thanks for listening to the Business Elevated podcast, a production of the Utah Governor’s Office of Economic Development. Listen to other episodes where you get your podcasts or at business.utah.gov.