Brice Wallace
Utah’s corporate recruitment has hit a slowdown, with the main culprit being corporate contemplation.
During the Governor’s Office of Economic Opportunity (Go Utah) board meeting in December, statistics revealed that both Go Utah and its contracted recruitment partner, the Economic Development Corporation of Utah, are seeing fewer-than-usual projects involving companies wanting to put operations in Utah or expand their existing business in the state.{mprestriction ids="1,3"}
For example, the Go Utah board at this point of fiscal year 2021-22 had approved tax incentives for 18 companies. This fiscal year, the board approved three projects each in July and August but only two in the four months since then, putting the year-to-date total at eight.
Daniel Royal, director of business incentives at Go Utah, said two factors have contributed to the lower numbers. One is the normal slowdown during the holidays. The other comes from companies being hesitant because of “general economic uncertainty” nationally, he said.
“We’re noticing that companies are moving slower with their decision-making,” Royal told the board. “We see there’s not as much movement as we experienced in times of normal economic goings-on in the country. A lot of companies have put a pause or hold on their applications that we’ve spoken to, but all in all I think it’s just a slower movement going on from the companies that we’ve been in contact with, that have applications and things like that.”
Erin Farr, senior business development manager at EDCUtah, told the Go Utah board that that organization likewise is seeing “a kind of slowdown.”
“We are definitely seeing companies holding on to their cash, making the timeline for their decisions longer and just generally moving slower,” she said.
Even recent projects, those announced since July, “have had a much smaller headcount than what we’ve been seeing, and a large square footage, so I think we’re seeing a lot of automation happening in a lot of these projects,” Farr said.
One element to keep in mind was that fiscal year 2022 was a record year for Go Utah and some of its corporate recruitment numbers for the first half of the current fiscal year top the entirety of fiscal 2021, which was dominated by the impacts of the COVID pandemic.
Projects approved for incentives by the Go Utah board in the first half of the current fiscal year are tied to the future creation of 1,658 high-paying jobs. That compares with 20,478 for the full 2022 fiscal year and 8,841 for FY2021.
Capital spending for the current-year projects is estimated at $790.7 million, compared with $1.97 billion for the FY2022 full year and $464.3 million in FY2021.
New total wages expected to be generated from the projects this year so far is about $1 billion, compared with $12.7 billion for the full fiscal year 2022 and $5.5 billion in FY2021.
New state tax revenue is estimated at $300.5 million for the current year so far, compared with $942.4 million in full FY2022 and $341.3 for FY2021.
Included in those figures are those for projects in rural Utah. Job creation in approved projects so far this fiscal year is 558, which compares with 8,972 for the full 2022 fiscal year and 2,747 the year before that.
Rural capital expenditure is $555.6 million, which compares with $1.27 billion for all of fiscal 2022 and $201.2 million in FY2021.
New state tax revenue from rural Utah projects is pegged at $252.8 million so far this fiscal year, compared with $572.4 million in full FY2022 and $116.7 million in FY2021.
Total wages from rural projects is estimated at $397.2 million for the current fiscal year so far. It was nearly $5.3 billion for the full FY2022 and nearly $2 billion for FY2021
For EDCUtah, the numbers presented at the Go Utah board meeting in December were contextualized by comparing them with the organization’s goals for the current fiscal year. As of December, EDCUtah had 11 project “wins,” or 31 percent of its goal of 35 for the fiscal year. The number of jobs created or retained was 1,776, or 15 percent of its goal of 12,000. Capital expenditure totaled $314 million, or 21 percent of its goal of $1.5 billion. Square footage had reached 891,600, or 36 percent of its goal of 2.5 million square feet.
Still, officials at Go Utah and EDCUtah expressed optimism that the first half of 2023, which is the last half of the current fiscal year, could be busy. EDCUtah had 121 active projects, mostly in manufacturing. Farr said new project “starts” have been averaging 10.6 per month, returning to figures seen before the COVID pandemic. “We don’t see any real worry at this point on new project starts,” she said.
Royal said four projects, all in manufacturing, likely will be up for Go Utah board consideration in the next couple of months. Those companies are involved in negotiations with cities and counties where their projects are being considered or they are working to refine their numbers, he said. About 1,200 total jobs are tied to those four projects, he added.
Go Utah does not provide upfront cash incentives. Its main incentive is economic development tax increment financing, or EDTIF. If a project is approved by the board, an incentivized company can receive a certain percentage of additional state taxes it would pay over the life of the agreement with the state. Each year that an incentivized company meets the obligations in its contract with the state, it will qualify to receive a portion of the new, additional state taxes the company paid to the state.
Go Utah and EDCUtah corporate recruitment and retention numbers never match exactly because not all of EDCUtah projects go through the state incentive process.{/mprestriction}
