FROM PERU TO YOU UA company markets healthy pichuberries PAGE 13
Your Weekly Business Journal for the Tucson Metro Area WWW.INSIDETUCSONBUSINESS.COM • AUGUST 24, 2012 • VOL. 21, NO. 65 • $1
Act II Advocates for film and TV industry incentive bill restart campaign Page 4
Ramping up revenue Eller College finds financial sustainability Page 5
Local real estate rises
Robert Alcaraz
Housing sector scores better at mid-year Page 19
Mayor’s trip likely to result in meeting with Mexico’s new president By Keith Rosenblum Inside Tucson Business Most likely one of the most important benefits of Tucson Mayor Jonathan Rothschild’s trip to Sonora and Mexico City this month was the pledge of an audience in March with soon-to-be President of Mexico, Enrique Peña Nieto. Rothschild and his Phoenix counterpart Greg Stanton met with business and government officials with an immediate on eye helping to increase regional commerce, expediting cumbersome border crossings and boosting tourism. “What I found was just how much people appreciate the mayors of Ari-
zona’s two largest cities reaching out to them,” Rothschild said this week after his return. “We both came back believing that Arizona is going to be the beneficiary of more tourism and commerce in the years to come.” The specific date for a meeting with Peña Nieto was not set. The new president is due to be sworn-in to his six-year term on Dec. 1, after winning the country’s national election July 1. Rothschild said he and Stanton were questioned by Mexicans about Arizona’s perceived hostility toward foreigners as a result of passage of the state’s anti-illegal immigration law, SB 1070. “We made it clear that this law did
not reflect the hospitable intentions of the people of Arizona,” Rothschild said. The mayors visits to Guaymas and Hermosillo included a tour of Leoni Wiring Systems Mexicana, a global company that has operations in Tucson. There Rothschild touted Southern Arizona as a place where Mexican companies can buy raw materials and then use it as a logistics center for shipping finished products. The mayor also met with Omar Canizales, president of Liga Mexicana del Pacífico a baseball league that will bring four teams — from Hermosillo, Ciudád Obregón, Culiacán and Mazatlán — to Tucson in October to play against prospects for
the Los Angeles Dodgers and San Diego Padres. In Sonora, Rothschild’s group included Maricela Solis, city business advocate; Joe Snell, president of Tucson Regional Economic Opportunities (TREO); Mike Hammond, president and managing shareholder of Picor Commercial Real Estate Serivces; and Fletcher McCusker, chairman and chief executive of Providence Service Corp. and a member of the Downtown Tucson Partnership. On the Mexico City leg of his trip, Rothschild was accompanied by Brent DeRaad and Felpe Garcia, president and vice president, respectively, of the Metropolitan Tucson Convention and Visitors Bureau.
2 AUGUST 24, 2012
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Contributing to 20 Scholarships for the 2012-2013 Academic Year. Edgar Duran - SUSD, Jorge Castro Maldonado- ASD, Bryon Nunes- MIL, James Love-*SUSD, Tasia Garcia- FWSD, Lucero Pesqueria-SCUSD, Karen Cooper- VUSD, Jacqueline Gudanowski- MIL, Jacqueline Scheidt- VUSD, Dakota Schorzman- VUSD, Kendall Hoback- *SUSD, Eric Cumberland- MIL, Andrea Vasquez- TUSD, Jason Herrlich- MIL, Manuel Lopez- TUSD, Saul Soto- SUSD, Not Pictured: Lauren Rayner- *SUSD, Tameela Acosta- VUSD, Hoang Le- VUSD, Stephen Lee- VUSD From left to right:
Key: SUSD: Sunnyside Unified School District, ASD: Amphitheater School District, MIL: Military, *SUSD: Sahuarita Unified School District, FWSD: Flowing Wells School District, VUSD: Vail Unified School District, TUSD: Tucson Unified School District
Congratulations
to these scholarship recipients in our community!
rosemontcopper.com
InsideTucsonBusiness.com
AUGUST 24, 2012
3
NEWS
Tucson looks at ways to stop city golf from losing more than $1M per year
Scottsdale firm buys semiconductor maker Analog semiconductor manufacturer Apex Microtechnology, 5980 N. Shannon Road, has been reacquired by Scottsdalebased Alerion Capital Group for $26 million. Alerion had sold the company five years ago to Cirrus Logic Inc. “It’s a very good, solid business,” said James Unruh, founding principal of Alerion. “I like the analog sector in the semiconductor world.” Although analog accounts for a smaller sector of the overall semiconductor market, the devices are used in a variety of businesses from cars to toys. Apex currently supplies high-power microelectronics for motor controls. Unruh said the company will look to expand into different market sectors, including medical and aerospace. Unruh said part of the appeal in buying back the company was the familiarity both with the product and the employees. Alerion said it will retain Apex’s 80 employees as well as its 50,000 square-foot facility. Greg Brennan, president and CEO of Apex, was in charge of the company’s sales and marketing efforts five years ago when it was owned by Alerion.
By Patrick McNamara Inside Tucson Business
SEE GOLF PAGE 6
CONTACT US
Phone: (520) 295-4201 Fax: (520) 295-4071 3280 E. Hemisphere Loop, #180 Tucson, AZ 85706-5027 insidetucsonbusiness.com
Tire distributor building $19.5M center on south side
Robert Alcaraz
With more than 40 golf courses in the metropolitan area, Tucson has long been considered a national capital of golf. But the abundance of golf courses belies the suffering of the industry generally and the looming troubles with the City of Tucson’s municipal golf operations. Tucson City Golf, a division of the Parks and Recreation Department, has been losing money on a large scale for several years. In fiscal 2011, the city’s golf course fund ran a $1.2 million deficit, requiring a subsidy from other city funds to make up the difference. Over several years, the city golf fund has accrued nearly $7 million in subsidies, which accounting officials call interfund balances. The city operates golf as an enterprise fund that is supposed to be self-sustaining. The growing annual losses have sparked a debate among elected officials and city management as how best to address the issue. “The status quo is unacceptable,” said City Councilwoman Regina Romero. Romero brought the issue of golf revenues to the table in April. Since then, the council has begun look for ways to make golf operations truly self-sustaining, to pay off the accumulated debt and develop a fiveyear plan for city golf’s future. “I want to be as fiscally prudent as possible,” Romero said. “As I see it, nothing is off the table.” The troubles with city golf appear to have started around 2002. That year nearly 300,000 rounds of golf were played on the five city courses. In 2011, the number of rounds dropped to 193,000. A decline in revenues followed. In fiscal 2007, city golf brought in more than $9.7 million in revenue. By fiscal 2011, that had fallen to slightly more than $7 million.
Tucson City Golf has received nearly $7 million in subsidies since 2003. The city has established a committee of stakeholders to address the financial issues and put together an action plan.
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A North Carolina-based tire distributorship plans to build a 125,000-square-foot distribution center at the southwest corner of Valencia Road and Alvernon Way on the south side, according to Tucson Regional Economic Opportunities (TREO). American Tire Distributors Inc., headquartered in Huntersville, about 12 miles away from Charlotte, is spending $19.5 million to buy the property and build out the warehouse. Construction has already begun and is expected to be finished next month, according to TREO. The facility will have 30 employees and be the company’s second such center in Arizona. The company has an operation and about 100 distribution centers nationwide. The Tucson center will serve the company’s retail tire clients in parts of Arizona, New Mexico and California. American Tire selected the Tucson site because of its logistical access, according to TREO.
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4 AUGUST 24, 2012
INSIDE TUCSON BUSINESS
NEWS
Supporters mount effort to revive film industry incentives
The number of Tucsonans in the workforce and the number of Tucsonans who actually have jobs is down and the statistical combination of the two also results in a falling unemployment rate The Arizona Office of Employment and Population Statistics reports the unemployment rate for the Tucson region in July was 7.7 percent, down from 9.0 percent in July 2011. The Tucson unemployment is not seasonally adjusted so year-to-year comparisons are more valid than month-to-month comparisons. In June, the unemployment rate was 7.6 percent. But the statewide unemployment rate, which is seasonally adjusted, also rose in July to 8.3 percent after holding at 8.2 percent for three consecutive months. It was at 9.6 percent in July 2011. For the most part job losses were slightly less than what is typical for July, although the number of government jobs were 0.4 percent more than average mostly due to school districts cutting back over the summer months. All totaled, jobs in the government sector were down 15.7 percent. The biggest losses in the private sector were in leisure and hospitality where jobs were down 5.7 percent. The Tucson region’s available workforce in July totaled 447,600, down 457,500 in July 2011. The number of Tucsons with jobs dropped to 413,000 from 416,300 in July 2011.
More Arizonans to travel over Labor Day weekend The number of Arizonans expected to travel at least 50 miles away from home for the Labor Day weekend will be up about 3.4 percent to about 674,000, according to AAA Arizona. Nationwide, the number expected to travel between Aug. 30 and Sept. 3 is forecast to jump 2.9 percent from a year ago to 33 million. “Slight improvements in the economy are giving travelers across the country a boost to take advantage of the final three-day weekend of the summer,” said Amy Moreno, director of travel services for AAA Arizona. “This is especially true in Arizona, as the projected number of Labor Day travelers is set to outpace nationwide travel growth.” Although more people are expected to travel, the distance they will travel this year is down 7.5 percent to an average of 905 miles and the amount of money spent on trips is down 14 percent to $596. The research was done for AAA by IHS Global Insight.
Gordon Bates
Fewer Tucsonans working, but unemployment rate falls
Lobbyist Barry Aarons, left, and Tucson Film Office Director Shelli Hall discuss strategies to gain lawmaker support for a film incentive bill. About 100 people showed up at the University of Arizona Center for Creative Photography for a discussion about attracting the film industry.
By Patrick McNamara Inside Tucson Business Undaunted after failing the last two years to get state lawmakers to approve of an incentive plan that could lure movie and TV productions to Arizona, supporters of the idea are gearing up to launch a new campaign for the next Legislature. “We have a legacy of film in Arizona that’s just magnificent,” said Shelli Hall, director of the Tucson Film Office and one of the BIZ FACTS organizers behind Arizona Film and the effort. Media Coalition Hall and other www.azfilmandmedia.org supporters of the Tucson Film Office film plan meet Aug. www.filmtucson.com 16 in a public forum at the University of Arizona Center for Creative Photography to discuss how that legacy could be reclaimed. The heart of the proposal that supporters pushed in the last legislative session would provide film and television production companies state tax credits of up to 30 percent of the costs they incur for production in Arizona. Companies would have to spend at least $250,000 on a production before becoming eligible for the credit. The dollar amount of credits the state would allow under the proposals would be capped at set levels. The Arizona Department of Commerce would determine the eligibility for credits based on a set of criteria that includes minimum in-state spending requirements and hiring Arizona residents for at least 50 percent of its full-time workers
while in production in the state. Productions also would be required to acknowledge in the end credits that filming was done in Arizona. In the coming legislative session, supporters plan to push a similar bill. “The second this hits the streets it’s going to start creating jobs,” said Tucson City Councilman Steve Kozachik, one of the panel particpants and a supporter of the proposal. Kozachik said the bill should be considered a jobs bill first and foremost because of the potential it has to bring outside money into the state and spur additional employment. “It will create thousands of jobs and it will put millions of dollars into our economy,” he said, adding that film and television production helps support numerous support industries from food service, lodging and building supplies, to name a few. Arizona is one of 13 states without an active film and television industry incentive program. “One of the western states has no incentives because it has no income tax, there’s nothing to incentivize,” said Mike Kucharo, president of the Arizona Film and Media Coalition, referring to Nevada. As an example of how much incentives have played into the industry’s location choices, Kucharo said Arizona had five film studios at one time but today has none. Meanwhile, the film industry in New Mexico grew from nearly non-existent to becoming a hub of motion picture and television production over the past decade following the adoption of an incentive program. Hall also said the growth in incentiveoffering states has contributed to Arizona’s
decline in film production. “When I started here, Arizona was No. 3 in terms of amount of productions happening,” she said, referring to the 1990s. “Today, I’m sad to say, we’re in the bottom three at least in feature film and television production.” Hall said the state no longer funds the Arizona Film Office, which in other states often serves as the first point of contact for film and television productions seeking information about filming locations and the local business climate. “It sends the wrong message to the industry,” Hall said. In an effort to send the right message to lawmakers, attorney and lobbyist Barry Aarons said supporters of film and the incentive proposals should attempt to educate people. “Part of the anti-tax credit crowd’s objection was that this was a refundable tax credit,” Aarons said. But many of those lawmakers who opposed the film industry tax credit supported a similar one passed for the benefit of semiconductor manufacturer Intel, which is building a $300 million research and development facility in Chandler. “That’s good news,” Aarons said, noting that it provides the opportunity to educate those lawmakers who opposed film incentives. Additional information on film incentives can be found at the Arizona Film and Media Coalition website at azfilmandmedia.org or the Tucson Film Office at www.filmtucson. com. Contact reporter Patrick McNamara at pmcnamara@azbiz.com or (520) 295-4259.
InsideTucsonBusiness.com
AUGUST 24, 2012
5
NEWS
Head of Eller College pleased with first year and school’s fiscal sustainability By Clayton R. Norman Inside Tucson Business One year into his gig as dean of the Eller College of Management at the University of Arizona, Len Jessup is manning the helm of a school that is entirely selfsustaining, highly ranked in multiple categories and looking to grow. Jessup took over the deanship in May 2011 after leaving Washington State University where he had served as dean of the college of business and director for Entrepreneurial Studies and where he had worked since 2000. In an interview last summer, Jessup told Inside Tucson Business his main goals were to improve Eller’s national rankings against other business schools and to make the school generate enough revenue to pay its own way. “It was a great year, I felt like we accomplished a lot as a team, we made a lot of traction on a whole array of strategic initiatives,” said Jessup when asked how he would describe his first year at Eller. “We’d said we wanted to collectively help to bring everything up to the next level of quality that the MIS (Management Information Systems) program and the McGuire Center (for Entrepreneurship) achieve and from that point of view, the external metrics, it was a good year we did really well in rankings in particular with the grad programs that we really focused on.” U.S. News and World Report ranked Eller’s MIS program seventh and the entrepreneurship program 10th among national MBA programs in 2012. Jessup said the school is working on to continue improving the MBA offerings including a pilot run of a new course this fall that pairs students in the MBA program at Eller with graduate students in other disciplines to write business plans and develop commercialization strategies for emerging technologies developed at the UA. Jessup said the school has already reached the other main goal that he came into the deanship with — ramping up revenue so the college would be self-sustaining. Besides improving revenue flows and fundraising, Jessup said, higher enrollment and rising tuition costs helped get the school into the black. “All of that has kinda come together for the Eller College,” he said. “We just saw the data, we’re now self-sustaining. When you think about all the money that everybody brings into the building with the students and the tuition they bring into the building with them, the grants the faculty bring in with them and our revenue generating programs like executive education, execu-
LEN JESSUP
tive MBA, private giving and philanthropy — we’re now self-sustaining.” Jessup said that from those diverse sources the school brings in somewhere between $80 million and $90 million in revenue. That includes the roughly $5 million in gifts and pledges that Jessup and his four-person fundraising team brought in this year. The school spends roughly $50 million to operate. “This college doesn’t use any state tax dollars,” Jessup added. “We’re generating more than we use.” In addition to fundraising Jessup said last year he intended to ramp up executive education courses as a way to tap into a lucrative market. Executive education revenues at other major business schools bring in as much as $20 to $30 million annually at schools like the University of Texas at Austin and the University of California at Berkeley. “If you look back over the last 10 years, we’ve averaged about $300,000 a year in revenue generation from those programs,” said Jessup who cited southern Arizona’s mild winters as a major advantage in attracting winter visitors for executive education programs. “We think that the market is there for us to be doing 10x of that. We think that could be a $3 million a year program for us.” Eller already offers executive education retreats at Loews Ventana Canyon resort and is in negotiations with Miraval and Canyon Ranch resorts to develop curricula for programs there, Jessup said. So with financial self-sufficiency out of the way and a year of strong national rankings for the program Jessup can focus on a
new initiative to try and export Eller’s entrepreneurial spirit to the wider campus. Tech Launch Arizona was announced last year as a way to streamline and consolidate the offices and processes of geting university-developed technology out into the marketplace. “(Tech Launch Arizona) is all for the purpose of getting more technologies from the U of A either get licensed or to spun out as companies — kind of like Ventana Medical Systems — into the local and state economy to try and help the state to grow,” said Jessup. Jessup headed a commission that spent the past eight months searching for a director for the initiative. He says an announcement about the filling of that slot is forthcoming. Parallel to the Tech Launch Arizona initiative are plans for a new building to house the Tech Launch Arizona offices as well as the McGuire Center for Entrepreneurship. Jessup said estimates for the cost of the building, which is currently in the concept stage, run around $45 million. The building, he said, will house all of the market end components needed to create what he calls a “pipeline” of product development. When talking about the future of that pipeline Jessup compares the potential in Tucson to places like Austin, Texas, and La Jolla, Calif., that have capitalized on technologies emerging from universities nearby to develop resilient industries and fuel economic growth. “Somewhere like La Jolla, they’re engine is up and running, it has been for 20 or 30 years,” said Jessup who visited the community near San Diego several times in the past year. “So they’ve got his pipeline just cranking, of drugs and devices and diagnostics and delivery and everything is just there it’s all been built up — the funding services, the professional services everything. So that pipeline never really missed a beat. During the downturn those were industries that kept going and people kept investing in them because people needed those medical services and treatments.” All the elements are in place here in Tucson to create a pipeline of our own, says Jessup. “We’ve got the makings for that here,” he said. “And you see evidence of it. We’ve got a great medical school and a couple of companies in diagnostics that are doing a good job up in Oro Valley and I think the same thing could happen around clean energy, we just have to keep building that ecosystem.”
This Week’s
Good News Mrs. America is back We almost missed it, but guess who is back in Tucson right now. The Mrs. America Pageant. Yes, after leaving town last year for the venue of the Greenbrier in West Virginia, the pageant has returned to Loews Ventana Canyon Resort where contestants from 50 states and the District of Columbia arrived earlier this week. The final pageant and crowing of the winner is scheduled for Wednesday (Aug. 29). One of the pageants struggles has been getting TV coverage. Thanks to new technology anyone anywhere can see it via live streaming at www.mrsamerica.com/ . Started in 1977, the Mrs. America Pageant honors married women. The winner of Mrs. America goes on to compete in a Mrs. World competition.
The Tucson
INSIDER Insights and trends on developing and ongoing Tucson regional business news.
TREO fills vacuum With a multitude of chambers of commerce and other organizations all fighting for survival in the Tucson region, there should be little surprise that Tucson Regional Economic Opportunities (TREO) was quick to fill the vacuum when the Tucson Metro Chamber looked like it was dropping the ball on organizing a business coalition to develop incentives that might attract airlines to improve service to Tucson. Actually Michael Guymon, vice president of regional development for TREO, helped develop the business air service survey that was conducted earlier this summer even though the effort was done under the auspices of the chamber. In retrospect, Insider noticed that when the survey was unveiled Aug. 8, there didn’t seem to be anyone from the chamber taking charge. In fact, the closest person to representing the chamber was Bill Holmes, whose position as chief operating officer had been eliminated less than two weeks earlier.
Plastic bag survey Chances are you’ve heard the Tucson City Council is considering an ordinance that would ban the use of plastic shopping bags. Now Insider comes to find they’re doing a survey. If you’re so inclined, go here — www. surveymonkey.com/s/plasticbagsurvey — and let them know how you feel.
6 AUGUST 24, 2012
INSIDE TUCSON BUSINESS
NEWS PUBLIC NOTICES Selected public records of Southern Arizona bankruptcies and liens.
FORECLOSURE NOTICES Crystal Homes Development LLC 4801 S. La Cholla Blvd. 85746 Tax parcel: 119-41-283 Original Principal: $240,000.00 Beneficiary: Commerce Bank of Arizona Auction time and date: 11:30 a.m. Nov. 6, 2012 Trustee: Steven J. Itkin, Waterfall Economidis Caldwell Hanshaw & Villamana, 5210 E. Williams Circle, Suite 800 Crystal Homes Development LLC 375 E. Elvado Road 85706 Tax parcel: 138-17-035B Original Principal: $260,000.00 Beneficiary: Commerce Bank of Arizona Auction time and date: 11:30 a.m. Nov. 6, 2012 Trustee: Steven J. Itkin, Waterfall Economidis Caldwell Hanshaw & Villamana, 5210 E. Williams Circle, Suite 800 Pamaha LLC 6444 and 6416-6418 S. 12th Ave. 85706 Tax parcel: 38-05-045J4 and 138-05-045H2 Original Principal: $585,000.00 Beneficiary: Wells Fargo Bank, Diamond Bar, Calif. Auction time and date: 11:30 a.m. Nov. 7, 2012 Trustee: Wade M. Burgeson, Engelman Berger, 3636 N. Central Ave., Suite 700, Phoenix Neon Enterprises LLC 2602 N. Tucson Blvd. 85716 Tax parcel: 112-07-22805 Original Principal: $952,000.00 Beneficiary: US Bank, Oak Park, Ill. Auction time and date: 11:30 a.m. Nov. 16, 2012 Trustee: Margaret L. Steiner, Lane & Nach, 2025 N. Third St., Suite 157, Phoenix TBM Equities LLC 919 N. Stone Ave., 10 W. Second St. and 928 N. Ninth Ave. 85701 Tax parcel: 117-02-191G Original Principal: $5,922,000.00 Beneficiary: Pi’Ikea LLC, Kahului, Hawaii Auction time and date: 10 a.m. Nov. 15, 2012 Trustee: John W. Dorris, Dorris and Giordano, 2 E. Congress St., Suite 1000 DMJJJ Dental Inc. 3405 N. First Ave. 85719 Tax parcel: 106-04-142A7 Original Principal: $210,400.00 Beneficiary: Bayview Loan Servicing, Coral Gables, Fla. Auction time and date: 11:30 a.m. Nov. 7, 2012 Trustee: Jason P. Sherman, Shapiro Van Ess and Sherman, 3300 N. Central Ave., Suite 2200, Phoenix PBI River LLC and PBI Oracle LLC 6760, 6770 and 6780 N. Oracle Road 85704 Tax parcel: 102-03-150F and 102-03-150G Original Principal: $2,050,000.00 subsequently raised to $2,880,000.00 Beneficiary: National Bank of Arizona Auction time and date: 1:30 p.m. Nov. 13, 2012 Trustee: Craig K. Williams, Snell & Wilmer, 400 E. Van Buren St., Phoenix
LIENS Federal tax liens Taqueria Juanitos Mexican Fast Food and Antonia Suazo, 708 W. Grant Road. Amount owed: $2,123.59. RJ&J LLC and Jose Quiroz-Miranda, 3081 W. Idaho St. Amount owed: $34,825.45. Learning Bee Preschool & Day Care Center Inc., 3966 E. Camino De Palmas. Amount owed: $1,364.75. P&B Mechanical Inc., 3132 E. 45th St. Amount owed: $34,164.10. Van Rylan Associates, 6879 N. Oracle Road, Suite 111. Amount owed: $1,620.13. Plants of Distinction Inc., 6930 E. Tanque Verde Road. Amount owed: $11,794.79. Oasis RV Center Inc., 2111 E. Benson Highway. Amount owed: $10,031.27. Keila Enterprises LLC and William B. Womack, 18 S. Eastbourne Ave. Amount owed: $5,075.52. Val’s Trucking and Valentine Kozielski, PO Box 950, Sahuarita 85629. Amount owed: $4,984.22. Jeff’s Total Performance Inc., 219 W. Calle De Las Tiendas, Green Valley 85614. Amount owed: $7,265.88.
Accelr8 arrival adds to vaunted Southern Arizona biotech ‘cluster’ By Patrick McNamara Inside Tucson Business The arrival early next year of Accelr8 Technology Corporation adds another piece to the south-after biotech cluster for the Tucson region. On Aug. 16, Accelr8, which is currently headquartered in Denver, announced its plans to relocate to the Pima County Herbert K. Abrams Public Health Center, 3950 S. Country Club Road, near the University of Arizona Medical Center South Campus. Officials with Tucson Regional Economic Opportunities (TREO) have long targeted biotech companies to develop the critical mass that will make a clus-
ter, bringing with it the synergies that will create more high-paying jobs and a ripple effect throughout the region. A viable cluster of like industries also benefit the companies that comprise the cluster. “It’s crucial, it really is,” said Accelr8 President and CEO Lawrence Mehren. Crucial because the more biotech industries in a region, the larger the talent pool becomes. “What really drives the success in this industry is the science and the science is the people,” Mehren said. Pima County plans to spend as much as $1.4 million to build wet-lab space in the building for Accelr8. The Arizona Commerce Authority will provide $700,000 in
a low-interest loan and the Pima Health System transition fund will provide the remainder of the funding. The company would lease the property at $9.25 per usable square foot, per year for an initial three-year period. Accelr8 plans to fill 65 positions over the first three years in Tucson with the potential to grow to more than 200 employees later. Founded in 1982, Accelr8 trades on the New York Stock Exchange under the ticker symbol AXK.
Contact reporter Patrick McNamara pmcnamara@azbiz.com or (520) 295-4259.
GOLF CONTINUED FROM PAGE 3
Despite the falling revenue, Tucson City Parks and Recreation Director Fred Gray said the division has been able to cut costs to alleviate the losses. The department has reduced its budget from roughly $11 million in fiscal 2008 to about $6.5 million this year. “We’ve been aggressive in controlling costs, we can’t control how many people play,” Gray said. A subcommittee of the city’s greens committee was assembled earlier this year to study the options. The group has been meeting twice monthly through the summer to parse the issue and come up with a recommendation for the city council. Subcommittee chairman Jeff Farkas said one issue has been discussed at length — marketing as a way to attract more golfers. “That is one of my central focuses,” Farkas said. He said city golf has an annual budget of less than $30,000 for marketing the city’s five courses. That’s a sparse budget for marketing, according to Ben Blake, executive vice president of business development at KemperSports, an Illinois-based golf management company that manages 35 municipal golf courses across the country. Blake said it’s not unusual for KemperSports to spend more than $50,000 a year on marketing for just one course. But it’s not just traditional advertising, Blake said. Courses are now using social media as a way to attract players. Marketing alone, however, isn’t likely to fix the ongoing financial issues Tucson City Golf faces. “Even if we add another 75,000 rounds of golf, it still doesn’t solve the structural problems,” Romero said. Other options for the subcommittee in-
clude changing the operating structure of city golf. Other communities across the country have privatized golf operations. This has generally two forms — a standard serviceprovider agreement whereby a municipality pays a management company to run golf operations or a long-term lease agreement, which a management company assumes all the costs and associated financial risks and receives greater autonomy to set fees and other policies. Blake said the first alternative is what’s used most often but he said a lease agreement holds benefits for a municipality that a service provider agreement doesn’t. For instance, leases will generally require the service provider to invest a specified amount in capital improvements. “In that case, the management company assumes all the risk,” Blake said. In either agreement, though, Blake said a management company like KemperSports brings to the table the expertise of running multiple courses across the country. Other cities have gone to a nonprofit model for course management. Often called the Baltimore model after the city where it originated, the municipal golf operations are run by a semi-autonomous nonprofit group. Although at this point no option has been ruled out for Tucson City Golf, neither of the alternative management structures would guarantee solvency. “I wouldn’t say privatization is the instant answer,” said City Councilman Paul Cunningham. The nonprofit model has struggled in many places it has been adopted due to the waning popularity of golf. It’s also the case that golf nonprofits haven’t been freed of political machinations, as evidenced by frequent squabbles
over funding and controling Baltimore Municipal Golf. Private courses haven’t been spared from the loss of interest in golf as numerous courses have closed or fallen into insolvency. In the Tucson region, financial issues plagued the Vistoso Golf Club for years. Forty-Niner Country Club also suffered and at one points was cut off from water service for not paying its bills until it was sold this summer for about $500,000, a fraction of the more than $3 million sales price the former owners paid a decade ago. Gray noted that two other private courses in Southern Arizona have recently closed, Santa Rita Golf Course in Corona de Tucson and San Ignacio in Green Valley. San Ignacio’s website says the course is scheduled to reopen in the fall following maintenance work. Aside from golf, it’s also possible the city might discuss alternative uses for underperforming courses. Both El Rio, 1400 W. Speedway, and Fred Enke, 8251 E. Irvington Road, are performing below expectations which has led to some talk of converting them to parks. “Based on water usage, parks are cheaper to run and benefit more people,” Romero said, adding that wants to ensure golf does not drain city resources away from other programs. “It’s not an attack on golf, I don’t want to dismantle golf,” she said. The subcommittee’s findings likely will be a study session item at a city council meeting in October or November.
Contact reporter Patrick McNamara at pmcnamara@azbiz.com or at (520) 295-4259.
InsideTucsonBusiness.com
AUGUST 24, 2012
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InsideTucsonBusiness.com
AUGUST 24, 2012
9
OUT OF THE OFFICE MEALS & ENTERTAINMENT
ARTS & CULTURE
High-tech liquor shopping at newest Total Wine store
Puppet performance to raise money for Kazakhstan trip
Total Wine & More has opened its second location in the Tucson region, and 84th store nationwide, in the old Border’s store at Park Place Mall. What makes this store different, is that it’s Total Wine’s first “next generation” store in the Southwest. By next generation they mean that it includes more technology in the shopping experience. For instance, they have iPads in the tasting bar allow customers to use an app that recommends specific wines to pair with foods. You can print the recommendations right there or have the results emailed to yourself. The store has Wi-Fi and they’re confident enough about their pricing that they even encourage customers to compare shop using smartphones or other connected portable devices. There’s also an education center for classes on beer, wine and spirits. Nonprofits can book the education center at no charge to host organized meetings. The 26,000 square-foot store features more than 80,000 wines, 3,000 spirits and 2,500 beers. Total Wine is an East Coast-based chain headquartered in Potomac, Md. Its first Tucson store is at 4370 N. Oracle Road, at the southeast corner of Oracle and Wetmore. • Total Wine & More, 5870 E. Broadway in Park Place Mall — www.totalwine.com/ — (520) 745-0540
Azul makeover Azul Restaurant & Lounge in the Westin La Paloma Resort and Spa has revitalized its lunch, lounge and dinner menus. Although responsible for all of the food at the resort, executive chef Serge Delage has taken a renewed interest in Azul.
Items include a tomato and fresh buffalo mozzarella salad with marinated olives, basil and balsamic reduction; a Peruvian shrimp ceviche with avocado, jalapenos MICHAEL LURIA and cilantro; jumbo scallops with fried crispy onions and a citrus butter reduction; a grilled double pork chop with a sour cherry bourbon glaze; a beef rib eye steak with shallot herb butter; and a Provencale-crusted rack of lamb. Side dishes include chipotle macaroni and cheese. Azul also has a happy hour from 5-7 p.m. weekdays in the lounge featuring signature martinis, house wine and well drinks for $5. Drafts are discounted by $2 and any of the small plate appetizers are half price. The Azul changes are just the beginning of things to come at La Paloma as part of a massive $30 million rejuvenation of the resort under its new ownership group. Every one of the resort’s 487 rooms will be made over. • Azul in the Westin La Paloma Resort and Spa, 3800 E. Sunrise Drive — www. azullapaloma.com/ — (520) 742-6000
I don’t often have a lot of news to report about puppets — even though Tucson is home to a world-class puppet community — but that changes this week due to a special event at 7:30 p.m. Saturday (Aug. 25) at the Rogue Theatre. The Tucson puppet company, Puppets Amongus, headed by artist Matt Cotton, has created many special puppets for Rogue Theatre performances over the years as well as for the annual All Souls Procession. Now Puppets Amongus has been invited to travel to Tucson’s sister city, Almaty, Kazakhstan, for the World Puppet Carnival Sept. 20-23, and a performance of “El Sueño de Frida” (“The Dream of Frida”) will serve as a fundraiser to help support the trip. Dealing with the subconscious of Mexican artist Frida Khalo, and the colorful day of the dead trappings, the show is most appropriate for mature audiences due to artistic, puppet romance scenes. However, depending on their age, there are children who can enjoy the show. Tickets are $20 each and can be purchased through the Tucson-Almaty Sister City Comittee by email at jerrymgary@aol. com or (520) 628-1309. Tickets can also be purchased at the door, cash or check only. The Rogue Theatre is at 300 E. University Blvd. in the Historic “Y” building.
Contact Michael Luria at mjluria@ gmail.com. Meals & Entertainment appears weekly in Inside Tucson Business.
Mini-Time Machine Museum, 4455 E. Camp Lowell Drive, celebrates its third anniversary with free admission Sept. 1. The museum has seen 115,000 visitors since it opened. With 275 miniature houses and roomboxes along with changing special exhibits, the collection is unique in the Southwest. The museum is open Tuesdays through Saturdays from 9 a.m. to
Museum
4 p.m. and Sundays noon to 4 p.m.
Film This week, in addition to a pair of horror films, the local film landscape features two special event screenings. HERB STRATFORD First the horror films, “The Apparition” and “The Day.” “The Apparition” deals with a scientific experiment on paranormal activity gone wrong and “The Day” features a post-apocalyptic world where an abandoned house is a trap for wandering survivors. Also in theaters this week is “Premium Rush” with Joseph Gordon-Levitt as a bicycle messenger and “Hit and Run” with Bradley Cooper and Dax Shepard as former partners in crime now estranged. At the Loft Cinema, 3233 E. Speedway, a full schedule of films and special events are on tap. Starting with the return today (Aug. 24) of the filmed-in-Tucson indie flick “Goats” starring David Duchovny and Vera Farmiga. There is also a special one-night screening tonight of the excellent documentary “Paul Williams Not Dead.” On Saturday, the fan favorite “Found Footage Festival” returns with an amazing collection of odd and unique orphaned video content culled from thrift stores nationwide. Finally, the haunting documentary “The Imposter” opens this weekend and tells the tale of a missing child and the man who pretended to be what he wasn’t.
Contact Herb Stratford at herb@ ArtsandCultureGuy.com. Stratford teaches Arts Management at the University of Arizona. This column appears weekly in Inside Tucson Business.
10 AUGUST 24, 2012
INSIDE TUCSON BUSINESS
TRAVEL
More of what businesses want in air service By David Hatfield Inside Tucson Business The people tasked with trying to improve air service at Tucson International Airport say they weren’t surprised by the overall results of an air service survey of businesses in the region. Wanting more flights to the Los Angeles and San Francisco Bay areas as well as nonstop flights to Washington, D.C., and New York have been long-standing requests. But Mary Davis, senior director of business development and marketing for the Tucson Airport Authority, and Jamie Kogutek, an air service consultant hired by TAA, mined a few nuggets from the survey released earlier this month that could help define future needs. For instance: • While United Airlines is the No. 3 airlines at the airport, accounting for 13 percent of passengers at the airport last year — and now up to 14.5 percent so far this year — four other airlines have as good or better relationships with businesses in the Tucson region. Kogutek explained a relationship includes frequent flier memberships or a possible contract with the airline. • Business travelers who frequently fly to cities in Mexico tend not to use Tucson’s airport for any of their travel. That may be due to those passengers being more accustumed to other airports so those airports are more top of mind, Kogutek said. • After Washington, D.C., and New York, the next highest ranking new destination business travelers want from Tucson is Portland, Ore. Two other destinations that got significant responses were Miami or south Florida in general and Sacramento, Calif. • A couple of other destinations that ranked surprisingly high on the survey were Santa Barbara, Calif., and Montgomery, Ala. In both cases, virtually all of the respondents said they originated their trips in Tucson. Davis and Kogutek said they have meetings alredy scheduled with executives of airlines to sell their case for improving airline service at Tucson International. In the case of United Airlines’ Kogutek said one argument that can be made is that the airline and Tucson would mutually benefit from improved marketing of its MileagePlus frequent flier program. Despite the fact that it has the only nonstop flights to San Francisco, United ranks third for relationships with travelers to the Bay Area. Kogutek said American Eagle’s introduction of nonstop flights to LAX in April 2011 was likely influenced by American’s strong business relationships in Tucson, despite the fact that United had a long history flying the route. As for Mexico, Kogutek said there is high interest in air service to Sonora by companies that conduct business there and much of it is generated by trade missions. While more definitive research needs to be done he said Tucson could become an air gateway to Sonora.
Despite the lack of nonstop air service, for 11.1 percent of Tucson’s traffic, down partners, JetBlue Airways took itself out of 81 percent of business travelers say they fly from 12 percent in the same time a year ago. contention this week. In an interview with out of Tucson to M e a n w h i l e Bloomberg, JetBlue CEO Dave Barger said Washington and American has his airline wasn’t interested in a merger with A BIZ FACTS 73 percent choose ggown to 23.6 per- American or any other airline. Tucson for their market ccent Since the Tucson Airport Authority is trips to the New sshare, from 22.2 restricted in how it can use money to York area. Kogutek percent a year p Mesa Gateway Airport is attracting more entice airlines to improve service at Tucson aago. American is said a separate more airlines of the ultra-low cost carrier modstudy done by his Tucson’s second T International Airport, Tucson Regional firm, Sixel Conbusiest airline fly- el — we’ll sell you a seat for cheap but if you b Economic Opportunities (TREO) has taken sultng Group, iing to its hubs at want anything else, there’s a charge for that. over responsibility for organizing a business D a l l a s - F o r t This week Allegiant Air announced it will found 82 percent up the ante with nonstop flights from Mesa coalition that will work to improve air ser- W of all passengers Worth, Chicago to Honolulu on Mondays, Wednesdays and from the Tucson O’Hare and LAX. vice, possibly including financial incentives O Fridays starting Feb. 8. The Las Vegas-based area bound for US Airways ranks U to airlines. airline will use 223-seat Boeing 757s on the Washington use ffourth in Tucson. Laura Shaw, senior vice president of marthe local airport In bankruptcy flights to Hawaii. Until Tuesday (Aug. 28), Allegiant is offerketing and communications for TREO, said iin court, Ameribut that 66 perthey’re still fleshing out the membership to ccan is still trying ing fares to Hawaii starting at $199 each way cent of those going to New York do. tto work through from Feb. 8 through April 16. include a broader range of major busiNonstop flights to Hawaii from Phoenix That’s indicative of rrevisions in its lanesses. So far, she said, there is sufficient a higher number bor union con- aren’t new. Hawaiian Airlines flies from Sky Harb representation from small businesses, vari- ttracts. And union bor to Honolulu and US Airways flies to Honoof leisure travelers ous organizations and the tourism sector. most likely bookwere lulu, Kahului, Maui, Lihue, Kauai and Kona on lleaders Michael Guymon, vice president of regional m ing flights from maintaining their the Big Island. Mesa officials are touting Alleother airports due development for TREO, is leading the busi- ssupport for a giant’s arrival as the first low-fare flights. to the perception merger. m ness effort. Contact David Hatfield at of lower airfares. Among airContact him at dhatfi eld@azbiz.com or (520) 295-4237. Inside For her part, llines that have Business Travel appears the fourth week of each michael.guymon@treoaz.org. the airport’s Davis been identified as b said she is meetpotential merger month in Inside Tucson Business. p ing with representatives from the University of Arizona and other large employers to get a better handle on how they book their travel. For instance, she said, that while the UA has a checks-andbalance system it is highly decentralized. The number of passengers going through Tucson International Airport in July was down 2.6% to 285,869 from 293,565 “At the end of the day, our job at the airin July 2011. Available seat capacity was down 10.6% to anverage of 5,695 outbound per day. Through seven months of 2012, passenger numbers are down 0.1%. This chart shows each airlines’ passenger totals and market share for the first port is to connect the customer with the supseven months of 2012 compared with the same months of 2011. plier,” Kogutek said of his mission. “We’re the middleman in this process. But as part of that Jan.-July 2012 Jan.-July 2011 Change we need to make sure the suppliers (the airAirline Passengers Market Passengers Market Passengers % lines) know there is demand.” Nonstop destinations Share Share
Mesa to Hawaii
TUCSON INTERNATIONAL AIRPORT 2012 PASSENGER STATISTICS
American in bankruptcy Tug-of-war battles on multiple fronts continue in American Airlines’ bankruptcy case. US Airways executives have promised various officials in the Phoenix area that the airline intends to maintain Sky Harbor as a hub airport if it’s successful in merging with American. But those Phoenix officials as well as the commerical real estate industry is becoming resigned to the fact that US Airways’s nine-story headquarters building in Tempe will likely be downsized, if not vacated. US Airways has said all along the combined airline, which goes by the name American, would take over American’s headquarters in Fort Worth, Texas. US Airways currently has 50 gates and 265 daily departures at Sky Harbor, making it the busiest airline at the airport. For Tucsonans flying US Airways, the flight to Phoenix is a necessary endurance to reach the rest of the system but the airline’s market share has been dropping this year. Through seven months of 2012 US Airways has accounted
Southwest
735,666
34.0%
733,514 33.9%
+2,152
+0.3%
481,711 22.2%
+29,044
+6.0%
299,252 13.8%
+15,343
+5.1%
Albuquerque, Chicago Midway, Denver, Las Vegas, Los Angeles, San Diego
American
510,755
23.6%
Chicago O’Hare, Dallas-Fort Worth, Los Angeles
United (Continental)
314,595
14.5%
Denver, Houston Intercontinental, Los Angeles, San Francisco
US Airways
241,089
11.1%
259,946 12.0%
-18,857
-7.3%
236,626
10.9%
230,627 10.6%
+5,999
+2.6%
Phoenix
Delta
Atlanta, Minneapolis-St. Paul, Salt Lake City
Alaska
72,324
3.3%
62,959
2.9%
+9,365
+14.9%
53,796
2.5%
98,755
4.6%
-44,959
-45.5%
-1,913
-0.1%
Seattle
Frontier
Service discontinued as of May 18
Total
2,164,851
2,166,764
Source: Tucson Airport Authority Airline totals include passengers on branded flights operated by contracted carriers: American (includes American Eagle), Delta Connection (SkyWest), United Express (ExpressJet and SkyWest) and US Airways Express (Mesa and SkyWest).
InsideTucsonBusiness.com
AUGUST 24, 2012
NEWS
Travel smart.
Broadway Plaza sale expected to seed other opportunities By Roger Yohem Inside Tucson Business
Save time and money by comparing costs online. Roger Yohem
In an effort to maximize long-term opportunities in commercial real estate, Larsen Baker has sold the massive 11.7-acre Broadway Plaza complex for $12.7 million to an Ohio-based real estate investment trust. The center at the northwest corner of East Broadway and Pantano Road has more than 80,000 square feet of space and is anchored by major retailers including PetSmart, Sprouts Farmers Market and Table Talk. “We sold a solid, stable, mature property because right now, there are many good opportunities for us to buy distressed properties and turn them around. That’s what we’re good at,” said Andy Seleznov, director of leasing for Larsen Baker. “We already have a few properties in line to replace it, that we would go out and buy and fix them up. That creates long-term value.” The plaza’s four buildings were constructed from 1980 to 1982 and carry ad-
Ohio-based investors paid $12.7 million for Broadway Plaza.
dresses from 7701 to 7865 E. Broadway. The plaza was sold by Broadway Powercenter Group LLC, an affiliate of Larsen Baker, 6298 E. Grant Road, to Phillips Edison ARC Shopping Center REIT Inc., Cincinnati. The plaza’s largest building is about 57,000 square-feet and the smallest is 6,200 square-feet. The two mid-sized buildings are about 10,000 square-feet each. Larsen Baker acquired the plaza in 1997.
Sahara Apartments student housing complex in default Seven years after completing a multimillion dollar renovation, the Sahara Apartments student housing complex, 919 N. Stone Ave., has fallen into foreclosure. It is set to be sold at public auction in November. Originally built as the Sahara Motor Inn about 50 years ago, it was closed in 1989 and re-opened in 2005 as the Sahara Apartments after a three-year, $7 million redevelopment modernization. The property’s buildings were gutted and converted into dorm-style apartments with state-of-the art technology and lifestyle amenities to appeal to Pima Community College and University of Arizona students. All 139 apartments are furnished. In addition, a free-standing hotel building features 30 studio apartments. According to public records, owner TBM Equities LLC of Tucson is delinquent on an original principal balance of $5.9 million. The notice of trustee’s sale lists three parcels on the 3.5-acre site: 919 N. Stone Ave., 10 W. Second St. and 928 N. Ninth Ave. The current beneficiary is Pi’Ikea LLC of
Otis Blank
By Roger Yohem Inside Tucson Business
The Sahara Apartment complex faces a trustee’s sale in November.
Kahului, Hawaii, successor-in-interest to West CRE Venture 2010-2 LLC and the Federal Deposit Insurance Corporation. As student housing, the apartment complex provided free shuttle service to the University of Arizona campus. The site’s amenities include a pool, spa, mini-movie theater, computer center, game room and electronic security locks and surveillance cameras. The law firm of Dorris & Giordano, 2 E. Congress St., is handling the trustee’s sale. The public auction is scheduled for 10 a.m. Nov. 15 in the law firm’s offices.
Non-stop destinations. Connections around the world. Alaska, American, Delta, Southwest, United, US Airways
11
12 AUGUST 24, 2012
INSIDE TUCSON BUSINESS
GOOD BUSINESS WOMEN IN BUSINESS
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There’s always plenty of buzz about how men and women are different but how has it impacted your business? Many businesses are comprised of husband-and-wife owners. If this is your business model, are you using those differences to strengthen your business and reach more clients? I worked with my spouse for over 20 years, not always the easiest fate. When a client, friend or relative tells me they are thinking of working with their spouse, I look at them, giggle and say “Don’t do it”! I am half serious and half kidding. I wonder how I can convey to them what is really involved. How do I explain that they have the opportunity to enhance and strengthen their relationship but at the cost of letting go of some role playing and pre-conceived ideas? Many of you business owners working with your spouse know what I mean. I have said that the yin and yang energy balanced out our firm and provided diversity for the clients. It wasn’t always that way; at first it felt like we were totally opposing forces. On the surface, yin and yang appear as opposites but actually are complementary forces. Yin and yang have been compared to the feminine and masculine, the light and dark and described as the sun moving across the sky, gradually trading places with each other, revealing what was unseen and hiding what was originally seen. Yin and yang combine into a greater whole. Working with your spouse can also be like that. Don’t work around the differences, instead work with them and combine your talents into a greater whole. Men and women tend to approach things in a different manner and do things for different reasons. Most likely you are even in business for different reasons. Sure, you both want to have a successful business and make money. But have you ever asked your spouse why they are in business? What is their definition of a successful business? The answers may surprise you. I’ve joked that before people get married they should paint or wallpaper a home. If you can do that and are talking to each other after the home improvement project, you are on your way to a lasting relationship. Usually the “divide and conquer” process works. You do the trim and I’ll paint the walls. I’ll roll the paste while you cut the wallpaper sheets. You define your roles, strengths and weaknesses and divide the tasks at hand. It’s the same in your business. Define your roles in the business and try not to default to the roles you play in your personal life.
How have you assessed your true strengths and weaknesses at the workplace? You and your spouse know each other well. You understand the weaknesses they are not so happy about DEB ALTER and the strengths they have not acknowledged. Don’t push your spouse to complete a task where they may be weak. Strengthen that weakness or find another way. Also, complementing your spouse’s strengths may help your partner discover those hidden talents or the confidence to express them. So here’s an exercise with a set of questions to help you identify possible misconceptions and hidden talents. What are the top five reasons you are in business? What are the top five things that you contribute to the business? What are three things you would like to change in the business? What are three things about your business you are proud of? What impresses you the most about your spouse in the business? What are your spouse’s top three strengths in the business? What are your spouse’s top three weaknesses in the business? Each of you should answer the questions in writing, then exchange papers and read your spouse’s responses. Here are the ground rules: • Read your responses in separate rooms. • Be honest but respectful. • Don’t be judgmental. • Don’t jump to conclusions. Make notes as needed so you may ask for clarification when you meet. • Remember this is in relationship to your business, so try to keep the personal life out of the discussion. After you have both completed your questionnaire and have read your spouse’s responses, meet in a professional setting with a business meeting tone. Discuss what you learned, what you can change and how you can become a combined force of success!
Contact Deb Alter, Alter & Alter CPA’s, at deb@alterandalter.com . Alter is immediate past president of the Greater Tucson Chapter of the National Association of Women Business Owners (NAWBO), whose members contribute this monthly column.
InsideTucsonBusiness.com
AUGUST 24, 2012
13
PROFILE
Exotic pichuberries coming from Peru By Adam Borowitz Inside Tucson Business
I.T. Genius
The
Keith Green represents the health qualities of the pichuberry at a farmers market at St. Philip’s Plaza. Adam Borowitz
An exotic berry with striking health benefits is making its way into the American market through a company created in a Tucson college classroom. University of Arizona researchers even say the orange, marble-sized berries can stimulate the body’s natural defense system to such a degree that they could be a valuable tool in the fight against cancer and other diseases. The berry in question is the fruit of the plant physalis peruviana. Indigenous to South America, it’s known as the Cape Gooseberry in Europe and by other names in countries around the world, where it is revered for flavor and health-promoting properties. It is still relatively unknown in the United States, but a company created at the UA’s Eller College of Management is looking to change that. Michael Popescu, general manager of Mojo Tree Farm, says the company’s business team has worked tirelessly to introduce the berry to local consumers, recently making a deal with a major grocery store chain that will give the fruit its best exposure yet. The fruit is currently available only at farmers’ markets in Tucson, Phoenix and several California cities, but this month all Whole Foods Market stores in Arizona will start stocking the berry and juice made from the berries. The berries will retail for $4 per container and the juice will fetch about $3.50 per 16-ounce bottle. Popescu created the company in 2010 as part of his Master’s thesis at the McGuire Center for Entrepreneurship at the UA. The business was moved to Phoenix to take advantage of distribution opportunities available there. Popescu says the first step was to rebrand the fruit the “Pichuberry,” linking it to the famed mountain city Machu Picchu of its Peruvian homeland. The company then set up stands at farmers’ markets in Tucson and Phoenix and got busy gathering feedback and educating the public about the product. “We found out that the farmers’ markets are a good place to interact and get realtime feedback from different demographics,” said Popescu. “People go to farmers’ markets to learn and find new things, so that’s helped us out a lot. Pichuberries are the company’s first product, but the company plans to work with other little-known foods from around the globe as well. “Mojo Tree Farm is basically the parent company for small products like the Pichuberry,” said Popescu. “Once we expand and grow it will be responsible for multiple unique treasures from around the world.” The company also established a website
— www.pichuberry.com — where consumers can find everything from recipes for Pichuberry compote to scientific papers detailing the fruit’s history and nutritional value. Nutritional analysis have shown the berries to be extremely high in vitamins A, B and C. They are also packed with other substances that could make them useful in applications ranging from skin creams to managing diseases such as cancer and diabetes. Mojo Tree Farm is currently working with Dr. Donna Zhang at the UA College of Pharmacy to pinpoint the berry’s cancerfighting potential. “What we are looking at, basically, is the ability of the Pichuberries to enhance the body’s defensive mechanisms,” said Zhang. “What we’ve been looking at specifically is their ability to activate what is called the NRF 2 pathway, which regulates cellular defense mechanisms.” Zhang said her research has shown the berries to be extremely effective at activating that cellular pathway, which makes them useful in ridding the body of carcinogens and other harmful substances. For now, Popescu is focusing on building domestic demand for the berries. He cur-
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rently imports the berries from South American suppliers, but plans to ramp up domestic greenhouse production in Tucson and other cities as demand grows. Mojo Tree Farm is also working with the Phoenix-based distributor Stern Produce to integrate the berries into school-provided student meals at school districts around the state. “One of our background initiatives is childhood nutrition, and this food has received a very positive response from kids when it comes to not only the taste, but the appearance,” said Popescu, adding that the berry has a papery husk that make it look “kind of like a candy with a wrapper on it.” “So it’s a superfruit that is liked by kids,” said Popescu. “Finding something that tastes good, looks good and is liked by kids is rare. We’re very excited about that.”
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14 AUGUST 24, 2012
INSIDE TUCSON BUSINESS
MEDIA SOCIAL MEDIA IN THE WORKPLACE
Social media accounts at work — without a policy it gets murky Many of us use social media throughout the day at work. We use it to stay connected to our work colleagues and, of course, to our personal friends. These days, more and more employers are crossing the line when it comes to leveraging the equity employees have built through their social media accounts. What happens when an employee’s bonus structure is tied to the company’s gross profits, the employee uses her accounts to promote the company, gets hurt and takes time off to recuperate and the company then begins impersonating
her to continue the momentum she has built on social media? A case with similar facts is pending in federal court right now. While we wait for the case JOHN BALITIS to resolve, circumstances like this are not hard to imagine and employers should be thinking about these issues as they develop social
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media policies. What can human resources leaders learn from this suit when it comes to establishing social media policies at their organization? • Social media policies must CARRIE RYERSON address the ownership of social media forums (Does the employee or employer own the forum and the content posted on the account?). • Policies need to explain who owns the platforms in a variety of circumstances, including when the employer asks the employee to use his or her personal account to market for the employer or, in contrast, when the employer asks the employee to create a social media account for the employer. • The policies, among other things, should explain that the employee must provide the employer with the login information once the account is created and that the employer owns both the account and all content posted on the account. What are some of the HR challenges associated with creating such policies? • As some of our previous social media articles explain, businesses need to take care not to run afoul of the National Labor Relations Act (NLRA). • The National Labor Relations Board
(the federal government agency charged with enforcing the NLRA) has aggressively pursued employers who implement overbroad social media policies. What advice do you have for HR leaders on the topic of creating social media use policies to avoid such lawsuits from occurring? • A well-written social media policy cannot necessarily avoid litigation but it certainly can help to put a swift end to the litigation once it commences if the policy, which should be signed by the employee at the start of employment or once the policy is implemented, directly addresses ownership of social media forums. • The policy must balance prescribing employee conduct while not offending employee rights under the NLRA. • Additionally, a policy might not be the answer for some employers. The better approach would be to enter into a contract with the employee regarding the ownership of the social media accounts. Then, the employer could sue the employee for breach of contract over the ownership issue.
Contact John Balitis, who practices in the labor and employment area with Fennemore Craig, at jbalitis@fclaw.com. Contact Carrie Pixler-Ryerson, who practices in the area of appeals as well as in labor and employment at Fennemore Craig, at cryerson@fclaw.com.
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InsideTucsonBusiness.com
AUGUST 24, 2012
15
MEDIA
Tucson News Now games Google search ... for awhile launched back in February. And, as we all know, Google won’t let Tucson News Now’s good fortune go on forever. Kat Eller with Google sent an email saying, “This is a known issue that the team is investigating. We hope to have a fix in place in the next couple of weeks.”
By David Hatfield Inside Tucson Business The generic term is search engine optimization (SEO), but let’s face it, it’s really about gaming Google. Specifically, getting Google’s search engine to prominently display your company’s website. No doubt anyone responsible for a website has received an email from someone purporting to be an expert at SEO who will help you move to the top. The fact is Google keeps its search algorithms closely guarded so even the experts are making educated guesses at best on how get the most of its search engine. So congratulations go out this week to the folks at Tucson News Now for beating the system. The website for the combined news gathering organization of both KOLD 13 and KMSB 11 has cracked the code. For at least two weeks anyone using a Google news search and keying in the word “Tucson” came back with a list of the latest updates from Tucson News Now — regardless of whether the news actually had anything to do Tucson. For example, a search Tuesday morning this week turned up these results on the first two pages: • Tucson News Now’s report on Phyllis Diller’s death. • Tucson News Now’s report on Diana Nyad being pulled from the water in her bid to swim from Cuba to Florida. • Tucson News Now’s report on Rep. Todd Akin, R-Mo., asking forgiveness for his comments on rape and abortion. • Tucson News Now’s report on Republican vice presidential candidate Paul Ryan’s education plan. • Tucson News Now’s report on Wynonna Judd’s husband having his leg aputated after a motorcycle crash in South Dakota.
Names in news
• Tucson News Now’s report on a wildfire in northern California. • Tucson News Now’s report on an Arkansas state crime lab report that a man shot himself in a patrol car after being arrested and handcuffed. • Tucson News Now’s report on a CSX train that derailed outside Baltimore. • Tucson News Now’s report on federal officials shutting down a central California slaughterhouse. • Tucson News Now’s report on Shawnee County District Attorney Chad Taylor’s determination that private state dinners held by Kansas Gov. Sam Brownback were not a violation of the state’s open meeting laws. Besides Tucson News Now, the only other thing all of those news stories had in common is that not one of them occurred or had anything directly to do with Tucson, which most likely is not what a person using a Tucson keyword news search wants. It was not until the third item on page 3 that Tuesday’s search results offered up a story from some organization than Tucson News Now. It was an Associated Press report from TriValleyCentral.com — the website of seven jointly owned newspapers in Pinal County — about the first ever White House “kids state
dinner” that included 11-year-old Tucsonan Haile Thomas (last week’s “Good News” item in Inside Tucson Business). But then Tucson News Now results resumed dominating all results until the second-to-last item on the fifth screen when a Phoenix Business Journal report on the sale of Apex Microtechnology showed up. News searches on the keyword Tucson in Yahoo and Bing brought up different results, though neither ranked timeliness very high. Former U.S. Rep. Gabrielle Giffords’ move back to Tucson and shooter Jared Loughner’s guilty plea were the top two Yahoo results and both stories were more than a week old. A search of results only from today resulted mostly in press releases. As for Bing’s results, the story about the Apex Microtechnology being sold was the only thing newer than 15 hours old. The next newest story, that 15-hour old report, was from, surprise, Tucson News Now. At least it was a local story on on door-to-door sales scams. For her part Debbie Bush, vice president and general manager of KOLD, had not done a Google news search until asked about it Tuesday afternoon. Her first reaction when she saw the results was to chuckle. She said they had trouble getting Google to recognize Tucson News Now when the new branding
Talk about climate change, Alexis Fernandez is about to see about as big a change as is possible in the U.S. when she arrives Sept. 4 to be a general assignment reporter at KGUN 9. She is a native of Fairbanks, Alaska, and up until now has spent most of her life in that state. She’s coming to Tucson from the CBS affiliate in Anchorage where she has been a reporter and weekend anchor. Before that she was at the NBC affiliate in Fairbanks. Fernandez earned her bachelor’s degree from the University of Alaska at Fairbanks. Former KVOA morning show co-host Josh Benson has moved on again. He starts Monday as the morning co-anchor for WFOR, the CBS-owned station in Miami, Fla. Since leaving Tucson two years ago, Benson has been in Orlando, Fla., where he has anchored evening newscasts on both the ABC affiliate and a sister independent station. Does the name Dusty Chandler ring a bell? He was a radio personality for 11 years, most recently at KIIM 99.5-FM and as program director of what was “Bob” KSZR 97.5-FM, until he left last November. He has dropped his on-air moniker and is now going by his real name, Jon Lurie. He owns Fruit Shack Smoothies & Yogurt in Oro Valley and just recently joined Long Realty.
Contact David Hatfield at dhatfield@azbiz.com or (520) 295-4237. Inside Tucson Media appears weekly.
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16 AUGUST 24, 2012
INSIDE TUCSON BUSINESS
CALENDAR SPECIAL EVENTS
1365 W. Grant Road Contact: Bruce Smith cassidycollectibles@ earthlink.net or (520) 622-0104 Cost: $4 Dealers from all over the Southwest will be selling vinyl, tapes, CDs and music memoribilia. Dealer tables are $35.
SAHBA Fall Home and Garden Show Friday (Oct. 5) through Sunday (Oct. 7) 10 a.m. to 7 p.m. Friday and Saturday and 10 a.m. to 5 p.m. Sunday Tucson Convention Center 260 S. Church Avenue Contact: Amy McReynolds amy@ sahba.org or (520) 795-3025 $8 for adults www.sahbahomeshow.com 8th Annual Tucson Record Show Sunday (Nov. 11) 9 a.m. to 3 p.m. Las Cazuelitas Event Center
REGULAR MEETINGS
Small Business Commission Meeting Fourth Thursday 3 to 5 p.m. Mayor and Council chambers 255 W. Alameda First floor Info: Ellen Hitchings, (520) 791-4343 ext. 245 or small.business@tucsonaz.gov
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The S.M.A.R.T. Group Every Friday 12 to 1:30 p.m. Nova Home Loans Multi-Media Conference Room 6245 E Broadway Blvd., 5th Floor $25 Members $45 nonmembers Contact: Dale Dillon Lips (520) 4296000 or dillonadvisory@gmail.com Society for Human Resource Management - Greater Tucson Chapter Second Tuesday 11 a.m. to 1 p.m. DoubleTree, 445 S. Alvernon Way Membership:Garrett Kowalewski, (520)
647-9100 garrettk@staffmattersinc.com RSVP by Thursday prior to meeting: www.shrmgt.org Solutions Forum Fourth Monday Noon to 4 p.m. Clements Insurance 6245 E. Broadway, Suite 310 Information: 1-800-716-9626 or (480) 200-5678 RSVP required Open only to business owners and divisional heads Southern Arizona Chapter of Enrolled Agents Third Tuesday 11:30 a.m. Knights of Columbus Hall 601 S. Tucson Boulevard Info: (520) 751-8986, www.aztaxpros.org/sacea Southern Arizona Architects & Engineers Marketing Association Third Tuesday 11:30 a.m. to 1 p.m. Sheraton Tucson 5151 E. Grant Road RSVP: Dana Dietrich ddietrich@eectuc.com Cost: $25 members / $35 Nonmembers Southern Arizona Chapter of the Society for Design Administration Fourth Tuesday Noon to 1:30 p.m. Viscount Suites Hotel 4855 E. Broadway Information: www.sacsda.com or tamara.g@wt-us.com RSVP: mormsby@hmwstructural.com Cost: $20 members, $25 nonmembers Southern Arizona Logistics Education Organization (SALEO) Third Wednesday Location and times vary Information: al@saleo, (520) 9773626 or www.saleo.org Cost: $25 members and 1sttimers; $30 nonmembers Superior Business Networking First and third Tuesday 11:30 a.m. to 1 p.m. Info: (520) 631-7398, vthompson@az-health.com The Annuity Doctor — Curt Zacharias Every Tuesday 3:30 p.m. Bookmans 6230 E. Speedway, Community Room Information: Curt Zacharias (520) 990-0009 Cost: Free Tucson Association of Executives Every Wednesday 6:30 to 8 a.m. Tucson Country Club 2950 Camino Principal RSVP: (520) 321-0879, taeoffice@aol.com Tucson Business Connection First Wednesday 5 to 7:30 p.m. Pearl Nightclub 445 W. Wetmore Road Information: (520) 219-0266, WArnold@ trayersinsurance.com or www.tbcnetworking.com RSVP: Not required Cost: Free to attend, free snacks, cash bar
InsideTucsonBusiness.com
AUGUST 24, 2012
17
BRIEFS GET ON THE LIST
His resignation came before a House subcommittee recommended taking action for his expulsion.
Next up: TV stations, Radio stations Inside Tucson Business is gathering data for the 2013 edition of the Book of Lists. Categories that will be published in upcoming weekly issues of Inside Tucson Business are: • Aug. 31: New car dealers • Sept. 7: Television stations, Radio stations • Sept. 14: Minority-owned businesses, Exporters • Sept. 21: Locally-owned restaurants, Chain-owned restaurants • Sept. 28: Commercial printers, Copying/Duplicating firms, Mailing service firms, Promotional product suppliers If your business fits one of these categories, now is the time to update your profile. Go to www.InsideTucsonBusiness. com and click the Book of Lists tab at the top of the page. New and unlisted businesses can create a profile by following the directions. The Book of Lists is a year-round reference for thousands of businesses and individuals. To advertise your business, call (520) 294-1200.
LEGAL
Patterson acquitted in domestic violence case Former Tucson state representative Daniel Patterson has been acquitted of misdemeanor domestic violence charges in Pima County Superior Court. Patterson had been accused of domestic violence following an altercation with former girlfriend Georgette Escobar. Patterson resigned from his seat following allegations he verbally abused staffers and other conduct-related issues.
HEALTH CARE
Access to care tops Health Needs Assesement Tucson’s nonprofit hospitals joined forces on a Pima County Community Health Needs Assessment that suggests access to care is the county’s top health gap. The Pima County Community Health Needs Assessment is an outcome of the Affordable Care Act, which requires taxexempt, non-profit hospitals to complete a Community Health Needs Assessment every three years and to implement strategies to address the needs identified in the report. Access to care — specifically, lack of insurance coverage, cuts in AHCCCS funding, limited coverage for behavioral health and lack of access to medications and funding for primary care — is the top health issue identified in the Community Health Needs Assessment jointly published by, Carondelet Health Network, Tucson Medical Center and The University of Arizona Medical Center. Among the findings of the hospitals’ Community Health Needs Assessment for Pima County: access-to-care issues topped the needs list; other critical areas of need include rising obesity rates, diabetes, shortages of primary care providers, and mental health; many areas Pima County did well compared with the rest of the state; obesity, diabetes and substance abuse led the list of top medical health issues in the county. The 121-page Pima County assessment was completed with information obtained through written questionnaires and focus groups attended by key informants and
community leaders representing the various needs and interests of Pima County. The assessment draws from county health rankings, the Arizona Department of Health Services Vital Statistics, Primary Care Area Statistical Profiles and the U.S. Census Bureau. To view the Pima County Community Health Needs Assessment in its entirety, visit any of the following websites: Carondelet Health Network — www.carondelet.org; Tucson Medical Center — www. tmcaz.com; The University of Arizona Medical Center — www.uahealth.com.
POLITICS
Asarco PAC comes out in support of Carroll The political action committee for mining company Asarco, has announced it supports the re-election of Ray Carroll to the Pima County Board of Supervisors. The endorsement came in a letter from Thomas L. Aldrich, chairman of the Asarco Political Action Committee who is also vice president of Environmental Affairs for the company who expressed Carroll’s support of Asarco’s operations in Pima County. Tucson-based Asarco is a subsidiary of Grupo Mexico. It operates 13 mines around the world, including the Mission Mine near Sahuarita and the Silver Bell Mine near Marana. The endorsement is seen as significant by some because Carroll has been among the most vocal opponents against Augusta Resrouce Corp.’s plans to develop the Rosemont Copper mine in the Santa Rita Mountains. That has become a major of distinction in the primary election campaign between Ray Carroll and his Republican challenger, Sean Collins. There is no Democrat seeking the seat so the Republican primary is virtually assured of election.
Tech council issues legislative endorsements Using a report tracking lawmakers’ past records in support of technology along with responses from both a written survey and candidate interviews, the Arizona Technology Council has issued its endorsements of candidates for the state Legislature. The council’s endorsements in Southern Arizona legislative districts are: • District 2 - Senate: Linda Lopez, Democrat. No endorsements for the House. • District 3 - House: Sally Ann Gonzales and Macario Saldate, both Democrats. No endorsement for Senate. • District 4 - Lynne Pancrazi, Democrat. No endorsements for the House. • District 9 - House: Ethan Orr, Republican, and Victoria Steele, Democrat. No endorsement for Senate. • District 10 - Senate: Frank Antenori, Republican. House: Ted Vogt, Republican, and Bruce Wheeler, Democrat. • District 11 - Senate: Al Melvin, Republican. House: Steve Smith Smith, Republican. • District 14 - Senate: Gail Griffin, Republican. House: David Gowan and David Stevens, both Republicans. The tech council also came out in favor of two propositions that will be on the Nov. 6 ballot. Proposition 116 would allow a state tax exemption equal to the amount of annual earnings of 50 employees on the value of business equipment or machinery. The group says it would help small businesses grow. Proposition 199 would allow the exchange of state lands for public lands to maintain military installations in Arizona. Under current mandates the state land must be sold to the highest bidder, which the tech council sees as a potential conflict for the growth of technology associated with defense and aerospace contractors.
PEOPLE IN ACTION
APPOINTMENTS Marianne Freitas and Tom Strasburg have been named co-chairs of the sixth annual Tucson Classics Car Show sponsored by the Rotary Club of Tucson. They will oversee the Oct. 13 event at St. Gregory Preparatory School that will benefit Reading Seed, the Pima Council on
MARIANNE FREITAS
Aging and the YWCA. Our Family Services has announced its senior leadership team following a July merger with New Beginnings for Women & Children. Patti Caldwell has become the executive director of the merged Our Family organization.
TOM STRASBURG
Caldwell served 23 years with Planned Parenthood in Arizona, including seven years as CEO and four years as COO, before becoming executive director of New Beginnings. Caldwell has a master’s in social work from Arizona State University and a bachelor’s in social work and women’s studies from
PATTI CALDWELL
LISA REAMS
{TELL US ONLINE} Now your business can tell Inside Tucson Business about new hires, promotions and special awards online. Go to www.insidetucsonbusiness.com and click the “People in Action” button. From there you can submit your announcement and we’ll publish it online and in print.
KIM EGITA
Michigan State University. Lisa Reams is Our Family’s senior director. Reams joined Our Family 21 years ago as a community mediator and later moved into program management and agency administration. Reams has a bachelor’s degree in sociology from the University of Arizona
and a certificate in public policy and management from the UA’s Eller College. She graduates from Capella University with her MS in human services with a specialization in nonprofit management in September. Kim Egita has become Our Family’s director of finance and assets, which
encompasses accounting, housing and facilities and office management. At the time of the merger, Egita was administrative director of New Beginnings for Women and Children, where she had worked for nine years. Egita has a bachelor’s in finance from the University of Arizona and is currently working toward CPA certification.
18 AUGUST 24, 2012
INSIDE TUCSON BUSINESS
FINANCE YOUR MONEY
Keep income investments working when rates are low Next weekend we observe Labor Day, which honors the hard-working men and women in the United States. As an investor, you’d like to think that all your investments are working hard, too — including the ones that are producing income. But can your income-oriented investments be productive when short-term interest rates are at historic lows? Or can you find other investment possibilities that could potentially boost your cash flow? The answers to both of these questions is “yes” — but you may have to take a closer look at where you stand on the risk-reward spectrum. For example, you might need to consider longer-term income producers, which typically pay higher yields than shorter-term equivalents. Longer-term fixed-rate securities, such as bonds, must pay these higher rates to reward investors, who face both interestrate risk — the possibility that interest rates will rise, causing the value of existing bonds to fall — and inflation risk — the threat of losing purchasing power by the time long-term bonds have matured. Still, you may be willing to accept those risks in exchange for the higher yields. However, you may be looking for income producers that can work hard for you without having to hold them for a long period to maturity because the “yield curve” — the line that plots the relationship between yield and maturity — is fairly steep right now. In plain English, this means you can gain noticeably higher yields just by modestly increasing the maturity of your investments. Your financial advisor can suggest some short-term and intermediateterm vehicles that may be appropriate for your needs. And while these rates will still not be as high as those offered by longerterm vehicles, they do offer flexibility — along with less interest-rate risk and inflation risk. You can also help protect yourself from these risks by building a “ladder” consisting of short-, intermediate- and longerterm bonds and certificates of deposit (CDs). Once you’ve built your ladder, it can help you weather changing interest-rate environments. When market rates are low, you’ll still have your longer-term bonds
and CDs earning higher interest rates. And when market rates rise, you’ll be able to reinvest your maturing shortterm investments at the higher levels. If you need the cash, you can TIM BEITHON liquidate the maturing bonds and CDs. Thus far, we’ve only looked at fixed-rate investments — but you may also be able to boost your income by owning dividendpaying stocks. Some companies have paid — and have even increased — their stock dividends for several consecutive years. If you’re not in need of the cash, you can reinvest the dividends and boost your ownership stake, which is a key to increasing your wealth. But if you do need the money, you can take the dividends as cash. Keep in mind that income producers are not a “sure thing” because companies can decide to reduce, or even discontinue, their dividends at any time. In addition, history tells us that you may experience more price volatility from stocks, and they can be worth more or less than the original investment when sold. As you can see, you can find ways to keep income-producing investments working hard for you, despite the prevailing low interest rates. So consider your options, weigh the risks — and then work with your financial advisor to make those choices that are right for you.
Contact Tim Beithon, a financial advisor with Edward Jones, at Tim.Beithon@ edwardjones.com or (520) 546-1839. Beithon’s office is at 9525 E. Old Spanish Trail, Suite 111. Certificates of deposit (CDs) are federally insured up to $250,000 (principal and interest accrued but not yet paid) per issuing institution. Additional information is online at fdic.gov or contact your financial advisor. Also, bond investments are subject to interest rate risk such that when interest rates rise, the prices of bonds can decrease, and the investor can lose principal value if the investment is sold prior to maturity.
TUCSON STOCK EXCHANGE Stock market quotations of some publicly traded companies doing business in Southern Arizona
Company Name
Symbol
Aug. 22 Aug. 15 Change
52-Week 52-Week Low High
Tucson companies Applied Energetics Inc CDEX Inc Providence Service Corp UniSource Energy Corp (Tucson Electric Power)
AERG.OB CEXIQ.OB PRSC UNS
0.04 0.02 11.60 40.05
0.04 0.02 11.07 40.25
0.00 0.00 0.53 -0.20
0.03 0.01 8.35 34.28
0.48 0.10 15.94 42.10
8.97 0.49 2.81 8.22 58.19 7.30 85.69 17.72 57.56 3.61 17.89 30.49 33.97 25.91 32.94 15.34 95.53 41.51 45.70 9.53 74.92 57.51 19.00 37.00 26.51 56.64 58.88 197.25 32.86 59.65 5.65 37.83 33.37 10.74 51.49 21.96 1.57 32.35 27.24 40.44 57.36 39.33 37.24 37.85 46.88 68.34 24.40 13.29 55.81 45.29 15.97 41.16 55.94 8.67 9.32 42.93 31.72 63.68 16.75 29.38 42.19 19.35 124.69 27.95 11.61 32.90 71.77 35.55 34.18 9.31 19.33
8.73 0.50 2.77 7.87 57.96 7.05 84.71 19.36 57.91 3.63 17.56 28.74 34.19 24.71 31.34 15.65 96.47 42.29 44.22 9.26 74.19 57.03 18.11 34.76 25.81 55.00 58.47 198.40 33.39 59.20 5.72 37.07 33.14 10.32 51.03 22.09 1.59 31.33 26.83 40.44 57.78 38.54 36.79 35.65 46.49 68.28 23.67 12.78 56.24 45.03 16.02 42.21 56.60 8.14 9.02 43.48 32.00 64.50 17.00 29.90 42.69 18.20 123.71 28.15 10.15 33.17 74.45 35.56 33.97 9.30 19.16
0.24 -0.01 0.04 0.35 0.23 0.25 0.98 -1.64 -0.35 -0.02 0.33 1.75 -0.22 1.20 1.60 -0.31 -0.94 -0.78 1.48 0.27 0.73 0.48 0.89 2.24 0.70 1.64 0.41 -1.15 -0.53 0.45 -0.07 0.76 0.23 0.42 0.46 -0.13 -0.02 1.02 0.41 0.00 -0.42 0.79 0.45 2.20 0.39 0.06 0.73 0.51 -0.43 0.26 -0.05 -1.05 -0.66 0.53 0.30 -0.55 -0.28 -0.82 -0.25 -0.52 -0.50 1.15 0.98 -0.20 1.46 -0.27 -2.68 -0.01 0.21 0.01 0.17
7.97 0.20 1.48 4.92 50.95 5.30 65.35 16.25 43.82 3.30 12.30 21.40 19.57 14.61 22.19 8.49 75.05 31.16 32.28 6.64 40.01 43.64 8.03 28.85 17.50 31.03 41.22 158.76 27.10 44.44 2.69 27.85 25.73 5.02 42.14 20.98 0.49 12.14 18.28 32.90 38.64 23.64 25.49 13.68 33.20 49.97 19.06 3.29 38.35 36.50 14.73 31.00 28.89 6.25 7.15 34.24 20.96 47.25 14.04 24.34 28.26 15.51 77.73 25.77 3.96 20.75 49.94 28.53 22.61 4.44 13.18
12.93 3.73 4.30 10.10 62.80 9.94 86.01 28.53 60.00 5.29 21.16 38.40 35.16 28.79 33.80 15.84 97.76 43.43 48.69 12.25 76.33 67.20 19.35 48.96 30.49 57.18 62.00 210.69 34.77 62.33 5.85 46.49 35.86 13.12 56.66 24.83 1.81 32.81 32.29 41.80 62.83 42.17 40.45 38.65 48.31 70.20 43.18 13.91 56.92 46.40 23.16 42.31 85.90 14.32 10.05 46.08 32.99 64.99 18.66 34.24 43.05 25.84 126.91 58.29 14.51 34.10 75.24 37.61 34.80 9.92 22.81
Southern Arizona presence Alcoa Inc (Huck Fasteners) AA AMR Corp (American Airlines) AAMRQ Augusta Resource Corp (Rosemont Mine) AZC Bank Of America Corp BAC Bank of Montreal (M&I Bank) BMO BBVA Compass BBVA Berkshire Hathaway (Geico, Long Cos) BRK-B* Best Buy Co Inc BBY BOK Financial Corp (Bank of Arizona) BOKF Bombardier Inc* (Bombardier Aerospace) BBDB CB Richard Ellis Group CBG Citigroup Inc C Comcast Corp CMCSA Community Health Sys (Northwest Med Cntrs) CYH Computer Sciences Corp CSC Convergys Corp CVG Costco Wholesale Corp COST CenturyLink (Qwest Communications) CTL Cvs/Caremark (CVS pharmacy) CVS Delta Air Lines DAL Dillard Department Stores DDS Dover Corp (Sargent Controls & Aerospace) DOV DR Horton Inc DHI Freeport-McMoRan (Phelps Dodge) FCX Granite Construction Inc GVA Home Depot Inc HD Honeywell Intl Inc HON IBM IBM Iron Mountain IRM Intuit Inc INTU Journal Communications (KGUN 9, KMXZ) JRN JP Morgan Chase & Co JPM Kaman Corp (Electro-Optics Develpmnt Cntr) KAMN KB Home KBH Kohls Corp KSS Kroger Co (Fry's Food Stores) KR Lee Enterprises (Arizona Daily Star) LEE Lennar Corporation LEN Lowe's Cos (Lowe's Home Improvement) LOW Loews Corp (Ventana Canyon Resort) L Macerich Co (Westcor, La Encantada) MAC Macy's Inc M Marriott Intl Inc MAR Meritage Homes Corp MTH Northern Trust Corp NTRS Northrop Grumman Corp NOC Penney, J.C. JCP Pulte Homes Inc (Pulte, Del Webb) PHM Raytheon Co (Raytheon Missile Systems) RTN Roche Holdings AG (Ventana Medical Systems) RHHBY Safeway Inc SWY Sanofi-Aventis SA SNY Sears Holdings (Sears, Kmart, Customer Care) SHLD SkyWest Inc SKYW Southwest Airlines Co LUV Southwest Gas Corp SWX Stantec Inc STN Target Corp TGT TeleTech Holdings Inc TTEC Texas Instruments Inc TXN Time Warner Inc (AOL) TWX Ual Corp (United Airlines) UAL Union Pacific Corp UNP Apollo Group Inc (University of Phoenix) APOL US Airways Group Inc LCC US Bancorp (US Bank) USB Wal-Mart Stores Inc (Wal-Mart, Sam's Club) WMT Walgreen Co WAG Wells Fargo & Co WFC Western Alliance Bancorp (Alliance Bank) WAL Zions Bancorp (National Bank of Arizona) ZION Data Source: Dow Jones Market Watch *Quotes in U.S. dollars, except Bombardier is Canadian dollars.
InsideTucsonBusiness.com
AUGUST 24, 2012
19
INSIDE REAL ESTATE & CONSTRUCTION
Housing sector scores better at mid-year THE PULSE: Median Price Active Listings New Listings Pending Sales Homes Closed
By Roger Yohem Inside Tucson Business
TUCSON REAL ESTATE
8/13/2012
8/6/2012
$134,900 4,114 350 390 213
$160,000 4,101 353 346 198
Source: Long Realty Research Center
Every month, new home building permits data is published from Bright Future Real Estate Research, exclusively in Inside Tucson Business.
MONTHLY BUILDING PERMITS: JULY 2012 2012
2011
2010
2009
Pima County
62
42
44
71
Marana
70
31
44
29
Sahuarita
21
20
20
50
Tucson
32
25
30
44
So. Pinal
53
14
8
26
Oro Valley
25
4
4
5
263
136
150
225
Total Source: Bright Future Real Estate Research
YEARTODATE BUILDING PERMITS JULY 2012 2012
2011
2010
2009
Pima County
360
323
465
425
Marana
309
181
243
83
Sahuarita
174
112
238
334
Tucson
183
141
220
206
So. Pinal
126
103
115
92
64
32
35
32
1,216
892
1,316
1,172
Oro Valley Total Source: Bright Future Real Estate Research
WEEKLY MORTGAGE RATES Program 30 YEAR 15 YEAR 3/1 ARM
Current
Last Week
8/21/2012
One 12 Month 12 Month Year Ago High Low
3.75% 4.00%APR 3.50% 3.75%APR 4.95% 3.13% 3.25%APR 3.00% 3.125% APR 4.22% 2.88% 3.125%APR 2.88% 3.125% APR
4.95% 4.22%
The above rates have a 1% origination fee and 0 discount . FNMA/FHLMC maximum conforming loan amount is $417,000 Conventional Jumbo loans are loans above $417,000 Information provided by Randy Hotchkiss, National Certified Mortgage Consultant (CMC) Hotchkiss Financial, Inc. P.O. Box 43712 Tucson, Arizona 85733 • 520-324-0000 MB #0905432. Rates are subject to change without notice based upon market conditions.
3.50% 3.00%
When it comes to a tight supply of lots for new home construction, Oro Valley is the region’s most challenged municipality. Yet in recognition of the value and revenues that new homes generate, the town makes the best of the situation and works collaboratively with developers and builders. The economic results are in the numbers. Year to date, Oro Valley has issued permits at the fastest velocity of any local entity. The town’s volume is up 100 percent, having spiked from 32 to 64 building permits (see chart). Overall, every jurisdiction has issued at least 11 percent more permits year over year, according to Ginger Kneup, owner of Bright Future Real Estate Research. The second-fastest pace was in Marana. The municipality’s volume has risen from 181 to 309 permits, a 71 percent increase. New home construction is clearly off the market’s bottom, Kneup noted. At this time last year, 892 permits had been issued. The current gain of 324 permits equates to a 36 percent increase.
Restaurant/office default An affiliate company of developer Don Bourn is in default on a commercial real estate parcel that contains a restaurant and offices in the North Oracle Road corridor. A notice of trustee’s sale has been filed on 6760-6770-6780 N. Oracle Road related to a $2.88 million note. According to public records, a public auction will be held in November. The onsite tenants include Hifalutin Restaurant, Realty Executives, Fidelity National Title, and Fairway Independent Mortgage. The trustee’s sale notice lists PBI River LLC and PBI Oracle LLC, both at 3915 E. Broadway, as the property owners. The ownership group includes Don Bourn, founder of Bourn Properties; Louis J. Sherman, Scottsdale; and the Patricia/Kevin Kiernan Revocable Trust, Coronado, Calif. The auction is being handled by Snell & Wilmer. The property is scheduled for public auction at 1:30 p.m. Nov. 13 at the law firm’s office, 1 S. Church, Suite 1500.
Breakdown by entity New data from Coldwell Banker’s Residential Market Report offers further evidence that local real estate is rising from the bottom. Based on a July year-over-year analysis by municipality: • At mid-year in the city of Tucson, there have been 6,524 sales, 8 percent ahead of last year’s 6,042 pace. The July average days-on-market was 94, just two days faster than in July 2011. The selling price per square foot indicates the direction of property values since the mix of high and low-end sales impact
median and average sales prices. In Tucson, the July selling price per square foot was $92, up from $86 a year ago. The median sales price was $134,900, up 12.4 percent from $120,000 in July 2011. The July average sales price was $179,464, up 6.3 percent from $168,906 in July 2011. • In Oro Valley year-to-date, there have been 454 sales. That is 24 percent ahead of last year’s 366 closings. The July selling time was 116 days, four days faster than a year ago. In July, the median sales price was $235,000 up 9 percent from $216,000 in July 2011. The average sales price of $306,014 was 11 percent higher than the $276,547 level in July 2011. The July selling price per square foot was $128 compared to $120 a year ago. • In Sahuarita, there have been 294 sales since January, 10 percent less than last year’s 327 pace. The July days-on-market was 71, down from 85 days a year ago. The median sales price was $172,000, a 46 percent increase from $117,750 in July 2011. The average sales price of $173,011 was 35 percent higher than the July 2011 level of $128,256. The July selling price per square foot was $78 compared to $66 a year ago. • In Marana, sales were only five ahead of the 287 closings in the first half of 2011. Over the past 12 months, the average selling time dropped to 79 from 95 days. Last month, the $235,450 median sales price was 65 percent higher than the $142,550 level in July 2011. The average sales price however, stayed basically flat at about $250,000. High-end sales had the effect of increasing the selling price per square foot by 18.5 percent, from $92 to $109, according to Coldwell Banker.
New home sales up At the mid-point of 2012, the sales of new-built homes across Southern Arizona are up a strong 15 percent. There have been 806 new home closings compared to 700 for the same six-month period in 2011, according to Ginger Kneup, owner of Bright Future Real Estate Research. Due to “the strong permitting activity of the past few months, total closings for 2012 will most likely fall between 1,500 and 1,600,” she said. There were 1,281 new home closings last year; 1,778 in 2010; and 1,307 in 2009.
Sales & leases • Tucson Roller Derby leased 13,000 square feet at 1145 E. Valencia Road from Valencia Holdings LLC. The transaction was handled by Gary Emerson, GRE Partners.
Email news items for this column to ryohem@azbiz.com. Inside Real Estate & Construction appears weekly.
20 AUGUST 24, 2012
INSIDE TUCSON BUSINESS
EDITORIAL BIZ BUZZ
No gain: mixing politics and religion An old expression is to never discuss religion or politics. It’s too dangerous. What may be worse for business is to put the two together and discuss religion AND politics. That may seem hypocritical coming from a guy who writes a column on the opinion pages of a publication, but as I’ve recounted previously, I initially wanted to get rid of these opinion pages in Inside Tucson Business until the DAVID HATFIELD owners and publisher suggested I rethink that stance. Our owners, Wick Communications, has long encouraged expression of opinions as a service to the communities served by their publications. So Inside Tucson Business continues to offer up viewpoints, trying always to respect our audience of business leaders and owners. (As I wrote last week, we welcome as many viewpoints as we can accommodate within the limitations of time and space.) In trying to respect the views of our readers, we’ve intentionally stayed away from getting too involved in social issues. Frankly, I’m not sure how we would formulate a business stance on something such as defining marriage, for example. That hasn’t stopped others, as we saw last month when Chick-fil-A President and CEO Dan Cathy told a devotional radio program host that he believed in a biblical definition of the family unit, adding “I think we are inviting God’s judgment on our nation when we shake our fist at him and say we know better than you as to what constitutes a marriage.” That brought out the knee-jerk reactions calling for a boycott, then the counter-call for a Chick-fil-A appreciation day and the ultimate in stupidity from a Tucsonan who posted a YouTube video in which he verbally berated a Chick-fil-A drive-through employee for what he called the company’s horrible policies The man — who has since apologized — was fired the next day from his job as chief financial officer from the medical device manufacturing firm Vante, which was compelled to issue a statement saying the man’s actions shouldn’t be construed as representing the company as a whole. That chain of events should stand as a lesson in why businesses shouldn’t mix religion and politics because there’s no possible benefit to be had. As Comedy Central’s Stephen Colbert demanded to know last month, “I’ve got to know what positions my food has taken on all the issues. For example, I love Carl Jr’s Western Burger. It must be anti-ObamaCare, because it is clearly trying to kill us. And whenever I go to Applebee’s, I insist that they only give me right wings. After all, you are what you eat. And now, you also believe what you eat.” Seriously, what’s supposed to happen when a business flaunts a political and religious viewpoint? Those who don’t share it aren’t welcomed? Whether that’s intended, it’s the probable outcome. In this economy I’m not sure there are too many businesses that can afford to exclude customers based on their beliefs. I’m a member of an organized religion. I also vote. You, as a reader, should not care one whit what I believe in either of those two areas. There’s more respect to be gained by showing an exemplary style of leadership. Customers can figure out the political and religious stuff later.
Contact David Hatfield at dhatfield@azbiz.com or (520) 295-4237.
EDITORIAL
Nice catch Within hours after the Aug. 16 announcement that Accelr8 Technology Corporation is moving its corporate headquarters to Tucson from Denver, news releases started arriving from those who wanted to take credit. First there was the announcement in the board room of Tucson Regional Economic Opportunities (TREO) and its press release. There was Gov. Jan Brewer who was on the phone. And the Arizona Commerce Authority that offered a $700,000 loan at a low interest rate to Pima County to help it build out more than 15,000 square-feet of wet labs in the 180,000 square-foot, four-story Herbert K. Abrams Public Health Center, 3950 S. Country Club Road, near the University of Arizona Medical Center - South Campus. Once the county repays the loan, the money would be available for more economic development projects. Pima County also sent out its own announcement. It wanted credit as landlord and the entity responsible for spending an estimated $1.4 million to build out the wet lab space. Under terms of the agreement, the county would receive just under $140,000 a year in lease payments. The rate of $9.25 per square foot is below market rate so that Accelr8 can recoup its moving costs. The rate would move up to market rates after three years. Even the City of Tucson stepped in to take some credit because, well, the Herbert K. Abrams Public Health Center is inside the city limits. And of course, it gave the city an opportunity to say it is working “to become more welcoming to businesses.” We also need to thank the company itself. Accelr8 is a biotech firm whose arrival hits a bulls eye among industry clusters TREO has specifically targeted. This is a company that develops instruments used for the detection of pathogenic microorganisms. When it arrives early next year, the company will join with Roche Group’s Ventana Medical Systems, Sanofi, the Critical Path Institute, Bio5 and others in creating the synergis-
tic critical mass that will make the Tucson region a biotech hub. While the number of jobs — 65 in the first three years — may not sound overwhelming, these are well-paying positions for engineers, scientists, sales and marketing, management, finance, quality control and regulatory and manufacturing. The hope is that the number of jobs can grow to 200, maybe 300, within a decade. This is precisely how Ventana Medical and Sanofi started and grew. There’s no reason to believe Accelr8 can’t do the same. We’ll take that over another announcement of a few hundred more low-wage call center jobs. The truth of the matter is that scoring an economic development win like Accelr8’s arrival took cooperation among many entities along with a healthy mix of the stars aligning just right and a few lucky intangibles. In this case Lawrence Mehren, who has been president and CEO of Accelr8 since June, had previously been head of global business at Ventana Medical Systems where he had worked since 2007. Mehren said it wasn’t a slam-dunk that Accelr8 would move to Tucson. In fact, he said the company’s first choice was to remain in Colorado, but he said company officials were impressed with the unified, organized effort put on by Tucson and Arizona. It also couldn’t have hurt that two of Accelr8’s board members and investors are Jack Schuler and John Patience, principals and founders of Crabtree Partners LLC, which has been instrumental in the success of other biotechs, including providing capital for Ventana Medical’s first instrument. So congratulations and thanks to TREO, state officials, the Arizona Commerce Authority, Pima County, the City of Tucson and to anyone and everyone else who had a hand in helping Accelr8 make its decision to come to Tucson. Nice catch.
InsideTucsonBusiness.com
AUGUST 24, 2012
21
OPINION WAKE UP, TUCSON
A ‘10 Commandments’ for Tucson’s public officials We have a lot of fun on our radio show every morning. Sometimes it’s tough waking up at 4 a.m. to take on the powers that be in this region. Once the opening bars of the Beatles song “Revolution” fire up shortly after 6 a.m. and we are engaging with our listeners, it is all forgotten. It seems as if we’ve covered every subject under the sun with our listeners, including their concert, their first car and even “boxer or briefs.” A couple of weeks ago, we asked listeners to help us compile a “10 Commandments for Public Officials” in Tucson. 1. Thou shalt live to serve and not be served. Check your ego and selfishness at the door. When U.S. Rep. Raúl Grijalva called for a boycott of Arizona, it was to serve his ego in an appearance the Keith Olbermann show, not the thousands of people, including those in his own district, who work in the tourism industry. 2. Thou shall not overstay thy welcome. We wouldn’t hear the cry of term limits if incumbents would recognize they should move on. After eight to 10 years in the same gig, it’s time to start looking for a real job. 3. Thou shall make decisions to benefit your constituents as a whole, not just the people who cut you checks. The City of Tucson’s coddling of neighborhood associations and Pima County’s environmental obsession has helped lead this region into a dead-end of stagnation. 4. Thou shall honor the efforts of small business everyday of your term, not just
the last six months leading into your re-election. Former Tucson City Councilwoman Nina Trasoff is the poster child for his. The week before her loss to Steve Kozachik in JOE HIGGINS 2009, the city council proclaimed “Small Business Appreciation Week.” Trafoff then proceeded to do a press conference on Congress Street announcing a new development deal that kicked most of the existing tenants to CHRIS DeSIMONE the curb, most of whom found out about it from her press conference. Trasoff was supposed to be a PR expert. Ooops. 5. Thou shall be transparent about the use of each and every taxpayer dollar. Democratic County Supevisors Ramón Valadez, Richard Elías and Sharon Bronson haven’t appointed anyone to the Citizens Budget Advisory Committee in years. Without those appointees, the committee hasn’t had a quorum since Color Me Badd had a hit on the top 40 charts. Meanwhile, Republican Supervisor Ray Carroll has
been refused budget information from County Administrator Chuck Huckelberry. That doesn’t sound too transparent for three folks looking for votes in November so they can stick around another four years. 6. Thou shalt not hold meetings during business hours. If you work or own a business, it’s tough to go to a 9 a.m. Tuesday government meeting. As a result Board of Supervisors meetings are for retirees, activists and the favored few. 7. Thou shall answer all reasonable questions. Even the tough ones. 8. Thou shall truly care about the environment for business. If you saw our last column two weeks ago, the map showed it all. State government and other jurisdictions within Arizona set a table for true economic development. In the Tucson region, we’re at the bottom of lists and one in four kids goes to bed hungry every night. 9. Thou shall not fluff the numbers. The county supevisor incumbents are already touting that Accelr8 Technology Corporation’s relocation to Tucson next year is bringing 300 jobs. It’s bringing 10 jobs. They’re planning to add 55 within three years and if everything aligns in the future that could grow to 300 in 10 years. The supervisors also like to talk about the 500 new biotech jobs created at Roche Group’s Ventana Medical Systems. So far the publicly revealed numbers aren’t anywhere close to that. 10. Thou shalt not be an ingrate. Republican City Councilman Steve Kozachik got a lot of support to beat Nina
Trasoff three years ago. Even if he was upset that Bob Walkup, the Republican mayor at the time, wouldn’t endorse him. But since then, Kozachik has turned on the very people who helped him, including state Sen. Frank Antenori and the rest of the Republican delegation to the the Legislature. So what happened when a quality guy like Republican Tyler Vogt calls on Kozachik in 2011 and asks for support? Kozachik refuses to support the one guy who could have helped him change Tucson. And that’s not the end of it, Kozachik has since endorsed Democrats Ron Barber for Congress and Richard Carmona in his bid to go to the U.S. Senate. Neither of those guys are going to help Kozachik at Tucson city hall. Memo to Mr. Kozachik: You’re not taking heat because you’re supporting Democrats, you’re taking heat because you’re ungrateful. We’ve probably missed a few potential commandments along the way. If you’ve got one, we’d love to hear from you. In the meantime, as you consider how you will cast your ballot use these commandments as a guide to scrutinize the candidates running for the county Board of Supervisors, Tucson Unified School District governing board and state legislative seats.
Contact Joe Higgins and Chris DeSimone at wakeuptucson@gmail.com. They host “Wake Up Tucson,” 6-8 a.m. weekdays on The Voice KVOI 1030-AM. Their blog is at www.TucsonChoices.com.
LETTERS Tucson still wants F35A TO: The Editor FROM: Ray Carroll, Pima County Supervisor, District 4 RE: ‘Tucson Forward Sets Tucson Back,’ editorial Aug. 10 issue While I completely agree with the editorial, particularly your excoriation of the “near invisible public profile” of the shadow group Tucson Forward, I must disagree with your comment that elected officials of Pima County were “not showing themselves to be leaders” in the organized effort to bring the F35A fighter plane to Tucson International Airport (TIA). As verification of my statement, I am enclosing my July 23, 2012, letter to the Assistant Secretary of the Air Force in
support of basing the F-35A at TIA. In addition, I am enclosing my follow-up letter of Aug. 14, 2012, which urges training in the F-35A at Tucson as well as at Luke Air Force Base. I was pleased to work with such business leaders as Ron Shoopman of the Southern Arizona Leadership Council, Mike Varney of the Tucson Metro Chamber and Darren Venters, retired lieutenant colonel in the U.S. Air Force, in this endeavor. This cooperation between the private sector and the public sector is the type of partnership our community needs to continue to grow and prosper. The military installations in our area are a major economic engine that provides jobs and revenue for Pima County. You can be assured that I will continue to support them.
Stakeholders did not OK Broadway widening TO: The Editor FROM: Laura Tabili RE: ‘Don’t blame the RTA for Broadway widening project,’ opinion July 27 issue Apologists for the misbegotten Broadway widening project consistently misrepresent its opposition. For years, city and Regional Transportation Authority staff have repeated the lie that stakeholders approved the plan. Yet the record shows consistent opposition from the 1980s to 2005 to today. The project will not remedy downtown bottlenecks but worsen them, running
eight lanes of traffic into the already clogged and even dangerous east end of Congress Street. Downtown Links (connecting the end of the Barraza-Aviation Parkway at Broadway with Interstate 10) would offer little relief as it would only be four lanes, not eight. The 2012 Traffic Study admits on page 1 that the Country Club Road intersection will fail 7-10 years after the expenditure of $74 million we do not have. I urge readers of Inside Tucson Business to examine for themselves this report as well as the 1987 Draft Final Report and other documents posted on the Broadway Project website: http://dot.tucsonaz.gov/ projects/broadway.
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22 AUGUST 24, 2012
INSIDE TUCSON BUSINESS
OPINION GUEST OPINION
Social Security is definitely not a good deal for retirement When I saw the headline in the Arizona Daily Star that read, “Social Security: Is it really no longer a good deal?” my initial reaction was that the media had finally caught on. But then I realized the report avoided answering the question in the headline and instead focused on the other benefits of Social Security: insurance for the disabled, widows and widowers. So let me go back and ask the question again, slightly rephrased: “Are Social Security taxes a good deal for their retirement benefit?” The short answer is a resounding “no.” And it’s not what you think. The Associated Press report published in the Star Aug. 5, 2012, stated today’s retirees can expect to pay more in Social Security taxes than they will receive in future retirement benefits. But the reason Social Security is a bad deal for retirement has nothing to do with the fact that we now have to pay more than we get back in benefits. Social Security is a bad deal for retirement because individuals in the current Social Security system don’t benefit from the most fundamental investment principle, “compound interest.” Compound interest means we earn interest on both the original principal and the previously earned interest. Thus, the amount of money earned increases based
on a return to a growing amount of money. We get no interest on retirement monies paid in to Social Security. Let’s look at what is really going on. By law, STEVE COLE individuals and their employers currently pay an annual Social Security tax of 12.4 percent on the first $110,100 of annual wages and salaries. The tax would amount to $13,652.40 on $110,100. That amount of money could equal mortgage payments for an entire year or a year’s worth of tuition plus room and board at a state university. More importantly, the money taken out in Social Security taxes could be invested in separate individual accounts, based on U.S. stock index funds, such as the Standard & Poor’s 500, one of the most widely used benchmarks in U.S. stocks. As of July 30 this year, the average rate of return over the last 40 years for the S&P 500, was 10.49 percent. Over an individual’s working life, say from 26 years of age to 66, the total of 40 years of annual Social Security taxes at the current maximum income of $110,100 would equal
$546,096. Assuming the historical annual compound rate of growth of the S&P 500 stock index at 10.49 percent, an individual’s retirement savings would be $6,887,422. Thus the benefit the individual receives from compounding of their individual tax account is the difference between the amount of taxes and the final account balance. That equals $6,341,326. As previously stated, compounding is the most fundamental benefit of investment. Since most people don’t make $110,100 a year, let’s take an average person’s income. Currently the average salary in the U.S. is estimated to be $47,000 annually. The 12.4 percent Social Security tax on that amounts to $5,828 per year or $233,120 over 40 years. Applying the same rate of growth of the stock fund, after 40 years the average individual would have a retirement account of $3,234,581. That spectacular amount of money results from individual accounts enjoying the benefits of a rate of return being applied to a growing amount of principal. In this example, compounding accounts for 93 percent of the retirement account. That is money that should belong to the individual for retirement. Instead under Social Security the federal government spends it. It is misleading to not even mention the
lost financial opportunity for growth. The loss of opportunity to have Social Security taxes grow in an individual account through compound interest is far more significant than whether a retiree receives as much from Social Security as he or she pays into it. That means the government believes a zero percent rate of return on Social Security taxes is a good deal. Indeed it even suggests that a negative rate of return on Social Security taxes is a good deal. One reason citizens do not have their own individual Social Security tax accounts is that the federal government has for almost 30 years been using the funds for other purposes and leaving IOUs — IOUs that contribute to a total budget deficit of $2.7 trillion. And now, the government is looking at adding $166 billion to cover this year’s shortfall in money coming in from Social Security taxes. So what is a citizen to do? Demand a change. Individual accounts for Social Security taxes would create a nation of savers rather than a nation clamoring for dependency on government. But that may have been a goal of Social Security all along.
Steven Cole, a commercial real estate appraiser in Tucson since 1975, is president of Southwest Appraisal Associates.
InsideTucsonBusiness.com
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