Strangers wandered through Steve and Debbie Madsen's front yard a couple of weeks ago, looking for a bargain among the odds and ends of the couple's life. The lawn was full of tables, lamps, a bench press, a motorcycle - things too big to ship to Hawaii, where the Madsens and their children hope to be moving at the end of the month.
The family would rather stay in Utah. But Madsen, a construction worker, can't find a job here.And then there is Earnie Redfearn. Redfearn moved to Utah recently so that he could become vice president of sales and marketing at Huish Chemical Corp., which has expanded its operations in the state. The Redfearns, originally from Southern California, had spent a lot of time in Utah on vacations; now they say they're looking forward to the state's four seasons and its slower pace. Because the housing market in Utah is in a slump, they were able to buy the kind of house they never could have afforded in California.
The Madsens and the Redfearns are two sides of Utah's economic picture, a picture that is at once bleak and hopeful.
The state's economy is turning out to be a key issue in statewide and local political contests this summer. Incumbents point to signs of progress, for example the 9,000 net new jobs created statewide in the last year, up from only 3,000 the year before. Opponents point to signs of failure, for example the relentless march of out migration that continues to plague the state, with another 13,500 people leaving between July, 1986 and June 1987.
In this election year it's hard to find a candidate who doesn't invoke the phrase "economic development," generally in
some sort of vague but hopeful way, as if the very words themselves imply a strategy.
What a difference a decade makes, notes James A. Wood, research analyst with the Bureau of Economic and Business Research at the University of Utah.
Wood remembers in the late 1970s when two electronics firms announced they were thinking of relocating to the state. "We got flak from existing electronics firms," he recalls. "Their message was: `We do not want you to go out selling Utah.' " In those days the buzzwords weren't "economic development," they were "managed growth."
Those were the days when you would not have seen a billboard proclaiming "Utah. A pretty, great state."
The billboard is the brainchild of the Utah Economic Development Corp., whose officials reason that we can't expect out-of-state businesses to move here or invest here if we don't have a healthy self-esteem.
But the billboards looming over downtown streets are only the most visible of Utah's economic development efforts. There are dozens of programs - state, local and private - aimed at creating jobs and an increased tax base. If the economy is still far from vital, it's not for lack of trying.
Things started souring for Utah around 1979, when national and international markets began to pay reduced prices for the minerals and energy-related products the state provides. While many parts of the country were affected by a downturn in the economy, Utah has had a harder time bouncing back than some states, said Dr. Kelly Matthews, senior vice president and economist for First Security Bank.
In addition to the over-reliance on energy and mining jobs, economic recovery has also been hampered by the construction industry's over-building and Utah's unique demographics. We have what economists call a high dependency ratio; in other words, a high number of kids per taxpayer. And that means too many school children whose education must be financed by per-capita incomes that lag well behind the national average.
Add to that the tax ramifications of large families and church contributions - both of them deductions - and Utah ends up with a tax base that is 20 percent smaller than other states with comparable tax rates, according to the Utah Foundation.
These days, every state and major city in the nation has an economic development plan, some more flamboyant, ingenious and costly than others. Baltimore outfitted a 100-foot clipper schooner called The Pride of Baltimore, which sailed around the world drumming up business for the city until the boat sank north of Puerto Rico two years ago.
Tennessee's economic development strategy has offered plenty of incentives to lure Japanese businesses, including the promise of free driving lessons for Japanese plant managers. And California spends somewhere between $5 million and $10 million a year on corporate recruiting alone.
Utah can't afford to play the economic development game on quite those terms. But its efforts are not minor league, either. In fiscal year 1989, the state will spend $15 million on economic development programs. That doesn't count the money that counties and cities around the state will spend. Or the federal money that goes into grants and loan programs. Or the investment of private capital.
With all these programs and all that money, are we just spinning our wheels or are we making progress? The answer depends on who you ask.
Rick Thrasher, president and chief executive officer since early May of Utah Economic Development Corp., says the answer may lie in forging a stronger public and private sector partnership.
The corporation is working to stimulate economic growth in the Salt Lake area. The Salt Lake Area Chamber of Commerce was a moving force in establishing the corporation.
Thrasher said UEDC is an umbrella organization whose objective is to unite the public and private sectors, particularly political subdivisions, in a uniform effort toward stimulating the economy.
"We present the area that we represent without being overly concerned with the boundaries of political subdivisions. If someone chooses to locate in one municipality versus another it is because the conditions of a given site best meet a client's needs," he said.
Thrasher said the "growth of political subdivisions is the responsibility of the politicians. The growth of the economic area we serve is our responsibility. Our job is to lift the tide, and a rising tide lifts all ships," he added.
Salt Lake Area Chamber of Commerce president Fred S. Ball said he's worked personally with many different directors and staff people in the state over the last 18 years, and he feels he has a better relationship with the current group of state officials than any of the others. But at the same time, he's also heard businessmen complain about the state's efforts.
Critics talk derisively about "The Daves": David W. Adams, executive director of the state's Department of Community and Economic Development; David J. Grant, director of the division's department of economic development; and David Johnson, who, until the department was recently privatized, headed the state's sports marketing efforts.
One of the trio's most vocal critics has been Utah legislator Joanne Milner, a Democrat from Salt Lake City, who states flatly: "One of the greatest deterrents to the success of Utah's economic development has been the ineptitude of persons in very key positions. . . . Are they the kind of image we want to present about Utah?"
But Wood of the U. of U's. Bureau of Economic and Business Research sees things differently. "I've worked with different administrations for the past 14 years, and I think the people I'm dealing with now are some of the best we've had," he said. "Economic development is a long-term process, and unfortunately it gets caught up in the short-term political process."
Grant has heard the criticisms, and he thinks part of the problem is that "people think we have more control over the economy than we do. We only impact the margin - about 2 percent of the economy." But it's an important 2 percent, he said, because even 2 percent means 13,000 jobs. "It's the difference between growth and stagnation."
One of the criticisms of his office, he said, is that it puts too much emphasis on corporate recruitment instead of on expansion or development of local companies. But this is just a perception, he said, because less than 10 percent of the economic development budget goes toward getting companies to relocate here.
Although corporate recruitment efforts have come under fire, Kirk Green, who heads up those efforts for the state, points to successes: 19 companies that have relocated to Utah in the past three years, including such Fortune 500 firms as Grumman Aerospace, McDonnell Douglas and Diamond Crystal Salt.
Compared to some states who play the corporate recruiting game, Utah and its individual counties rarely offer much in the way of monetary incentives to out-of-state companies, said Green.
"Our philosophy is that long-term success relies on more than incentives," he said. "Some states have given away the farm without any hope of recouping anything."
Until recently, some of Utah's efforts were diluted by competition between counties and cities within the state. But creation of regional groups such as Metro Utah (a coalition of northern Utah economic development entities) and the Utah Economic Development Corp. has helped erase boundary lines. There is still criticism, though, that not enough is being done to boost the economy of rural Utah.
With more than 3,100 counties and more than 10,000 municipalities in the country, all trying to improve their economic picture in some fashion, the Utah corporation faces tough challenges. Thrasher said the corporation is banding together to compete with cities like Denver, Phoenix, Los Angeles and Portland.
"What we are really after is the retention and expansion of high-quality investment that provides the opportunity to retain and expand employment opportunities for our people," Thrasher said.
The selling of Utah usually focuses on its human resources - namely a motivated, educated, healthy workforce.
But some critics worry that there is another message being sent out about Utah workers. "Those incompetent idiots in Community and Economic Development are selling the state by telling businesses that Utah's workers will work for less than anyone else," complains Ed Mayne, president of the Utah AFL-CIO.
In response to criticisms that too much effort has being spent on corporate recruiting, there has been a shift in emphasis at state and regional levels toward expanding, creating or retaining local businesses, particularly in the small business sector. Hundreds of companies have been helped so far (see story above).
Despite these successes, it is generally agreed that more is needed to help Utah businesses provide more jobs. One of the biggest problems is the lack of capital - or at least the lack of the right kind of capital.
Grant L. Cannon of the Utah Technology Finance Corp., said he has identified 70 venture capitalists with a total of $5.3 billion who are willing to invest in Utah companies.
Several venture funds have been started or are in the process in being formed, including the Utah Technology Venture Fund 1, Eagleplace and Technovest. A networking group, MountainWest Venture Group, meets regularly in an effort to hook up entrepreneurs with investors.
Venture capitalists, however, are willing to take big risks only because they expect big returns. At the other end of the financial spectrum, Utah's banks aren't willing to take much of a risk at all, and have been notoriously conservative when it comes to investing in local businesses, whether it's a mom and pop outfit or the resurrection of Geneva Steel.
What most Utah businesses are left with, said R. Kent Moon, district director of the Small Business Administration, is a "middle market gap." What Utah businesses need, he said, is a Small Business Investment Corp.
SBICs have been around for 30 years in other parts of the country, and in fact have helped in the creation of such recent American institutions as Godfather's Pizza, Federal Express and Nike Shoes.
With backing from the U.S. Small Business Administration, an SBIC raises large sums of money which it then loans to small businesses under terms generally denied by banks. While a bank might require that a business have collateral and three years' worth of success in order to qualify for a loan, a SBIC "scrubs the analysis," said Moon, and stretches out the repayment time.
Backers of the SBIC idea in Utah - spearheaded by local businessman Peter Cooke - hope to raise at least $10 million in the next three years from local investors, including pension funds, governments and banks. The return on a typical SBIC investment is about 13 percent, said Moon.
The hope is that all this money will create not only jobs but jobs that create other jobs - and jobs that pay well. According to the state economic development office, to avoid state budget deficits between now and 1995 we need not only high job growth - 31,200 net new jobs - but high wage growth - 4.7 percent a year. Creating that many new jobs at only 3.4 percent wage growth would mean a budget deficit of $540 million.
Wage growth, according to the development office, is a higher priority for economic development than job growth.
With that in mind, the state is putting a lot of emphasis on the creation of high-tech jobs. In fact, predicts, the UTFC's Cannon, the Wasatch Front could become a leading "technopolis" in the years ahead. Already, he said, 38 percent of the area's manufacturing is technology-related, compared to only 32 percent in Boston.
According to Cannon, Utah ranks fourth in the nation in the number of science and engineering Ph.D.s per 1,000 residents and ranks fourth in the nation in percent of the workforce with at least four years of college education - both elements that could help create that technopolis.
"Utah right now is at the crossroads of its economic future," said Cannon. Whether the road leads toward prosperity or bad times will depend on programs like the Utah Technology Finance Corp., the Centers of Excellence, small business loan programs, and venture capital efforts.
But it will also depend on which way the economic winds blow. Trade deficits, interest rates, the stock market, a drop in copper prices, even space shuttle disasters do more to affect Utah's economy than the best-laid plans of a room full of economic development experts.
This story was compiled by Deseret News staff writer Elaine Jarvik, with contributions from Staff Writer Chuck Gates.