HomeMy WebLinkAboutSPAC.2012.0306.Minutes I
TOWN OF FOUNTAIN HILLS
MINUTES OF THE FOUNTAIN HILLS
(110' STRATEGIC PLANNING ADVISORY COMMISSION MEETING
March 6,2012
AGENDA ITEM#1-CALL TO ORDER
Vice Chair Curt Dunham called the meeting to order in Council Chambers at Town Hall at 3:04 p.m.
AGENDA ITEM#2—ROLL CALL
Present for roll call were the following members of the Strategic Planning Advisory Commission: Vice Chair
Curt Dunham, Commissioner Denise Atwood, Commissioner Nick DePorter, Commissioner Mike Dooley,
Commissioner Alan Magazine, Commissioner Barry Spiker, and Youth Commissioner Sarah Traylor. Chair
Audra Koester Thomas was excused. Also present were Town Manager Ken Buchanan, Deputy Town
Manager/Finance Director Julie Ghetti, Economic Development Administrator Lori Gary, and Recording
Secretary Shaunna Williams.
AGENDA ITEM#3—CALL TO THE PUBLIC
No one appeared at the Call to the Public.
AGENDA ITEM #4 - CONSIDERATION OF APPROVING MEETING MINUTES OF FEBRUARY 6,
2012
Commissioner Magazine MOVED to approve the February 6, 2012 meeting minutes and Commissioner Spiker
SECONDED the motion, which CARRIED UNANIMOUSLY by those present.
• AGENDA ITEM#5—TOWN MANAGER'S UPDATE
Vice Chair Dunham welcomed Ken Buchanan as Town Manager. Mr. Buchanan responded that he is pleased to
be here and that he will be working closely with SPAC; he deferred to Ms.Ghetti for the remainder of the report.
Ms. Ghetti referenced a memorandum dated March 6, 2012 that had been distributed to the Commissioners (copy
attached). She noted that the memorandum contains Council Goals for FY12-13, as well as the initiatives
proposed by staff to accomplish each goal. She reported that the Council made changes to the initiatives at the
Work Study Session on February 21 that included removing a telecommunications tax as a funding source,
removing the update of the Hocking Report, and removing the update of the Stantec Report. She stated that
"Other SPAC recommendations and initiatives" listed in the report will go back to Council at a Work Study in
April so that the Council and SPAC can have more dialogue on the memo that Council tabled in December.
In response to a question from Vice Chair Dunham, Ms. Ghetti stated that at the Work Study in April there will be
a specific agenda item pertaining to the Strategic Plan Update.
AGENDA ITEM #6 - UPDATE ON TOWN FINANCES AND REVIEW OF STAFF'S
PROPOSED INITIATIVES TO MEET COUNCIL PRIORITIES FOR FY12-13
Ms. Ghetti reviewed a document that had been distributed to the Commissioners entitled, "Economic Update —
January 2012 — Strategic Planning Advisory Commission" (copy attached). She noted that retail sales tax
revenues will be closely monitored to ascertain whether or not the sales tax collections reported for December
0 sales are anomalies.
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4
In responding to a question from Commissioner Magazine relating to the correlation between sales tax collections
and a potential saturation of the Fountain Hills market in restaurants and bars, Ms. Gary stated that there is no
direct correlation.
AGENDA ITEM #6 - DISCUSSION AND POSSIBLE CONSIDERATION OF FIRST
PROGRESS REPORT FROM ASU'S NEW VENTURE GROUP ON THE RESEARCH
PROJECT "COMPETITIVE ADVANTAGES AND REGIONAL COLLABORATIVE
OPPORTUNITIES FOR BUSINESS DEVELOPMENT IN THE TOWN OF FOUNTAIN HILLS"
Vice Chair Dunham noted that, due to unforeseen circumstances, representatives from ASU's New Venture
Group (NVG) were unable to attend the meeting tonight. He said that their report had been received and that
copies have been distributed to the Commissioners (copy attached). He stated that, inasmuch as NVG was not
present to put the report in context, SPAC would discuss generalities of the report.
Discussion ensued about the report being incomplete based on the direction provided to NVG for the examination
a larger sector that includes healthcare, wellness, medical, and bio-medical; that the analysis should include bullet
lists of driver and barriers, or challenges and opportunities, or strengths and weaknesses; that the analysis should
identify how the components listed relate to economic development; that scale is something NVG should look at,
i.e., the ability to move around in a small town and do one-stop shopping; and concern that the Scope of Work
does not allow an adequate amount of time for NVG to do a thorough job.
Ms. Gary pointed out that there is some erroneous information in the report; that information she provided to
NVG has been taken out of context. She stated that she will contact NVG to relay that message.
Vice Chair Dunham suggested that the second report should be an update of the current report, with the erroneous
numbers corrected and more focus on healthcare and wellness. He also stated his concern that the report focuses
on Fountain Hills competing with other areas in the Valley; whereas he feels that a regional effort is necessary in
order to get the first level of interest here.
Discussion ensued about potential advantages and disadvantages of working in concert with GPEC and others to
get visibility for Fountain Hills.
Commissioner Atwood stated that being part of a bigger team and getting our name out there does have benefits.
She also pointed out that the "What's Next?" section of the report does not advise a clear direction or path
forward.
Commissioner Dooley indicated that he believes the debate about focusing on the region or Fountain Hills,
specifically, involves a strategic approach to business development, i.e., working with others or going it alone?
He noted that SPAC should discuss which strategy should be used.
Ms. Gary pointed that Economic Development involves a two-pronged approach; that we must be part of the
region, but that regional involvement does not preclude us from marketing ourselves individually.
Vice Chair Dunham stated that we need to keep in mind that this exercise is trying to determine whether we
should allocate human and financial resources to this approach; that we are in the discovery phase; that regional
analysis is something that is lacking from this report. He said that SPAC should give NVG direction on the
comments heard tonight and ask them to have a representative come back with a revised report to discuss it in
person;that NVG should not move on to another report without updating the current report.
Commissioner DePorter stated that although he has no interaction with this group, he would be happy to reach out
to Dr. Brooks to determine"what is going on with them."
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Vice Chair Dunham suggested that Commissioner DePorter check with to see if NVG has an expectation that they
are not going to be interacting with SPAC.
Commissioner DePorter agreed to do so and will report back to Chair Koester Thomas.
Vice Chair Dunham summarized that health and wellness should be explored in the report, including behavioral
health, rehabilitation, convalescence, and specialized medical services; that inaccuracies should be corrected; and
that NVG should present a second draft of the report in person at the next SPAC meeting. He noted that
Commissioners should send additional comments or suggestions about the updated report to Chair Koester
Thomas and let her be the gatekeeper. He stated that Commissioner DePorter should also talk to Dr. Brooks
about the schedule to see if March 27 is a viable date to get an updated report back.
Further discussion ensued about whether or not"biotech" should be discussed in the report.
In response to a question about the feasibility of the biotech sector in Fountain Hills, Ms. Gary stated that while
NVG could perhaps provide insights not previously considered about that sector, it is SPAC's decision as to what
should be included in the report.
Vice Chair Dunham noted that we should proceed with the stated scope of work. He said that the March 27
SPAC meeting date will remain on the schedule pending conversations with NVG. He also established a
March 13 deadline for providing suggestions on an updated report to Chair Koester Thomas.
AGENDA ITEM#8—ADJOURN
Commissioner Atwood MOVED to adjourn at 5:52 p.m. and Commissioner Magazine SECONDED the motion,
which CARRIED UNANIMOUSLY by those present.
Shaunna Williams, Recording Secretary
C
Page 3 of 3
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Al JlyT 1V�!r
o r TOWN OF FOUNTAIN
EJii HILLS
,�; OFFICE OF INTERIM TOWN
�' c' MANAGER
that is xe,,o
INTER OFFICE MEMO
TO: Honorable Mayor and Town Council DT: March 6,2012
FR: Julie Ghetti,Interim Town Manager: FY2012-13 Proposed Budget
During the November 17, 2011 Council retreat the Town Council was presented with the chart below
showing a deficit in the General Fund of$411,000 for FY12-13 and further deficits in future years.
FY2012-2017 Projected General Fund
Revenues and Expenditures
(Shortfalls)
$16.0 ---
$(543)
$(376) ••'•
$(758) ,•••
$(599)
$14.0 spin) . .••• Oman Building
1111 .,,�,..... Permits
.......
$12.0 ------ --
$10.0
FY11-12 FY12-13 FY13-14 FY14-15 FY15-16 FY16.17
+OPERATING REVENUE •••••• OPERATING EXPENDITURES
One of the goals of that retreat was to analyze the tools available to the Town to resolve the deficits
and provide fiscal sustainability to Town government. The tools that appeared to have consensus have
been incorporated into the proposed FY12-13 budget (those tools are shown on a separate memo in
your packet) with a couple of exceptions for discussion. Subsequent to the toolbox exercise there have
been some changes in the estimates for revenues and expenditures for next fiscal year based on
updated information. Specifically:
State Shared Revenues(i.e., income tax) revenues are expected to increase$369,000
Local(Fountain Hills) local sales taxes are expected to increase$100,000
MCSO contract is$127,000 less than November projections
Based on the above the chart below is revised to reflect those changes as well as the initiatives
proposed in the FY12-13 budget.
L
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r r
FY2012-2017 Projected General Fund
Revenues and Expenditures
110
$i8.o
::::
. Ellman Building
........ Perms
$12.0 -
$10.0
FY11-12 FY12-13 FY13-14 FY14-15 FY15-16 FY16-17
-••••••—OPERATING REVENUE •••••• OPERATING EXPENDITURES
During the February 21, 2012 budget workstudy staff will be asking for another consensus on those
items so that we can plan the work program for the next fiscal year and include that information in the
draft budget document. Based on the assumption that fiscal sustainability will be resolved staff is
proposing the following increases in program costs;these are items that have been postponed over the
past four years and are becoming critical to be addressed:
increased wash maintenance $20,000
new equipment for GIS $31,000
ADWR fee $29,000
Household hazardous waste event $45,000
major facilities maintenance $350,000
parks parking lots maintenance $36,000
increased toddler/teen events $5,000
citizen satisfaction survey $35,000
cost of living/merit $69,000
law enforcement contract* $33,000*
fire/EMS contract $75,000
TOTAL NEW BUDGET ITEMS $728,000
*revised with confirmation from Maricopa County Sheriff's Office
Toolbox items that are not included in the proposed budget due to additional information but need to
be discussed at the workstudy are:
Increased employee contributions to health care premiums
Staff has done significant research and analysis on this toolbox item and would like the Council to
consider a variation of the proposal.
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L
The format of the documents included in the workstudy packet is as follows:
Section 1: Summary of revenues by fund for ALL funds combined
Summary of expenditures by fund for ALL funds combined
Summary of expenditures by program for ALL funds combined
Summary of expenditures by line item for ALL funds combined
Section 2: General Fund summary of revenues by revenue category
General Fund summary of expenditures by division
General Fund detail for all expenditures by division
Section 3: HURF summary of revenues by line item
HURF summary of expenditures by program
HURF summary of expenditures by line item
HURF detail for all expenditures by line item
Section 4: Excise Tax ED summary of revenues by line item
Excise Tax ED summary of expenditures by line item
Excise Tax ED detail for all expenditures by line item
Section 5: Special Revenue Funds(grants) summary of revenues by line item
• Special Revenue Funds summary of expenditures by program
Special Revenue Funds detail for all expenditures by program
Section 6: Capital Projects Fund summary of revenues by line item
Capital Projects Fund summary of expenditures by project
Capital Projects Fund detail for all expenditures by project
Section 7: All other funds summary sheet by fund that includes revenue and expenditures by line
item
The objective of the budget workstudy is to give the Town Council and the public an opportunity to
review the proposed initiatives and associated expenditures for the fiscal year that begins on July 1,
2012 and clarify that the staff initiatives match with the Council's intent for each goal. Before the final
draft is completed the staff will be available to answer any questions or provide further information to
any member of the Town Council or the public. Another budget workstudy is scheduled for Tuesday,
March 20, 2012. At this meeting the public will have an opportunity to provide input and the Council
will be able to give direction. The month of April will be dedicated to going out to the community with
the draft budget and allow for more public input. In May there will be three more workstudy sessions
where the final work plan will be considered for final adoption in June.
The table below presents the staffs proposed initiatives and fiscal impact that are being presented to
accomplish the goals that the Council discussed during the January 21, 2012 budget retreat. Staff will
4 be available at the workstudy to respond to any questions, provide information, get feedback from the
Town Council and make changes.
Page 3 of 7
COUNCIL GOALS AND INITIATIVES FOR FY12-13
Strategic Directions and Staff Proposals
C 3 Genuinely solicit and consider public and stakeholder feedback as part of the decision-making process.
(ADMINISTRATION)
• Create a budget committee including two members of the public (possible graduate of citizen's
academy), solicited through volunteer program (no fiscal impact, however, impact will be staff time)
• Conduct a statistically valid citizen survey, correlating to the previous statistically valid survey($35,000
in Town Manager budget)
• Staff to attend at least 12 meetings per year(one per month)with community organizations, HOA's, etc.
(no fiscal impact, however, impact will be staff time)
• Enhance Town website to promote citizen feedback, comments on specific initiatives or general
comment
• Utilize telephone technology to make calls to citizens to inform them of upcoming events,etc.
EV 1 Develop a comprehensive economic development strategy for the Town's future and work with our
partners to forward economic growth and awareness. (ADMINISTRATION -ECONOMIC DEVELOPMENT) j_
• Review the economic development plan annually and recommend revisions as appropriate.
EV 2 Develop and maintain a balanced, equitable, sustainable and local financing structure to support the
Town's core government services at desired service levels. (ADMINISTRATION)
• Outreach to the community citizens regarding proposals that came from the November toolbox retreat;
highlight individual proposals during the budget process; reemphasize sustainability
• Update Hocking Report(fiscal impact$25,000)
• Support Chaparral City Water with franchise election in Spring 2013
• Continue to work with partners and legislators on the creation of a Public Safety District
• Consider a public safety fee on all property owners(similar to Paradise Valley)
EV 4 Promote retention, expansion and relocation of quality businesses. (ADMINISTRATION -ECONOMIC
DEVELOPMENT)
• Expand upon the outreach efforts in one of the targeted industry sectors to encourage business
locations which create new employment opportunities and increase daytime population.
• Utilize the trade area analysis to target recruitment efforts on those businesses/business sectors
identified.
Page 4 of 7
• Encourage the location of businesses along the Avenue that complement and support the existing
business base. (fiscal impact$42,000-$8,000(or—19%)from the General Fund and $34,000(or—81%)
from the Excise Tax Fund. A significant portion geographically falls within the downtown area (the
retail,office and "Avenue" initiatives).
I 2,19 Lower the reliance on state revenues by developing a locally controlled, reliable funding source for
infrastructure maintenance. (DEVELOPMENT SERVICES)
• Create an Infrastructure maintenance fund for facilities, parks and fire—no roads;would require initial
cash infusion of$500,000 and annual contribution of$275,000 from the General Fund (excluding the
lake liner and park lights).A dedicated fund with proceeds from an increase in the telecommunications
sales tax; increase to 3.1%would provide$275,000 per year. Capital projects fund could fund the initial
and the new fund would be dedicated to the infrastructure maintenance.
• Sell assets that have become expensive to maintain and have limited future value
CR 7 Communicate the role of local government and clearly define the trade-offs between service levels and
amenities and the associated costs so residents can make informed choices. (ADMINISTRATION)
• Continue Citizens Academy
• Create a reader friendly report that citizens can understand
• SPAC recommendation: "Create a sense of urgency regarding the importance of residents and
businesses taking responsibility to financially participate in the Town's infrastructure maintenance and
provision of basic services to protect home, land and property values."
• Utilize results of citizens survey to compare to previous survey; citizens will communicate where we
need to do better
• Introduce the idea of a property fire fee to cover the cost of fire and EMS protection
CR 2,CR 3 Discover, recognize and utilize the talents of our citizens and use these assets to address
community needs. (ADMINISTRATION—HUMAN RESOURCES)
• Advertise with a Request For Proposals for specific need or skillset that a member of the community
may have and want to offer services to the Town
• Foster a culture of public service and volunteerism through the annual Make a Difference Day
R 2 Provide an interconnected,multi-use trail and bicycle system that promotes active living,physical
activity,education and appreciation of our parks and natural resources. (COMMUNITY SERVICES;ECONOMIC
DEVELOPMENT)
• Coordinate and promote activities with McDowell Mountain Regional Park
• Coordinate with Tourism Bureau to promote Town trails and bicycle system as part of active living,
including a booth during the two fairs
• New flyers distributed to valley sports stores
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• Promote FIT(Fountain Hills Interconnected Trails)
• Urban Trails Plan, create a flyer for distribution, coordinate with Tourism, create new Town webpaggl)
dedicated to healthy living,active lifestyles. Utilize FIT logo to promote trails,signage to mark FIT
stations.
I 3 Maintain a current condition assessment of all roadways and sidewalks and prioritize and implement
maintenance efforts to minimize costly reconstruction. (DEVELOPMENT SERVICES)
• Update Stantec report(fiscal impact$35,000 in HURF budget)
• Evaluate the post mortem on bond with the public, prepare new strategy for recommendation
C 2 Support community events and activities that create opportunities to build community and friendship.
(COMMUNITY SERVICES; ECONOMIC DEVELOPMENT)
• Do more events; network with promoters(Tourism contract)
• Coordinate calendars with McDowell Mountain Regional Park and Tourism
• Tourism contract to include keeping up with future events, contact hotels and restaurants to reach out
to promoters
CR 1 Foster an environment of accessible, responsive governance. (ADMINISTRATION)
• Upgrade citizen portal to be more user friendly, offer more options(estimated $10,000 fiscal impact)
• Appoint a formal Ombudsman (perhaps a retired judge so they are impartial) .4)
CR 6 Evaluate customer satisfaction with Town services on a regular basis and implement appropriate service
improvements. (ADMINISTRATION)
• Statistically valid customer satisfaction survey($35,000 fiscal impact, using prior as a baseline); consider
survey at least once every three years
• Develop customer service performance measures utilizing the ICMA standards
• Solicit citizen feedback through a mailer asking how we are doing
Other Public Safety
• Funding for posse based on specific deliverables,funding to come from contract with MCSO
• Propose bond issue for fire station
• CARE program added to Rural Metro contract(fiscal impact$24,000)
via)
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%k► Other Tourism
• Rebid contract
• Consider placing a Visitor Center down town commercial space (Tourism contract) staffed 7 days a week
(unknown fiscal impact)
• Promote Brand, including the Town's trails
• Coordinate with Town on events
• Coordinate events to capitalize the two fair events(new events on either side of fairs)
• Communicate with event promoters for events
• Link to hotels, restaurants,etc., provide restaurant guides to promoters
• Promote trails locally, nationally and internationally;trails on Tourism website, maps in packets
• Partner with McDowell Mountain Regional Park to promote trail that encompasses both organizations
Other SPAC Recommendations and proposed initiatives(those not included in above):
EV4 Promote retention,expansion and relocation of quality businesses.
Move forward with strategy development for the two other target industry sectors for employment
expansion: "health care and social assistance", and "finance and insurance".
EV6 Identify a slate of economic development tools and strategies (including tax incentives,fee abatements,
etc.)to stimulate economic growth.
ELCS Encourage access to higher learning opportunities or the establishment of an educational or training
campus within our community.
Other
• Rightsourcing for all Town programs
• Eliminate street sweeping saves HURF approximately$100,000 per year
Parking lot items leftover from November retreat for further discussion:
Increase sales tax on telecommunications $550K
kies„ Reduce sales tax rate, replace with franchise,telecommunications tax $570K
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•
ECONOMIC UPDATE-JANUARY 2012-STRATEGIC PLANNING ADVISORY COMMISSION
'too- Retail sales tax for January 2012 (December sales)-the local retail sales tax collections for the seven
months ending January, 2012 is the lowest since 2005; however,the restaurant/bar sales tax collections
are the highest since 2005 (see charts below).
July-January Retail Activity July-January Restaurant/Bar Activity
$2,000.000 ._ $325,009
$2.200,000 _.... $}OO,a00 ... _.._
S2,D00,OD0 _.... ....... .... �,17s,009 ...... _. ...,... ''..
$1.900.OD0 �... '-,.. .."- ,1 $2s0,000
$1>6D0,000 .. ....... _.._ ....... $22s,000 ;... ..
..,.. ..,.., $100006 .... ., .._ _ .-... .- '.
.... ...... _._ _.... ..-:. ,,,... '', $t75,D00 .... _... ....... __ .... ..,. ._.
$1.000.D00 $is0A00 ._....
000400 F405-06 0406.07 7407-08 7408-09 FY09-10 7710.11 7711-12 FY0405 7704.06 F406-07 0407-08 0Y01404 740410 7710-11 771112
Total revenues and expenditures for all funds for the seven month period ending January, 2012 are
shown below; General Fund expenditures remain below the year to date revenues.
Current Year Revenues-All Funds
Change
from
lilir January January 7Month % of Prior
FY2010-11 FY2011-12 Budget Budget Year
General Fund $7,269,770 $7,435,490 $7,364,279 101.0`7 2.3%
HURF $811,106 $664,358 $678,097 98.0% -18.1%
Dev Fees r $21,011 $5,601 $51,680 10.8% -73.3%
Special Revenue $165,256 $188,674 $875,000 21.6% 14.2%
Downtown Development $166,564 $163,272 $158,746 102.9% -2.0%
Debt Svc MPC $885,428 $315,985 $481,369 65.6% -64.3%
Debt Svc GO $793,104 $823,843 $840,060 98.1% 3.9%
CIP $234,643 $416,739 $8,208,720 5.1% 77.6%
Grand Total All Funds $10,346,881 $10,013,961 $18,657,951 53.7% -3.2%
Current Year Expenditures -All Funds
Change
from
January January 7 Month % of Prior
FY2010-11 FY2011-12 Budget Budget Year
General Fund $7,138,447 $6,842,940 $7,347,755 93.1% -4.1%
HURF $638,155 $654,010 $745,674 87.7% 2.5%
Dev Fees r $0 r $8 404 r $40,833 20.6% 0.0%
Special Revenue $206,992 $177,156 $896,627 19.8% -14.4%
Economic Development $75,406 $73,889 $123,295 59.9% -2.0%
Debt Svc MPC $195,453 $2,883,635 $2,340,303 123.2% 1375.4%
Debt Svc GO $177,926 $156,786 $840,597 18.7% -11.9%
CIP $502,633 $410,104 $9,940,023 4.1% -18.4%
Grand Total All Funds $8,935,011 $11206,925 $22,275,107 50.3% 25.4%
New
Venture
group
Tempe, Arizona
Competitive Advantages and Regional Collaborative
Opportunities for Business Development in the Town of
Fountain Hills
First progress report submitted to:
Fountain Hills'
• Strategic Planning Advisory Commission
By:
New Venture Group
•
i
Overview:
As outlined in the Scope of Work, the goal of this progress report is to ensure that New
Venture Group's efforts are correctly informed and aligned with the intents and desires
of the client, and to determine if further research into the medical/bio-tech business
sector is a viable economic development effort for the Town.
Table of Contents
Executive Summary p. 2 j
Existing Economic Profile: p. 3
What is the medical/bio-tech business sector? P. 5
Analysis: Is medical/bio-tech viable for Fountain Hills? p. 9
What's next? p. 10
nVg 1
Phoenix, AZ Johannesburg, South Africa Heidelberg, Germany San Diego, CA
41;) Executive Summary
Existing Economic Profile:
Of the 618 businesses located in the Town of Fountain Hills, 123 fall into
classifications for `Professional, Technical, and Scientific Services' or `Health Care and
Social Assistance' services. Given the fact that the Town of Fountain Hills is seeking to
recruit or develop businesses within the medical research and biotechnology industry,
these broad classifications seem promising. However, upon further analysis the
companies in these categories have very little in common with the target firms in the
medical research or biotech business sector.
What,then, do firms in the biotech business sector look like?Does the Town of
Fountain Hills have any resources that could prove advantageous for biotech firms that
are seeking to start in or relocate to the Phoenix metropolitan area? The exploration of
these two key questions forms the bulk of this report.
What is the medical research or biotech business sector?
In essence,biotechnology and medical research firms apply scientific or
technological advancements in the life sciences or medical fields in order to develop
commercial products. We develop the concept of Product Novelty, which varies from
cutting-edge,to commercialization, to manufacturing, as one way to describe the strategic
focus of firms within the biotech industry at large. We also discuss the value of
identifying a firm's Field of Specialization as another important element to understanding
a biotech company's strategic focus.
By combining these two key dimensions, it is possible to map the existing
competitive landscape, and much simpler to analyze the biotech sector for new
opportunities.
Analysis: What makes medical/biotech a viable development effort for Fountain Hills?
There are many things that make the Town of Fountain Hills a wonderful place to
live,to work, and to play. However, while these factors help town residents to enjoy a
high quality of life,these do not necessarily represent unique sources of competitive
advantage. Many of the considerations that are valuable for the environment of the town
are valid descriptions of other communities around the valley.
In order to succeed in recruiting biotech firms to its municipality, Fountain Hills
must identify sources of unique competitive advantages for biotech firms that are seeking
to locate within the Phoenix metropolitan area. We propose two potential sources: (1)the
ability to identify and fill unique niches in the biotech industry state- and nation-wide,
and(2)the willingness and capacity to give tangible incentives to start-ups or relocating
companies.
C
nVg 2
Phoenix, AZ Johannesburg, South Africa Heidelberg, Germany San Diego, CA
Fountain Hill's Existing Economic Profile:
The Town of Fountain Hills has 618 businesses within its boundaries.According
to the March 2011 report entitled "Targeting Office Users for Business Attraction"that
has been provided to New Ventures Group (NVG), these 618 businesses can be grouped
into 17 categories as depicted in the figure below. I
NAICS Industry Sectors in Fountain Hills
Administrative March 24,2011
and Support and
Waste Transportation and Educational Services Public
Management and Warehousing Information 1.1% Administration
Remediation 1.1% 1.1% 0.3% Utilities
Services 0.2%
3.1% Wholesale Trade
Arts,Entertainment, 3.2%
and Recreation Retail T'
3.6%
15.7%'
Manufacturing
1144 4.Oitinance and
Insurance i� lif.
5.2% ifiiittiti
Other Services
(except Public J
•nstructior ' Administration}
a 15.4%
Health Care and
Social Assistance Professional,
8.4% Scientific,and
Real Estate and Accommodation Technical Services
Rental and Leasing and Food Services 11.5%
8.4% 9.7%
Given NVG's charge from the Town of Fountain Hills to evaluate the medical
research& biotech business sector,two categories are of particular relevance;
Professional, Scientific, and Technical Services (PSTS), and Health Care and Social
Assistance (HCSA). On the one hand, 11.5% of all Fountain Hills businesses fall into the
PSTS category (71 companies). On the other hand, HCSA accounts for 8.4% of all
Fountain Hills firms (52 companies).
i Data in this section comes primarily from the report"Targeting Office Users for Business Attraction
Using NAICS Industry Sectors",by Lori Gary, which Fountain Hills provided. Supplementary data
regarding businesses within specific categories was collected from www.yellowpages.com. void
nVg 3
Phoenix, AZ Johannesburg, South Africa Heidelberg, Germany San Diego, CA
•
Although the presence of any profitable businesses is a value-add for the Town of
Fountain Hills, these categories can be slightly misleading—particularly as it relates to
medical research&biotech businesses. For example,the PSTS category, despite having
"technical" and"scientific" in its name, is mainly composed of lawyer's offices, CPAs,
and computer design services. Similarly, HCSA companies are actually physicians,
dentists, or chiropractors. (See table below.) 2
Ultimately, many businesses in the aforementioned categories are service-
oriented, and rely on the redistribution of income from town residents. However, as it
was phrased to NVG, "Fountain Hills doesn't need another pizza place or foot doctor."
What Fountain Hills does want, and what the Town is hoping to gain from businesses in
the medical research/biotech sector, is a company with opportunities for long-term
growth that brings in revenue from outside the town and has a highly skilled workforce.
The remainder of this report will attempt(1)to define the medical
research/biotech business sector, and (2)to analyze the strengths, weaknesses,
opportunities, and threats that Fountain Hills represents as a location for possible biotech
partners. Future reports will address the competitive landscape, and illustrate potential
steps the Town of Fountain Hills can take if it chooses to pursue active economic
development efforts in this business sector.
Professional, Scientific,and Technical Health Care and Social Assistance
Services Services
lir Offices of lawyers • Offices of physicians
• Title abstract and settlement offices • Offices of dentists
0. • Offices of C.P.A.s • Offices of chiropractors
• fax preparation services • Offices of optometrists
• Architectural and landscape architectural • Offices of physical,occupational,and
services speech therapists
• Engineering services • Offices of podiatrists
III. Surveying and mapping services • Offices of all other health practitioners-'
• Interior design services • Diagnostic imaging centers
• Graphic design services • Homes for the elderl
• Custom computer programming services • Child day care services
L. • Management consulting services
• Photogra by studios
te nary"services
ID2 The details behind the types of businesses included in each sector were recreated from information in the
"Targeting Office Users for Business Attraction"report.
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Defining the Medical Research or Biotech Business Sector
In order to evaluate the Town of Fountain Hills as a location for businesses in the
medical research or biotech business sector, it is important to first(A) identify what firms
in this industry actually do. Then,we will (B) further segment the industry by
specializations; this will facilitate(C) discussing the resources required by companies in
this business sector. These steps will inform the analysis in the final section of this report.
What do medical research or biotech firms do?
Broadly defined, firms that engage in medical research apply scientific or
technological advancements to develop commercial products. Biotech companies focus
specifically on doing this using "biological systems, living organisms, or any derivatives
thereof."3 Accordingly,the contribution from these companies is most easily quantified
in terms of research(new patents) or in output(number of units produced).
In other words, medical research or biotech businesses are essentially highly
specialized manufacturing firms.4 This means that the companies take particular inputs,
transform them using certain resources, and sell the products to make money. Any firm's
success depends on its unique competitive advantage within the biotech industry. In order
to explore sources of competitive advantage in more detail,we must segment the overall
biotech industry.
Segmenting the Industry
For our purposes, we can think of biotech firms in two dimensions:product
novelty, and field of specialization. Product novelty describes the relative `newness' or
uniqueness of a given output or concept. Field of specialization refers to the external
area—such as medicine, defense, or materials science—where a product that a biotech
company manufactures is actually applied.
Product Novelty
We will assume that product novelty varies from Cutting Edge, to
Commercialization, to Manufacturing, as illustrated in the figure below. Within each
range, we can consider factors for funding, likelihood of success, and profitability.
nu acturing Commercialization Cutting-Edge
3"The Convention on Biological Diversity(Article 2.Use of Terms)."United Nations. 1992.Retrieved on February
27,2012.http://www.cbd.int/convention/articles/?a=cbd-02
4 According to the paper"Target Industry Sector Research"from Lori M.Gary,the Town of Fountain Hills is home to
Nerd
25 other enterprises that fit the NAICS description of a Manufacturing firm.
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0 Cutting edge products are, quite simply, cutting edge—like a cure for cancer or a
super-efficient way to analyze DNA. Most innovation at this level is funded by
government grants or within large corporations, and requires expensive investments in
infrastructure and personnel. Projects have a high probability of failure, and so are
usually only undertaken in large organizations. To start from scratch intending to pursue
projects in this range would probably be to incur redundant investment given the
proximity—and level of expertise—of Arizona's major universities.
Commercialization refers to products or concepts that have already been
discovered; a company on this level is seeking to make money from a product's
manufacture by creating a scalable process. One example would be a company that
purchased the patent for a particular genetically modified plant, and needs to start
producing seed to sell to farmers. Often, this requires a moderate level of investment in
equipment and other unique resources. Commercialization projects still have a fair
likelihood of failure, so companies in this range are sensitive to opportunities to share the
full risk of an endeavor with strategic partners. However,the riskiness often comes with
high profitability if the company can define a process and leverage its patent.
Manufacturing businesses use a particular patent and a proven process to make
products in substantial volume. This will still require a moderate level of investment in
equipment and other resources,but the likelihood of failure will be substantially lower
than for cutting edge or commercialization products due to the proven process. In order to
truly excel as a manufacturing business, a company often needs some other sources of
competitive advantage,because its product or process may not be absolutely unique.
Field of Specialization
In addition to the dimensions of product novelty, the external field of
specialization for a biotech firm is important. These fields represent separate categories
that a company can target with its operations. This categorization relies on the
assumption that the set of skills and other resources necessary for a biotech firm in the
defense industry, for example, will differ from the competencies required for an
agricultural biotech company, or a biotech organization specializing in oncology.5
Building on this concept, a key to being successful is to find an emphasis or
special area in bio-medical research or development that is complimentary to those areas
already in existence. That way, a company can benefit from collaboration and add to the
overall capabilities of the State of Arizona, rather than compete directly with some center
that has already started. Accordingly, analyzing this spectrum is particularly important as
it pertains to the competitive landscape.
Many other municipalities in the Valley of the Sun are drawn to the biotech
industry by its high profitability and white-collar workforce, as well as its positive impact
on the surrounding economy. In fact, several have already partnered to create biotech
® 5 Also note that within a single field of expertise,a particular firm could focus on commercialization or
manufacturing,and not necessarily be in head-to-head competition with an incumbent organization.
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clusters that specialize in various areas. Some existing biotech centers are focused on
medical devices, defense, sustainability, and personalized medicines. 4111
By combining our notion of product novelty with the various fields of
specialization, we can map out the existing clusters of biotech firms and attempt to
identify gaps or strategic opportunities for the Town of Fountain Hills. An example
would look like the figure below. According to our example, Fountain Hills might be able
to leverage opportunities by building a cluster of biotech companies focused on
`manufacturing' for the defense industry, on `commercialization' of new ideas in the
medical devices sector, on `manufacturing' in the sustainability arena, or on
commercialization or manufacturing in other fields that aren't yet represented in the
valley.
Conceptual Depiction of the Competitive Landscape for Biotechnology Firms
Cutting-Edge
Commercial-
iZation based)
bused]
a.
Manufacturing
Persunahzed Medicine Defense Med.Deveces Sustamability Other Field_..
Field of Specialization
Please note that our example here is by no means an exhaustive or perfectly
correct diagram, and the town would be wise to seek the counsel of an industry expert in
identifying possible specializations. There may be some resources that NVG can provide
in this respect through its connections with Arizona State University and the biotech
industry at large.
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11) Other Notes on Strategy
Although the focuses may be diverse and unique, biotech firms do require many
inputs that are similar,particularly in terms of skilled personnel, as well as a robust
external network. So, another aspect of providing an opportunity for a new bio-medical
company to be successful (that is, a long-term and growing resident that contributes to
economic growth and employment)means taking into account the need for that company
to develop a network of other bio-medical and bio-engineering organizations. This could
include medical facilities (hospitals, clinics),bio-engineering research labs (such as the
one at ASU), schools(MCC has a very good bio-tech emphasis, DeVry,NAU, U of A),
and other for-profit and non-profit companies.
Additionally, it is helpful to try to start not with a single company, though that can
be done,but to start with the idea of developing a `cluster' of companies that are doing
related work that provides some benefits to each other. Other cities have been successful
creating an incubator environment, creating turn-key labs that meet common
requirements of a particular field. This has the effect of starting a"portfolio"of small
companies with the benefit that if one of them falters,the others can carry that company
through a hard spell and the cluster as a whole has a higher probability of long-term
success than any one of them by itself.
Building on the concept above, if a new company (or a relocating company) can
be identified that can benefit from some of the existing strengths and current companies
already in Fountain Hills (suppliers, collaborators, etc.),this can be a way to help existing
companies in the process of investing in a new company and has the added"portfolio"
benefit, as well.
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Analysis: Is Medical Research or Biotech a Viable Economic
Development Effort for the Town of Fountain Hills?
As it pertains to medical research or biotech in general,the Town of Fountain
Hills does have some clear strengths and opportunities as a potential site for a medical
research or biotechnology business. Obviously,the town is located in close proximity to
the Phoenix metropolitan area, and offers an excellent quality of life.
Additionally,the stock of existing property-tax-free luxury homes and the
available commercial and light industrial space are enticing for starting or relocating a
new business. Also, the town is undergoing a major rejuvenation project for the
downtown area, adding a brand new 12-theater movie theater and premium downtown
shopping. Furthermore,the local government is eager to attract technology companies,
and existing firms like the nearby Mayo Clinic may be willing to act as strategic partners.
All of these factors are great—true strengths for Fountain Hills—but
unfortunately nearly every single factor accurately describes other municipalities around
the Phoenix metropolitan area. At the same time,there are also some obvious weaknesses
and threats that will need to be addressed or mitigated in order to court biotech businesses
that are seeking to start in or relocate to the Phoenix metropolitan area.
The clearest potential negative is the distance from downtown Phoenix or other
communities, but this could be less of a problem if a cluster of similar companies was
successfully seeded in the town. Similarly,there is a lack existing infrastructure and
skilled, experienced labor within the town itself.
However, it might be possible to reconfigure existing office and light industrial
spaces in the immediate future, and existing open properties could potentially be in-filled
with more appropriate facilities. Additionally,the relative proximity to other
communities like Mesa or Scottsdale, when combined with the opportunities presented by
partnerships with local colleges and universities, might help to turn these geographic
weaknesses into strengths.
Ultimately, it is useful to note that many factors that are potential weaknesses
accurately describe other municipalities around the Phoenix metropolitan region.
In order to make a competitive case for the Town of Fountain Hills,the town
should focus on two key aspects of differentiation. First,the ability to identify unfilled
niches in the biotechnology landscape within the industry state-and nation-wide will be a
unique strategic component that is hard to imitate. The biotech community within
Arizona is seeking to develop a network of local enterprises that can service all types of
biotech research and manufacturing needs. Through NVG,Arizona State University may
be able to provide important connections in this arena.
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Second, it is crucial to keep in mind that since the any mobile organization in the
biotech industry is in high demand, cash grants and other tangible financial incentives are
the dominant factor in any biotech business negotiations. Although the town might not be
able to win a bidding war against neighboring communities, by adopting a cooperative
strategy, Fountain Hills may be able to identify and invest in niches of the biotech
industry that complement the assets of the region.
What's Next?
These two dimensions will motivate the bulk of our next report: unfilled niches
within the competitive landscape of the Arizona medical research and biotechnology
industry, and the types and magnitudes of common incentives. Ultimately, we hope that
these next steps will lead us to a final discussion where we may be able to quantify the
impact of an investment or other tangible commitment by the Town of Fountain Hills.
0
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