Thursday, August 25, 2016

Silicon Valley Businesses Move to Phoenix—Because It's Cheaper

Posted By on Thu, Aug 25, 2016 at 9:00 AM

click to enlarge COURTESY OF WIKIMEDIA.ORG
  • Courtesy of wikimedia.org
Governor Ducey loves to talk about businesses fleeing states with high business taxes and onerous regulations to come settle in Arizona. It hasn't worked out exactly as planned. Our U-Haul lots aren't overflowing with moving trucks carrying California businesses here, though we've seen a bit of an economic upswing lately. That includes high tech businesses from Silicon Valley setting up outposts or situating in Phoenix. But according to a New York Times article, their primary reasons for moving here aren't our business-friendly taxes and regulations. The more important reason is, Silicon Valley is crowded and expensive, and by comparison, Phoenix is wide open and cheap.
As start-ups across San Francisco and the Silicon Valley try to contend with high salaries and housing costs, many are expanding to lower-cost cities in the West. . . . For Phoenix, which is about a 90-minute flight from San Francisco, the Bay Area’s loss is its gain.
That doesn't mean businesses are deserting Silicon Valley for Phoenix, however. New tech jobs are being added in both places.
At the end of last year in the Bay Area mega-region — including both the San Francisco and San Jose metropolitan areas — there were 530,000 tech and engineering jobs, a 7 percent increase from a year earlier. Phoenix has about one-fifth as many tech jobs, but the total grew 8 percent from a year ago, according to Moody’s Analytics.
According to the Times article, Phoenix is something of a newcomer in tech job growth compared to other areas of the country. When it comes to the percentage increase in tech jobs from 2010 to 2015, Phoenix ranks 14th with an 18.6 percent increase, compared to a whopping 71.6 percent increase in San Francisco, a 28 percent increase in Charlotte, North Carolina, a 27.3 percent increase in Boston, a 27.2 increase in Detroit and a 22 percent increase in Salt Lake City. Phoenix may be adding tech jobs, but not at a breakneck pace.

Lower business taxes may figure into the high tech equation, but the perks in lower costs for businesses and employees rank far higher. An example:
Housing [in Phoenix] is much cheaper [than in Silicon Valley]. The median home price in the Phoenix metropolitan area is $221,000, according to Zillow. In San Francisco, it is $812,000.

For Ms. Rogers and others, that is a far bigger perk than an extra vacation or a raise in California. Instead of renting a rundown house in Redwood City and commuting an hour or more to work, she now lives 10 minutes from the office in a house that is twice the size — with mortgage payments that are half the cost of her California rent.
It helps, of course, that Phoenix built a light-rail system and has revitalized its downtown, making the city a more attractive place for young high tech workers to live. The light rail didn't come cheap, of course. It was built with new taxes, not tax cuts. Some added tax dollars to improve our schools, our roads and other social and infrastructure needs we've left unaddressed would be a stronger draw for new businesses than a few dollars cut from their tax bills.

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