A state agency that in the minds of some elected and private sector officials was a comfortable place for political appointees to perform is on the way out.
Without question, the Arizona Department of Commerce carried out myriad programs with some connection to economic development. But over the years it has had as many detractors as supporters — and a revolving door of directors.
Certainly any business or community that received financial assistance from the Commerce Department could be counted on to sing the agency’s praises. Yet certain lawmakers, even conservative business-minded Republicans, felt the department was a waste of taxpayer dollars. Periodic attempts to shut down the agency failed, though in this budget-cutting era, its financial and human resources have dwindled.
The Commerce Department budget is $5.5 million this year, compared to $9.2 million in fiscal 2000.
Enter the Arizona Commerce Authority, a public-private partnership stacked with a “who’s who” of Arizona CEOs. It is designed to jump-start the Arizona economy while making the state a friendlier place to do business.
In existence only on the strength of a June 29 executive order from Gov. Jan Brewer, the Commerce Authority will not be a political tool for this or any other governor. So says one of the key architects of the agency, Don Cardon.
Cardon, who quietly gave up his title as director of the Commerce Department during the transition period, now serves as president and CEO of the fledgling Commerce Authority. Eventually, the authority will replace the Commerce Department, focusing solely on four targeted areas of economic development. Cardon says he’ll return to the private sector once a new chairman is hired, but he plans to remain on the authority’s 34-member board of directors.
“We have to be passionate, have a sense of urgency and be focused on what we’re trying to achieve,” Cardon says. “This is not just a name change, not a rebranding of Commerce, and this is not, as some have mentioned, just a committee. It’s more than a committee. This is a serious gathering. We’ll put everybody in the room and say it’s time to own up to your unique responsibility of the office you hold and what citizens of Arizona need of leaders both public and private. It’s really a call to arms.”
Cardon was reminded that governors in the past have used the Commerce Department and economic development as a political tool, casting favors and financial assistance where they would do the incumbent the most good.
He says the board consists of people who agreed to serve because they are concerned about the economy and agree with Brewer “that this is not a political situation we’re in.”
The governor will serve as chair of the authority, regardless of the outcome of the November election. Two non-voting members will be the speaker of the House and the president of the Senate. The Legislature will be asked to pass legislation in 2011 formalizing the transition from the Commerce Department to the Commerce Authority.
“If Mr. Goddard were successful he would assume chair position. It’s the position, it’s not the person or the party,” Cardon says.
Jerry Colangelo, former owner of the Phoenix Suns and vice chairman of the authority, and others signed on with the understanding that this would not be a political entity, Cardon says. “In every perspective this thing demonstrates its aversion to politics,” he says.
Sara Dial, a Commerce Department director in the Fife Symington administration who currently runs a consulting business, was asked to put together a report on how more-successful states were handling economic development. The 70-page document became a blueprint for the structure of the new Commerce Authority.
Noting that the Commerce Department had seven politically appointed directors in the past 10 years, Dial’s report recommended that the board of business leaders hire a CEO to a long-term contract.
“The report talks about trying to take politics out of a statewide economic development organization,” Dial says. “However, it’s critical that the governor play a leadership role, which is why we recommended that the governor be chairman of the board. Our research found that the states that have the most active governors were the states that were most successful. If you have a passive governor who is not engaged in economic development, you’re not going to be successful, particularly in dealing with international companies. They really want to look to the governor and the governor’s team.”
Dial says a quasi-public agency such as the authority has more flexibility over personnel and procurement regulations. “It gives you more flexibility to be more competitive,” she says.
When Colangelo was announced as vice chairman of the Commerce Authority, he said he wants “a tool box full of all kinds of initiatives, tax breaks, whatever it takes.” He also recommended a revamping of the tax code, and said, “I’ll use whatever means I can to sell our state and attract businesses and new companies.”
At the same time, Colangelo emphasized the need to focus on retaining businesses that are already in Arizona, creating an atmosphere that encourages expansion.
Dial has heard the criticisms of targeted tax breaks and incentives, but raises the possibility of temporary programs that would expire after, for example, three years.
“In today’s economic environment you have to be more aggressive with programs that would bring jobs to Arizona,” she says. “Every other state is competitive, and today incentives matter more than ever. They could be temporary, for fear of how it would impact the state budget.”
Cardon says the key word is focus. Ancillary functions of the Commerce Department, including research, unemployment reports and transportation projects, will be spun off to other state agencies. Primary objectives of the authority will be science and technology, aerospace/defense, renewable energy, and small business/entrepreneurship.
“You can’t just kinda throw a line in water and say whatever fish comes along you’ll take, which isn’t to say we won’t respond to any other opportunities,” Cardon says. “But you have to know what you’re trying to go after. To do that, you need dialogue with the board.”
The first public meeting was held
The authority will work closely with other economic development entities around the state, including the Greater Phoenix Economic Council, Tucson Regional Economic Opportunities, Flagstaff Forty, and the Greater Yuma Economic Development Corporation. Those organizations will be invited to provide input to the authority, Cardon says.
Neither the governor nor the Legislature will give up any of their constitutional authority once the new commerce agency is up and running. Basically, recommendations from the authority will be just that, recommendations, but Cardon doesn’t want to label the high-profile panel as advisory.
“It has no authority to shape or implement policy,” Cardon says, adding that “advisory” indicates a lack of ownership. People who were asked to serve asked what was expected of them.
“The governor and Mr. Colangelo told them to come in and have a sense of ownership of both the challenges and of bringing their talents and expertise to a solution,” Cardon says. “Come in and own this with us. You can’t be on the sidelines, waiting for public bodies, elected or appointed, to bring about solutions.”
Once the transition is complete and the Commerce Department disappears, the staff will total about 50, compared to 150 today, Cardon says. Marketing of the state will be performed by employees of the authority and private-sector firms.
“All aspects of the Commerce Department that exist today with regard to business innovation and attraction are going to be retained,” Cardon says. “It will be the same staff, doing what they have been doing. But when we go to the Legislature for policy changes or future investment into efforts, they (legislators) will believe that Commerce is different than it was. It’s not political. It’s engaged with the private sector, and will have measurable expectations that we can quantify in a given period of time.”
The board will meet four or five times a year. “It’s going to have quantifiable expectations, not just 3- or 5- or 10-year plans,” Cardon says. “In the first 90 days, what are we going to do? In six months, what are we going to do?”
The search for a CEO of the authority starts this month. The hope is to have finalists for a selection committee to consider by the end of the year.
Internally, the Commerce Department has eliminated five deputy director positions, dropping to two divisions from seven. “It’s not my objective to retain a large body of people,” Cardon says. “It is my objective to win. To do that internally, we are getting rid of politically placed individuals.”
Cardon says in the 25 or so years the Commerce Department has been around it became “a holding tank of all kinds of political objectives.”
“The problem is,” he continues, “it was a shotgun approach. There was no focus within the department. Because of the lack of focus, I don’t believe the Legislature has had a great deal of confidence in our efficiency, our ability to accomplish what we set out to do. It is an agency that has really lost touch with what it’s really supposed to be about.”
During the transition, the Commerce Department will operate under the $5.5 million budget approved for fiscal 2011. Officials say it is too early to speculate on what the budget for the authority will be.
Cardon says the $10 million in federal stimulus money that Brewer directed to the Commerce Department for job training is still available, and likely will be utilized in the months ahead after the group assembles.
“From this point forward,” he says, “most of the cutting has already been achieved. Now I see efficiencies, not so much cost-saving. The goal is not just to continue to save dollars, it’s to get more done with the people we have. I have not been shy about calling inefficiencies in the department.
“As a management team, we have left no stone unturned. Things people didn’t want to talk about, they’re being talked about. Nothing is sacred any longer. People were politically appointed, and programs were not functioning well. There was a sense that they (programs) were protected politically. There was a culture in Commerce that it was too fractured. The silo effect of divisions being independent within the culture of Commerce — that, I can say without exception is no longer here.”