March 08, 2017

Fresh Tracks: Rail, roads and a highly educated workforce have helped make Utah a tech and finance hub (U.S. News & World Report) »

It took 90 years and $4.5 billion to build the first phase of a new subway line in New York City. A high-speed rail project to connect Los Angeles and San Francisco is in conservatives’ crosshairs.

Yet in deep-red Utah – where the twin strands of rugged individualism and low taxes had long made the automobile supreme and centralized planning little more than a dream – not one but two rail systems have become national models for mass transit. They’ve been partly funded, no less, by a pair of self-imposed tax hikes in 15 years.

The gleaming light-rail and commuter-rail lines – 140 miles of socialized transportation, built for roughly $3.6 billion – have helped reinvigorate Salt Lake City’s downtown, eased congestion and connected the city center with college campuses, the international airport and ever-expanding suburbs fueled by the fastest rate of statewide population growth in the nation.

Combined with expanded highways the envy of any moribund commuter, low unemployment, strong universities, and a robust economy driven by both the population boom and big expansions in construction, finance, technology and tourism, the investments in mass transit have helped place Utah among the top 10 in the U.S. News & World Report ranking of Best States.

“We’ve created a very business friendly environment in Utah,” says Gov. Gary Herbert, highlighting the state’s low taxes, relatively cheap tuition rates and investments in transportation.

Jobs are growing much faster in Utah than the national average.

Jobs grew by 3.6 percent last year – more than twice the national average – and unemployment hovered near just 3 percent. The state also ranked the youngest in the nation with a median age of 30.7, seven years younger than the U.S. average.

“Those young people are very high-tech savvy,” Herbert says. “They understand computers and iPads and all the things we see out there. So the new economic opportunities that come from innovation, our young people are already involved with it.”

Even before builders began expanding the highways and laying rail, there were plenty of reasons to love Utah, especially for outdoors types: Seven of the state’s fabled ski resorts – where snow made powdery soft by the high-desert air can pile over 400 inches each winter – sit within a 45-minute drive of the airport. Four hours to the south, five national parks dot the state’s arid landscape: Zion, Bryce Canyon, Capitol Reef, Arches and Canyonlands.

“The lifestyle associated with Utah, combined with our global brand, has allowed us to attract very, very strong talent into our office,” says David Lang, a managing director at Goldman Sachs who left the Wall Street headquarters to lead the firm’s Salt Lake City office, which with close to 2,300 employees ranks as the one of the city’s largest private employers and celebrated its 15th anniversary last year.

Financial planners can spend the morning skiing or mountain biking with clients. Business owners can network while hiking or fishing just a few minutes from the office. And while traffic can snarl the highways like any city, for former New Yorkers the commute can still seem blissful.

Utah has one of the highest business birth rates in the nation.

“It was taking an hour and 20 minutes to get into the office every morning. Now it takes 14 minutes,” Lang says.

Long-range plans have helped.

As early as the 1960s, the Cold War was spurring big expansions at Hill Air Force Base, and the advent of commercial air travel was bringing the masses to Utah’s ski resorts. Most of the state’s residents also were members of the Church of Jesus Christ of Latter Day Saints, which teaches that parents are co-creators with God and places a high value on having children. (Mormon families were the largest in the U.S. in 2015, with mothers giving birth to an average 3.4 children in their lifetimes. Mormons also made up more than half the adult population in Utah last year.)

But it wasn’t until the collapse of steel prices in the 1980s, which crippled the state’s mining industry, and the popping of the dot-com bubble in 2001, that residents and state leaders embraced planning in earnest. Even then, it took Salt Lake’s selection to host the 2002 Winter Olympics as a catalyst.

“We hadn’t invested in a long time – bridges, you’d see the rebar,” says Natalie Gochnour, director of the Kem C. Gardner Institute, a public policy research center at the University of Utah, who previously worked for three of the state’s governors and was involved in redevelopment in Salt Lake. “They all knew we needed to invest and they just couldn’t figure out the way to do it. And the Olympics was a huge motivator.”

A top-down attempt by Gov. Calvin Rampton had crashed and burned in 1973, shot down by real estate developers and a coalition of Libertarian and far-right political groups. So the state’s movers and shakers – financiers and political kingmakers, real estate developers and elders in the LDS Church – took another tack: they formed Envision Utah, an outfit with no power at all, but made up of 110 board members, representing virtually every aspect of the state’s economy.

The group held information sessions and researched potential growth scenarios, putting the ideas to voters in surveys. And with the urgency of the approaching Winter Games, voters and lawmakers sided with sizable investments in roads, rail and the airport: state legislators raised the gas tax in 1997 to pay for highway reconstruction, and residents in Salt Lake and two nearby counties voted in 2000 to increase the sales tax to help pay for commuter rail. Six years later, Salt Lake County voters approved another tax hike to fund light rail and the city’s streetcar.

“Utahns saw that without multi-modal transportation, without ways to get around, we were going to be in a bad way by 2020,” says Robert Grow, the president, CEO and co-founder of Envision Utah.

About 60 percent of the projects’ costs were covered by local funds, with the rest coming from the federal government, according to the Utah Transit Authority. (A notable exception is the FrontRunner commuter rail project and two of the light-rail lines, which were entirely paid for with local money, the UTA says.)

Today Salt Lake is experiencing nearly $6 billion in new construction, Grow says, with developments at City Creek Center downtown and the Point of the Mountain between Salt Lake City and Provo. In St. George near Bryce and Zion national parks, tourism is booming and the population is growing at one of the fastest rates in the nation.

Tech and financial firms have played a major role, drawn by the state’s low taxes, cheap real estate, and a network of universities that has built a strong feeder system for the start-up and finance sectors. Flights to the airport – a Delta hub – are short: just two hours from California and only four hours from New York, with two hours saved by the change in time zones.

“We were primarily motivated for the right workforce, but there were also better economic conditions,” says Cory Capoccia, president of the firm Womply, a business-support startup that expanded from California in August 2016. “The market is growing strongly, but there also isn’t the same overhead that you get in some of the other markets like San Francisco.”

At Goldman Sachs, Salt Lake City has become one of the firm’s most-requested offices, home to virtually every business function performed on Wall Street, but with less expensive housing, easier access to the outdoors – and of course the better commute. Volunteerism, which the firm strongly encourages, is also prized: Utah led the nation in the percentage of residents who volunteer for the 11th straight year in 2016.

“They get the lifestyle benefits that come with coming to Utah, but they also get the business experience that comes with working with a global bank,” Lang says.

Utah has also emerged as one of the nation’s more diverse states, especially within its younger generations, says Pam Perlich, director of demographic research at the Gardner Institute. High numbers of Latino residents arrived during the state’s building boom through 2008, drawn by the construction jobs as well as the LDS Church’s presence in Latin America and, later, its support of immigration reform. More recently, large numbers of immigrants from Asia and the Pacific Islands have been attracted by the state’s university system and the growing finance and tech sectors.

Challenges do lay ahead: Residents consume large amounts of energy and water, a particular concern in the high desert. Salt Lake County, largely encircled by mountains, faces perennial air-quality problems, which some policy experts say the state has been slow to address, particularly in light of its opposition at the national level to stricter federal clean air regulations. And the sales and gas taxes approved by voters and the legislature – including a gas tax hike signed by the governor in 2015 – face shrinking revenues from more fuel-efficient vehicles and the ongoing shift to online sales.

“We all know that at some point we’re going to have to stop widening the freeways and figure out other ways to get people around,” says Steve Kroes, president of the Utah Foundation, a nonpartisan research group.

What’s more, a fight is brewing over raising state taxes to fund education: The state ranked last in per-pupil spending in 2016, and about 40 percent of teachers quit within the first five years, frequently to seek better pay. Many of those who do stay have been forced to find second jobs. And while Salt Lake County voters were amenable to raising taxes to fund infrastructure improvements, voters statewide – who tend to be more conservative – appear less enthusiastic about a similar measure for education.

“It’s a really difficult lift in this conservative state with the conservative background of this presidential election,” says Nolan Karras, a former speaker of the state House and head of Education First, which is supporting a ballot initiative to raise money for education. “We’re not trying to take money away from infrastructure, we’re just trying to balance the load.”

Casey Leins contributed reporting.

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