Question

Chinese and Canadian investors have been investing a lot in the real estate assets in the U.S Western Region. Discuss what specific factors have been drawing Canadians to invest heavily in Arizona.

Answer 1

Arizona’s pro-business environment and low operating costs make the state very attractive to Canadian companies.

“Arizona is an open-for-business type of state, which we saw as very attractive,” said Joe Gysel, president of EPCOR Water USA Inc., an indirect wholly-owned subsidiary of the Canadian company EPCOR Utilities. EPCOR began operating in Arizona in 2010 and is now responsible for providing water and wastewater service to 22 communities and seven counties in Arizona and New Mexico, making it the largest privately regulated water utility in both states. Arizona was EPCOR’s entry point into the United States, with its U.S. headquarters in Phoenix. Choosing Arizona was a decision based purely on economics.

Regulatory assets, a competitive tax structure, talented labor pool and strategic location were all characteristics that attracted EPCOR and are continuing to draw other Canadian companies looking for corporate expansion, growth and start up in the U.S. market.

The low cost of operating a business in Arizona is key, experts said. Critical to this is Arizona’s Competitiveness Package. Adopted in 2011, this legislation modernized the state’s tax system, streamlined the regulatory structure and promoted a focus on business recruitment, retention and high-value job creation, according to the CABC.

Arizona’s simplified tax system is also a huge draw for Canadian companies. The state and local tax burden on Arizona’s citizens is the 14th lowest in the nation, according to the Tax Foundation. The tax-friendly environment is comprised of no franchise tax, no business inventory tax and no estate tax. The corporate and individual income tax rates in Arizona are also among the lowest in the nation. Additionally, the state provides companies low workers’ compensation and unemployment insurance rates.

Geography

Another major benefit Arizona offers Canadian companies is the access to the growing consumer market. The state’s strategic geographic location offers business unique access to major world markets.
The most apparent reason you see a lot of Canadian companies out of Vancouver, Toronto and Montreal is because they can get access to the California marketplace from a market that is more favorable from the cost side.

Arizona’s strenghtening workforce is also continuously fed by the state’s higher education system. The workforce in metro Phoenix offers a rich talent pool, Camacho said. The quality of the labor resources in Arizona was a compelling factor in EPCOR’s decision to locate it’s U.S. headquarters in Phoenix, according to the company. Arizona offers a number of top-quality universities, technical and trade schools that companies such as EPCOR are looking at during site selection. High-level education and training are key to companies growing in the utility space, experts said.

Arizona’s high quality of life, low cost of living and the low cost of commercial real estate are other huge draws for Canadian companies.

“One in five homes in Arizona is owned by a Canadian and that made coming to Arizona quite easy,”

Arizona has proved to be a fruitful location for Silent-Aire, a privately held Canadian custom HVAC manufacturing company originally founded in Edmonton in the 1980s. In 2013, it expanded into the United States, establishing its U.S. headquarters in Gilbert.

"Arizona was familiar to the ownership group as a tourist destination initially," says Brett Manning, Silent-Aire's director of operations, noting that there was a desire for the company to operate in the western part of the U.S. and for its plant to be in close proximity to its customer base. "I am originally from Edmonton but enjoy dual citizenship. I see many similarities between Alberta and Arizona, and there's a strong connection between the two."