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Cementing Hopes for Regional and National Economic Growth

Drake Cement’s nearly-complete $310 million production plant is located within Yavapai County in Paulden, Arizona – once a historic ghost town and about 60 miles southwest of Flagstaff. Bringing Drake to the region is expected to employ approximately 550 people in construction projects and provide 90 full-time jobs within the plant.

Local and Regional Development

Chino Valley Area Chamber of Commerce CEO Ab Jackson envisions Drake as a critical first step in expanding regional economic development, due to Drake’s use and expansion of BNSF railways for shipping and receiving goods into the once-remote area. Jackson also hopes Drake will be an active member of the Chamber’s formal economic development organization set to launch in January 2011.

“We’re looking for major employers and clean industry who can move here and impact jobs and schools,” said Jackson.

Drake’s impacts may also reach Flagstaff by creating industry-specific jobs that were lost in the recession. In 2007, the mining, logging and construction industries of Flagstaff employed nearly 4,000 workers. But in 2010, that number dropped to approximately 1,600, according to data from the Bureau of Labor Statistics. With this loss of jobs, some of Flagstaff’s displaced workers may find employment with Drake. In addition, Flagstaff may be able to build on Chino Valley’s economic development strategy. Flagstaff Deputy City Manager Jim Wine spoke with Flagstaff Business News about numerous local programs that have saved jobs during the recession and a new collaborative effort much like Chino Valley’s that should diversify Flagstaff’s economy.

“In the past few years, we have provided local stimulus to pave 30 miles of roads and a tourism stimulus package to increase advertisement of Flagstaff,” said Wine. “We’d also like to bring more high-tech, green industries into Flagstaff that will have a low impact on our environment.”

Wine pointed to the recent creation of the Economic Collaborative of Northern Arizona (ECONA) as a broad partnership to diversify the Flagstaff economy, similar to what helped Chino Valley recruit Drake. It is hoped that ECONA will bring more high-tech, green industries to Flagstaff through a working alliance between the City, Coconino County, the Flagstaff Chamber of Commerce, local developers, large employers and educational institutions.

Federal Stimulus

The completion of Drake’s facilities and its regional economic impact can be partially attributed to the federal government’s help.

As part of the American Recovery and Reinvestment Act (ARRA), Arizona received $225 million in federal “Recovery Zone Bonds” to be used for public and private construction projects. Of that stimulus money, Drake was awarded $22 million from the Yavapai County Board of Supervisors in “facility bonds” used to complete the construction of the plant. And just this past October, Drake received $17.7 million more through a statewide lottery to disburse funds unused by other counties, according to the Arizona Commerce Authority.

The Great Recession and Cement

Drake’s entry and long-term success in Northern Arizona is vital not only for the regional economy, but is also an important indicator of national economic growth. Ed Sullivan, chief economist for the Portland Cement Association (PCA) tells Flagstaff Business News that to determine when a full economic recovery has taken place, cement consumption is critical to watch because it means new construction and development is taking place.

“We really don’t see a significant recovery beginning until 2013; the cement industry right now is running pretty depressed.”

Cement consumption also reveals the strength of the labor market. According to Sullivan, half of cement consumption is from the public sector, mostly state government contracts. These state governments rely upon tax dollars for infrastructure projects, and as Sullivan said, “every job lost was a taxpayer lost.” And so, until the labor market improves, in turn, state budgets, new construction and cement consumption will lag.

Flagstaff’s own Block-Lite Co. felt the drastic drop in construction, and owner Nancy Ross said her company’s sales were down by 85 percent over the past few years. Ross speculates that Block-Lite and Drake may continue to struggle as the national economy slowly rebounds.

“The bottom line to me is that when they started to make this facility, it was when things were booming,” said Ross. “I’m not sure they would have done the same thing over if they would have seen the market tank like it did.”

Although the cement industry is hurting now, the long-term future of Drake and the region’s economy is still bright due to demographics. With economic recovery, cement consumption is projected to grow from around 75 million metric tons in 2009 to nearly 192 million metric tons in 2035, according to the PCA.

“We look at the Southwest region, it’s one of the fastest growing areas in the country. The population is moving there,” said Sullivan. “That means you’re going have to build more homes, more schools, and more roads. It all translates into more concrete and cement consumption long-term; it’s still a very good market.”

This should be good news not only for Drake Cement and Northern Arizona, but also for the nation’s long-term economic recovery. FBN

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