Economic Development FAQs
Why is economic development important?
Economic Development efforts include business retention, expansion, and recruitment. The businesses and jobs that result from these efforts are of the utmost importance to the local economy and directly impact the residents of Orem. Businesses pay property taxes, collect sales tax, and infuse cash into the local economy through wages paid to employees. This creates the following benefits. The local economy thrives and grows, Orem residents pay low property taxes, the City is able to provide services such as parks, recreation, fire and police, which results in a high-quality of life for residents, and Orem is able to remain a desirable and attractive community to live, work, and play.
It seems like high-paying jobs are leaving our community, why?
There may be multiple reasons why some companies have chosen to leave. A few of the reasons may include:
· Due to the scarcity of vacant developable land in Orem, land prices are more expensive than in other Utah County locations. As businesses grow and look for corporate headquarters, vacant land in north Utah County is available in large tracts. In some cases, the land is half the cost of land in Orem.
· To accommodate these types of developments in Orem, redevelopment and consolidation of existing parcels is necessary. Redevelopment is expensive and requires the demolition and removal of existing improvements and buildings.
· Future office developments in Orem will require structured parking due to land constraints. Structured parking is very expensive compared to typical surface parking lots. The large vacant tracts of land in other Utah County locations accommodate large traditional parking lots that are much cheaper to construct.
Are we doing anything to keep jobs here?
Yes. The City proactively works with businesses to encourage them to stay and to grow in our community. The City is also a member of the Economic Development Corporation of Utah in an effort to recruit out of state businesses. Additionally, the City encourages developers to consider Orem for redevelopment projects that can accommodate desirable business tenants that offer high-paying jobs.
What is the story with the incentives for University Place (Mall)?
As you may already have heard, indoor malls across the country are slowly dying. Malls that maintain the status quo may not survive. Malls that become innovative, reinvest in their developments, and add additional creative uses such as housing and office, have demonstrated the ability to thrive and grow. The challenge with redevelopment of a mall is the cost associated with demolishing existing structures, developing attractive amenities, relocating and installing new utilities, and building structured parking, which opens up necessary land for new office buildings.
The University Mall produces nearly 25% of all sales tax collected by the City. As a community that relies heavily on sales tax to pay for services such as Police and Fire, it is critical that this part of the City stays vibrant.
The State of Utah has tools that cities are allowed to use to facilitate redevelopment projects like University Place. Other cities are taking advantage of these tools, and Orem is doing the same. University Place is an example of how Orem is proactively pursuing job retention and job growth. A Community Development Area (CDA) was created for University Place to assist with infrastructure costs including utilities, park amenities, and structured parking garages in an effort to provide a dynamic and attractive development, which will be home to 700,000 square feet of Class “A” office space. At project completion, University Place is anticipated to create 4,000 jobs from the local economy and produce total economic activity of $412 million annually.
The CDA created for the University Place development resulted in NO TAX INCREASE to citizens & businesses in Orem. Here is how the money works:
· There was no tax increase to any citizen or business in Orem. Woodbury previously paid $1.6 million in annual property tax. Woodbury’s $500 million investment will increase the property value at University Place. As their property value goes up, so will their annual property tax payment.
· Woodbury continues to pay the $1.6 million and they receive a 75% rebate on the additional property tax created with the new investment. The rebated property tax dollars will only be used for infrastructure needs (park, roads, parking, utility replacement and upgrades, etc.). The other 25%, plus the continued $1.6 million will go to the School District, the City, and the County.
· At the end of the life of the incentive (20 years) 100% of the property tax will go to the respective taxing entities. The estimated annual property tax payment made by Woodbury will go from $1.6 million to approximately $6.5 million.
· The incentive only comes from the increased property tax. The City will keep 100% of the increased sales taxes and franchise taxes.
· In the long run, the City, County, and the School District will receive significantly more property tax revenue, even with the incentive, than they would have received otherwise.