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Informal Meeting Minutes Monday, September 18, 2017 Board Members 9:00 AM Denny Barney, Chairman, District 1 Steve Chucri, Vice Chairman, District 2 BOARD OF SUPERVISORS Bill Gates, District 3 Maricopa County, Arizona Clint Hickman, District 4 (and the Boards of Directors of the Flood Control District, Steve Gallardo, District 5 Library District, Stadium District, Improvement Districts, and/or Board of Deposit) County Manager Joy Rich "The mission of Maricopa County is to Clerk of the Board provide regional leadership and fiscally Fran McCarroll responsible, necessary public services to its residents so they can enjoy living in healthy and safe communities.” Meeting Location Supervisors' Conference Room/Sullivan Room 301 W. Jefferson, 10th Floor Phoenix, AZ 85003 The Board of Supervisors of Maricopa County, Phoenix, Arizona, convened in Informal Session at 9:00 AM on Monday, September 18, 2017, in the Supervisors' Conference Room/Sullivan Room 301 W. Jefferson, 10th Floor Phoenix, AZ 85003, with the following members present: Steve Chucri, Vice Chairman, District 2; Bill Gates, District 3 (entered late); Clint Hickman, District 4; Steve Gallardo, District 5. Absent: Denny Barney, Chairman, District 1. Also present: Fran McCarroll, Clerk of the Board; Amy Goodloe, Minutes Coordinator; Joy Rich, County Manager; and Andrea Cummings, Legal Counsel. 1. EXECUTIVE SESSION Vote to convene in Executive Session to consider items on the Executive Agenda dated September 18, 2017, for Board of Supervisors and relevant Special Districts pursuant to statutory authority listed for each item. Motion to approve by Supervisor Hickman, seconded by Supervisor Gallardo Ayes: Chucri, Hickman, Gallardo Absent: Gates, Barney ~ Supervisor Gates entered Executive Session after the motion ~ OPEN SESSION RECONVENED Vice Chairman Chucri recessed executive session to reconvene open session for the following agenda item. PRESENTATION Management and Budget 1. ECONOMIC AND FISCAL FORECAST PRESENTATION Presentation regarding the Economic and Fiscal Forecast. (C-49-18-003-P-00) Elliot Pollack, Elliott D. Pollack & Co. Informal Meeting Minutes Monday, September 18, 2017 Page 2 of 14 Elliot Pollack, Elliot D. Pollack & Co. noted he would be presenting information regarding the Economic and Fiscal Forecast. He briefly explained the slides in following presentation: U.S. Business Cycle Expansions The current cycle is the third oldest and weakest recovery in U.S. history As the economy gets older it is more susceptible to shocks U.S. Leading Indicators 1970 – 2017 and Consumer Confidence Informal Meeting Minutes Monday, September 18, 2017 Page 3 of 14 The leading indicators are up and things look good as we move on from the recession. Additionally consumer confidence is rising Treasury Spread: 10 year bond rate less 3 month bill rate 1959 – 2017 Informal Meeting Minutes Monday, September 18, 2017 Page 4 of 14 Spread between long and short rates are stable and accurate Indicator is above levels for protecting against a recession Treasury Spread: Recession Probabilities 1960 – 2018 Only 10% projection for another recession Job Openings 2001 – 2017 Informal Meeting Minutes Monday, September 18, 2017 Page 5 of 14 5 million job openings Highest number in history for unfilled job positions Overall Hourly Wage 1998 – 2017 Wage rates are increasing more rapidly than inflation Incomes are slowly increasing Labor Force Participation Rate (16 years and over) 1986 – 2014 Labor force participation rate is low More individuals will come back into the Labor force once wages start going up Informal Meeting Minutes Monday, September 18, 2017 Page 6 of 14 Vice Chairman Chucri asked if wages keep going up will this inhibit more job growth. Mr. Pollack responded that only to a certain degree but when a business has to dip into their margins they become resistant to add labor. GDP Potential Versus Actual 2000-2017 There is still a deficit because of the recession The potential is expected to catch up next year. Informal Meeting Minutes Monday, September 18, 2017 Page 7 of 14 If Expected Tax and Economic Proposals Pass Higher Interest Rates and Higher Cap Rates Higher inflation Higher after Tax Profits Larger Deficits Construction and other labor Mr. Pollack stated that construction and other labor is somewhat related to the immigration policy. He stated as recoveries get older, they become more vulnerable to shocks. Mr. Pollack shared some concerns related to the recovery: Lack of political capital Lack of consistency on immigration policy Unfilled jobs in construction and 500,000 tech jobs Recovery/expansion has lasted for 91 months since the President’s inauguration and if it continues it would be the longest U.S. recovery in U.S. history Informal Meeting Minutes Monday, September 18, 2017 Page 8 of 14 Financial Obligation Ratio 1980 – 2017 Recession caused people to take charge of their debt Individual’s finances are at their best since the 1980’s U.S. Consumer Credit 1980 – 2017 Top blue line is a combination of auto debt and student loan debt Credit scores of individuals taking out auto loans is higher than any cycle in U.S. history Credit scores suggest the economy is in good shape Credit card use is under control Consumers have more liquidity Informal Meeting Minutes Monday, September 18, 2017 Page 9 of 14 Cyclically Adjusted PE Ratio 1950 – 2017 The last time it was at its highest point was during the tech bubble in the late 1990’s and early 2000’s The stock market can rise but without a corporate tax cut it could cause problems with the stock market Mr. Pollack provided some information related to household net worth, personal income per capita and current or possibly proposed changes to interest rates. Nationally prices are above the previous peak People have more equity and not locked into their homes Supervisor Hickman asked how the $20 trillion debt will affect the County. Mr. Pollack responded that eventually it could be an issue only if there is a competitor with the U.S. dollar. The only country that is stable and large enough to be a reserve currency is the U.S. dollar. There is no other country that could possibly be a competitor and with no alternative the debt will be maintained. Mr. Pollack shifted the focus of the presentation to Maricopa County. Informal Meeting Minutes Monday, September 18, 2017 Page 10 of 14 Phoenix is at a 93.4% growth rate Maricopa County is at a 83% growth rate Tucson is stagnant Arizona is 10th out of 50 States and will most likely stay the same Maricopa County’s growth has not been as rapid as historical recoveries Sub normal national recovery Slowdown in population flows Nationally Population Growth after Recessions Fewer people are visiting which means fewer houses and less commercial construction In turn, fewer goods and services are being bought Informal Meeting Minutes Monday, September 18, 2017 Page 11 of 14 Maricopa County has fewer than a 2% growth rate and it is projected to stay under 2%. Capture rate has decreased 10% of movers came to Arizona Informal Meeting Minutes Monday, September 18, 2017 Page 12 of 14 The top row is the actual employment Arizona has normal growth Supervisor Gates stated that if the migration rate increases than employment growth should rise. Mr. Pollack concurred. Supervisor Hickman asked what is driving the population growth for Utah and Nevada. Mr. Pollack responded that Nevada’s numbers are lower than ever. He stated Utah has a good climate and industry that drive people to that area. He stated the population flows will have a slow recover. Mr. Pollack provided information about housing issues in Maricopa County. Factors which may be keeping potential buyers out of the housing market include negative equity, foreclosures, student loans, and tougher loan standards. Informal Meeting Minutes Monday, September 18, 2017 Page 13 of 14 Trend shows millennials are moving back to the suburbs to live with their parents Mr. Pollack concluded his presentation with information about apartment living and demand. He compared groups of apartment developers including Baby Boomers, Generation X and Millennials. The presentation also included statics regarding retail space, multi-family homes, office buildings and industrial space. Super stores and internet sales continue to have an impact, especially retail space. Vice Chairman Churcri asked if a saturation point would happen due to all the building in Scottsdale and surrounding areas. Mr. Pollack responded that the apartments being built in Scottsdale and Chandler are smaller and the dollar amount is affordable. He stated that many are building for the education institutions. Overall Conclusions Phoenix is different than the State because it is growing Arizona employment growth is ranked 10th out of the 50 States Maricopa County will probably stay at 10% Maricopa County’s growth in this cycle has been subpar relative to its historical norm due to: Sub Normal national recovery Slowdown in population flows Nationally and in Arizona Unknowns Supervisor Gallardo stated the political environment has an impact on Maricopa County and Arizona. He stated in District 5 he looks to see if the school districts are growing. If the school district is expanding then families are moving. He stated he would like to see Arizona move forward. Supervisor Gates asked if the reason there are fewer people are moving into the state is because there are fewer people moving in general. Mr. Pollack responded it is because fewer people are moving around and Arizona is not necessarily capturing all who move, with the exception of Maricopa County. Supervisor Gates commented that the corporate tax rate changes will have an impact on job growth. Supervisor Gallardo asked if there is a correlation between the corporate tax rate and immigration policy. Informal Meeting Minutes Monday, September 18, 2017 Page 14 of 14 Mr. Pollack responded that the immigration policy would make a difference to fill the 5 million unfilled jobs. Supervisor Hickman noted that the the University of Chicago did a poll of 51 leading economists. They were asked if professional subsides for professional sports are likely to cost the local taxpayer more than any local economic benefits that are generated. There were 45% that strongly agreed and 12% that did not agree. He wanted to know Mr. Pollack’s opinion. Mr. Pollack stated the general answer is when you build a stadium in a city that it doesn’t affect the state or County as a whole. It will affect the local level but you have to look at it on a case by case basis. He stated it would be important to decide if the direct, indirect or induced benefits are most important. As a governing body it is best to decide if you want to look at local or state level benefits and take each issue case by case. Vice Chairman Churci asked Mr. Pollack if he was surprised Maricopa County was considered the fastest growing county. Mr. Pollack responded that some studies put the County in first place, but not every study. Regardless, the County is doing very well with steady growth. Supervisor Gallardo stated the recession had an impact on Maricopa County and asked if the political environment around 2008 and 2009 prohibited growth and expansion. Mr. Pollack stated the extended real estate crash was the major factor that effected so many businesses and people. EXECUTIVE SESSION RECONVENED Vice Chairman Chucri reconvened executive session to consider the remaining agenda items. After discussion on the remaining executive items, and there being no further discussion, the meeting was adjourned. __________________________________ Steve Chucri, Vice Chairman of the Board ATTEST: ____________________________ Fran McCarroll, Clerk of the Board