1. Elliott D. Pollack & Company To: ACMA By: Jim Rounds, Senior Vice President Elliott D. Pollack & Company February 6 th, 2013 The Land of Common Non Sense

2. Elliott D. Pollack & Company Context

3. Elliott D. Pollack & Company The economy we wanted…

4. Elliott D. Pollack & Company What we got…

5. Elliott D. Pollack & Company United States Real Gross Domestic Product* Annual Growth 1970 - 2014** Source: U.S. Bureau of Economic Analysis & Blue Chip Economic Indicators * Based on chained 2005 dollars. ** 2012 - 2014 are forecasts from the Blue Chip Economic Indicators, January 2013 Recession Periods 4 th Qt = -.1%

6. Elliott D. Pollack & Company Worried about GDP? No. - Spending boost followed by budget cuts, - Inventories.

7. Elliott D. Pollack & Company US New Job Data Change from Prior Month (S/A) June 2010 – January 2013 Source: Bureau Labor of Statistics (000’s)

8. Elliott D. Pollack & Company U.S. Unemployment Rate 1976 – 2013* Source: Bureau of Labor Statistics *Data through January 2013 Recession Periods

9. Elliott D. Pollack & Company U.S. Underemployment Rate 1994 – 2012* Source: Bureau of Labor Statistics *Data through August 2012 Recession Periods Beaten down by life. Unemployment Rate

10. Elliott D. Pollack & Company Financial Obligation Ratio** 1980 – 2012 * Source: Federal Reserve *Data through third quarter 2012 **Ratio of mortgage and consumer debt (including auto, rent and tax payments) to disposable income. Recession Periods Paying less for past purchases!

11. Elliott D. Pollack & Company Consumer Confidence 1978 – 2012* Source: The Dismal Scientist *Data through December 2012 Recession Periods Normal New Normal?

12. Elliott D. Pollack & Company Real Retail Sales U.S. Percent Change Year Ago 1973 – 2012* Source: Federal Reserve *Data through November 2012 **Three-month moving average Recession Periods

13. Elliott D. Pollack & Company Real Disposable Personal Income Percent Change Year Ago 1971 – 2012 * Source: Bureau of Economic Analysis * Data through third quarter 2012 Recession Periods

14. Elliott D. Pollack & Company Hours Worked Percent Change from Year Ago 1976 – 2012* Source: Bureau of Labor Statistics Recession Periods *Data through third quarter 2012

15. Elliott D. Pollack & Company Capacity Utilization Rate 1970 – 2012* Source: The Federal Reserve Bank of St. Louis *Data through November 2012 Recession Periods

16. Elliott D. Pollack & Company U.S. Leading Indicators 1971 – 2012* Source: The Conference Board Recession Periods *Data through November 2012

17. Elliott D. Pollack & Company FISCAL CLIFF 2013

18. Elliott D. Pollack & Company Recession? No. Slow growth? Yes. Kicking the can… Yes.

19. Elliott D. Pollack & Company Arizona

20. Elliott D. Pollack & Company 9 4 1 5 2 10 3 7 Job Growth 2006 11 15 6 22 8 Source: US BLS 13 Jobs growing Jobs declining Top 10 Hawaii Alaska

21. Elliott D. Pollack & Company 5 49 24 36 45 4 30 8 25 46 50 44 1 3 Alaska 2 20 34 Job Growth 2009 Source: US BLS Jobs growing Jobs declining Top 10 Hawaii 6 7 9 10

22. Elliott D. Pollack & Company 6 5 34 10 8 4 48 32 33 11 1 3 Alaska 43 22 Jobs growing Jobs declining Top 10 Hawaii 14 9 2 Job Growth 2012 Source: US BLS 50 7

23. Elliott D. Pollack & Company SRP Residential Utility Hookup Percentage Growth Greater Phoenix 2003 – 2012* Source: SRP *Data through July 2012. POP

24. Elliott D. Pollack & Company APS: Slowest Growth in over 50 years 1954 – 2012* *Data through third quarter 2012 Source: APS POP

25. Elliott D. Pollack & Company Arizona Retail Sales Percent Change Year Ago* 1999 – 2012** Source: Arizona Department of Revenue *Data through November 2012 **3-month moving average Recession Periods

26. Elliott D. Pollack & Company Arizona Restaurant and Bar Sales Percent Change Year Ago* 1999 – 2012** Source: Arizona Department of Revenue *Data through November 2012 **3-month moving average Recession Periods

27. Elliott D. Pollack & Company Uncollected Taxes on E-Commerce (Millions) Arizona 2000 – 2012** Source: Elliott D. Pollack and Company, AZDOR, ATRA, IMPLAN

28. Elliott D. Pollack & Company Projected Net Job Growth: 2013 = 73,600 2014 = 88,500 = 162,100 FISCAL CLIFF IN ARIZONA ?

29. Elliott D. Pollack & Company If the mandated spending cuts take place, total loss to Arizona is projected at: 45,000 to 50,000 jobs. We will still grow, but very slowly. Remember, the “worst case” is not the most likely scenario. FISCAL CLIFF IN ARIZONA ?

30. Elliott D. Pollack & Company Addl. Detail: Greater Phoenix

31. Elliott D. Pollack & Company Arizona Employment* Source: Bureau of Labor Statistics Sectors in Decline Net Change Information-1,000 Other Services-400 Natural Resources & Mining-100 *Dec. 2012/ Dec. 2011 Sectors Improving Net Change Professional & Bus Services13,300 Trade, Transp, Utilities12,200 Education & Health Services10,200 Leisure & Hospitality8,800 Construction7,300 Government6,200 Financial Activities3,800 Manufacturing3,600

32. Elliott D. Pollack & Company Greater Phoenix Employment* Source: Bureau of Labor Statistics Sectors in Decline Net Change Information-600 Natural Resources & Mining-100 *Dec. 2012/ Dec. 2011 Sectors Improving Net Change Professional & Bus Services9,700 Education & Health Services9,700 Trade, Transp, Utilities9,600 Leisure & Hospitality6,200 Government5,300 Construction5,200 Financial Activities3,500 Manufacturing2,400 Other Services900

33. Elliott D. Pollack & Company Arizona- Jobs in the Black Over last 12 months: 63,900 12 months before that: 22,900 12 months before that: 7,000 12 months before that: (160,500) 12 months before that: (138,100) * As of December 2012

34. Elliott D. Pollack & Company Arizona Jobs Source: BLS Jobs lost Peak to Trough:300,800 (Dec-07) (Jul-10) Jobs gained Trough to Current:102,900 (Jul-10) (Dec-12) ***We are 33% of the way back*** *Based on seasonally adjusted monthly data

35. Elliott D. Pollack & Company Employment Levels: Arizona back to Peak in 2015? Source: ADOA Recession Periods Peak

36. Elliott D. Pollack & Company Arizona Per Capita Personal Income 1978–2011 Source: Bureau of Economic Analysis Recession Periods

37. Elliott D. Pollack & Company Arizona Per Capita Personal Income % of US: 1978–2011 Source: Bureau of Economic Analysis Recession Periods

38. Elliott D. Pollack & Company U.S. Single-Family Starts 1978–2012 1/ Source: Census Bureau (Millions) 1/ Through November 2012 Recession Periods Over- supply Under- supply LTA: 1.2

39. Elliott D. Pollack & Company Single Family Permits Greater Phoenix 1975–2016* Source: RL Brown & Elliott D. Pollack & company # Permits (000) *2012 – 2016 forecast is from Elliott D. Pollack & Company But population growth also slid…

40. Elliott D. Pollack & Company Greater Phoenix Percentage of Homes Purchased with $$$ Cash $$$ 2003 – 2012* Source: Cromford Report *Data through November 2012

41. Elliott D. Pollack & Company Greater Phoenix Permits Source: R.L. Brown *Data through YTD December 2012 vs. YTD December 2011 YearPermits% chg 200460,87227.6% 200563,5704.4% 200642,423-33.3% 200731,172-26.5% 200812,582-59.6% 20098,027-36.2% 20106,822-15.0% 20116,794-0.4% 2012*11,61571.0%

42. Elliott D. Pollack & Company Home Prices Indices Greater Phoenix 1989 – 2012* Source: Macro Markets, LLC; AMLS Recession Periods *Data through October 2012. ?

43. Elliott D. Pollack & Company Total Single Family Units Occupied by Renters 2000-2011 Greater Phoenix Source: American Community Survey ?

44. Elliott D. Pollack & Company Greater Tucson

45. Elliott D. Pollack & Company Same basic story, just different scale and timing…

46. Elliott D. Pollack & Company Greater Tucson MSA Employment* Annual Percent Change 1975–2012** Source: Department of Commerce, Research Administration *Non-agricultural wage & salary employment. Changed from SIC to NAICS reporting in 1990. **Data through November 2012 Recession Periods

47. Elliott D. Pollack & Company Greater Tucson Employment* Source: Bureau of Labor Statistics Sectors in Decline Net Change Education & Health Services-1,000 Other Services-400 Information-300 *Dec. 2012/ Dec. 2011 Sectors Improving Net Change Trade, Transp, Utilities2,100 Business & Prof. Services1,500 Leisure & Hospitality1,300 Construction900 Government900 Financial Activities500 Manufacturing300

48. Elliott D. Pollack & Company Pima County Retail Sales Percent Change Year Ago 2000 – 2012* Source: Arizona Department of Revenue *Data through November 2012 Recession Periods

49. Elliott D. Pollack & Company Greater Tucson Single Family Permits 2000–2012* Source: Southern Arizona Housing Market Letter Recession Periods *Data through December 2012

50. Elliott D. Pollack & Company Single Family Resale Median Price Greater Tucson 2000 – 2012* Source: Southern Arizona Housing Market Letter *Data through December 2012 Recession Periods

51. Elliott D. Pollack & Company Balance of State

52. Elliott D. Pollack & Company Balance of State Employment* Annual Percent Change 1975–2012** Source: Department of Commerce, Research Administration *Non-agricultural wage & salary employment. Changed from SIC to NAICS reporting in 1990. **Data through December 2012 Recession Periods

53. Elliott D. Pollack & Company Balance of State Employment* Source: Bureau of Labor Statistics Sectors in Decline Net Change Other Services-900 Financial Activities-200 Information-100 *Dec. 2012/ Dec. 2011 Sectors Improving Net Change Professional & Bus Services2,100 Education & Health Services1,500 Leisure & Hospitality1,300 Construction1,200 Manufacturing900 Trade, Transp, Utilities500

54. Elliott D. Pollack & Company Balance of State Retail Sales Percent Change Year Ago** 2000 – 2012* Source: Arizona Department of Revenue *Data through December 2012 ** 3-month moving average Recession Periods

55. Elliott D. Pollack & Company Balance of State Single Family Permits 1976–2013* Source: University of Arizona Recession Periods *2012 & 2013 are forecasts from the University of Arizona

56. Elliott D. Pollack & Company Commercial

57. Elliott D. Pollack & Company Multi-Family

58. Elliott D. Pollack & Company Multi-Family Year-End Vacancy Rates Maricopa County 1975–2014* Source: ASU Realty Studies / Hendricks & Partners** *2012 -2014 are forecasts from the Greater Phoenix Blue Chip **Data prior to 2005 is from ASU Recession Periods

59. Elliott D. Pollack & Company Absorption Completions 2007 (3,121) 3,800 2008 (4,466) 5,900 2009 9,100 6,231 2010 11,619 200 2011 7,729 248 2012q3 2,931 274 Multi-Family Housing Market Source: PMHS and Hendricks & Partners

60. Elliott D. Pollack & Company OFFICE More lights on?

61. Elliott D. Pollack & Company Office Space Year-End Vacancy Rates Maricopa County 1986–2014* Source: CBRE *2012 -2014 are forecasts from the Greater Phoenix Blue Chip Recession Periods

62. Elliott D. Pollack & Company Greater Phoenix Office Market Source: CBRE YearAbsorption (sf)Chg in Inventory (sf) 20063,245,888**2,320,302 20071,500,7044,905,374 2008(603,112)3,402,646 2009(677,329)1,798,415 2010233,6702,011,404 20111,857,4333,144,910 2012q31,111,0081,033,684 *Only includes multi-tenant space greater than 10,000 SF ** A number of buildings in downtown and mid-town are being converted to office condos.

63. Elliott D. Pollack & Company As of third quarter 2012, there are 300,975 square feet of office space under construction. Source: CBRE

64. Elliott D. Pollack & Company INDUSTRIAL Slowly filling up?

65. Elliott D. Pollack & Company Industrial Space Vacancy Rates Maricopa County 1980 – 2014* Source: CBRE * 2012 - 2014 are forecasts from the Greater Phoenix Blue Chip Recession Periods

66. Elliott D. Pollack & Company Greater Phoenix Industrial Market Source: CBRE YearAbsorption (sf)Chg in Inventory (sf) 20066,032,1757,829,959 20078,359,83513,914,181 2008629,83813,467,215 2009(4,649,352)4,753,218 20104,455,0972,451,202 20117,753,1112,842,185 2012q36,093,1322,132,574

67. Elliott D. Pollack & Company As of third quarter 2012, there are 5.4 million square feet of industrial space under construction. Source: CBRE

68. Elliott D. Pollack & Company RETAIL

69. Elliott D. Pollack & Company Retail Space Vacancy Rates Maricopa County 1985–2014* Source: CBRE** * 2012-2014 are forecasts from GPBC ** Data prior to 1992 is from Grubb & Ellis Recession Periods

70. Elliott D. Pollack & Company Greater Phoenix Retail Market Source: CBRE YearAbsorption (sf)Chg in Inventory (sf) 20065,244,5974,582,618 20079,424,36211,104,865 20083,395,9866,229,205 2009(1,117,100)4,405,985 2010(75,352)902,380 2011(152,647)24,543 2012q31,179,828(58,535) NOTE: 325,000 sf were deleted from inventory during 2011 and 175,000 through q2 2012 due to market data updates and demolitions.

71. Elliott D. Pollack & Company As of third quarter 2012, there are 0.9 million square feet of retail space under construction. Source: CBRE

72. Elliott D. Pollack & Company Why be Optimistic?

73. Elliott D. Pollack & Company Housing?

74. Elliott D. Pollack & Company Many renting will buy. Many doubled-up will buy. Some population growth is back. Employment growth is occurring. Retirees less bound to crappy states. Investors will not suddenly dump and run. Still producing less than “normal.” Fundamentals remain in place. “Normal” returns in 2015-ish. Growth rates will be strong now though.

75. Elliott D. Pollack & Company Cyclical vs. Permanent?

76. Elliott D. Pollack & Company How Arizona Ranks Among the States in Percentage Growth Source: U.S. Bureau of Census; Bureau of Labor Statistics; Bureau of Economic Analysis PERSONAL DECADE POPULATION EMPLOYMENT INCOME 1950 - 19604 TH 3 RD 2 ND 1960 - 19703 RD 3 RD 4 TH 1970 - 19802 ND 3 RD 4 TH 1980 - 19903 RD 3 RD 5 TH 1990 - 20002 ND 2 ND 3 RD 2000 – 20102 ND 12 th 8 TH

77. Elliott D. Pollack & Company Is the Cycle Our Enemy or Friend? (Non-farm Emp. Percent Change 1980 – August 2012) Recession Periods Do you want to always be the same? Or, most of the time EXCEED the US?

78. Elliott D. Pollack & Company Greater Phoenix Population Annual Percent Change 1976–2013* Source: Arizona State University & Department of Commerce, Research Administration. * 2012 & 2013 forecast is from Elliott D. Pollack & Co. Recession Periods The Exception…

79. Elliott D. Pollack & Company Growth Factors Still Intact? 1. Climate 2. Lifestyle 3. Geographic Location 4. Pro-Growth Attitude 5. Competitive Tax Structure 6. Focused Incentives/Investment (i.e. transportation) 7. Leadership with Common Sense 8. Low Cost of Living 9. Congressional Delegation Working for State 10. Business & Government in Same Direction 11. ETC, ETC, ETC.

80. Elliott D. Pollack & Company Source: CBRE Competitiveness Map – 2012(2013?) Source : CBRE

81. Elliott D. Pollack & Company 5 9 10 Benefits of the “SUNBELT” Alaska Hawaii Industrial Northwest

82. Elliott D. Pollack & Company Where do they come from? 1. California – Complete disaster. 2. Northeast – Too damn cold. 3. Rust Belt – No jobs. 4. Florida – Need help finding their luggage though. 5. Others…

83. Elliott D. Pollack & Company Top 10 States Percent of Homes with Mortgages with Negative Equity Source: Core Logic U.S.= 22.3%

84. Elliott D. Pollack & Company AZ will still be a top 5 economy. The economy has multiple gears. 2015/2016 is FULL recovery for AZ. The long term potential remains intact! Closing Points:

85. Elliott D. Pollack & Company ELLIOTT D. POLLACK & Company 7505 East Sixth Avenue, Suite 100 Scottsdale, Arizona 85251 480-423-9200 P / 480-423-5942 F / www.arizonaeconomy.com / info@edpco.com Economic and Fiscal Impact Analysis/Modeling Real Estate Market and Feasibility Studies Litigation Support Revenue Forecasting Keynote Speaking Public Finance and Policy Development Land Use Economics Economic Development