Phoenix Now a Tier 1 City

Valorie Rice, Senior Business Information Specialist 

Phoenix is now a Tier 1 city according to The Milken Institute Best-Performing Cities 2021: Foundations for Growth and Recovery released on February 17. There were several significant changes to the rankings in this year’s report with positive results for most Arizona metropolitan areas.

Milken considers 401 metropolitan statistical areas (MSAs) across the U.S. when ranking city performance and computing the index. As in past years, the analysis ranks large cities and small cities separately. The large cities list includes 200 metropolitan areas with a population of 250,000 or more, and the small cities list is comprised of 201 metropolitan areas with a population over 60,000.

This year for the first time the rankings have been broken down into five tiers. The top 13 cities (metropolitan areas) within the large and small cities lists make up Tier 1. By grouping cities with similar scores into different tiers, the researchers hope to create new benchmarks for city leaders to use in making their areas more competitive over time.

The Best Performing Cities Index has always placed an emphasis on jobs, wages and high tech growth with both short term and five-year job growth and wage growth weighted heaviest followed by high tech GDP growth and high tech concentration. This year’s index also includes one- and five-year measures of housing affordability by looking at housing cost burden as well as broadband access among the metrics used. The onset of the COVID-19 pandemic did play a role in the reasoning for updating the measures used in the index and was evident in the short-term job market indicators.

Phoenix ranks seventh among large cities placing it in Tier 1. Arizona has three Tier 2 cities, two Tier 3 cities and one Tier 4 city as seen in Figure 1. Tucson, the only other metro in Arizona among large cities, was listed as a Tier 2 large city with a rank of 41 among large cites. Within Tier 2 small cities, Lake Havasu City ranked 16 and Prescott Valley ranked 25. Yuma and Sierra Vista were among the Tier 3 small cities with ranks of 66 and 100, respectively. Flagstaff fell to Tier 4 with a rank of 169 out of 201 small cities, a drop of 82 places from its 2020 ranking. There were no Arizona cities within Tier 5.

Figure 1: Arizona Cities by Milken Tier

The best-performing large city in the nation was Provo-Orem, Utah, reclaiming its spot at the top after landing at number two last year. The best-performing small city was Idaho Falls, Idaho. Both of these metro areas ranked highly in job growth and the amount of high tech industries there. In fact, high tech concentration plays a large part in all Tier 1 cities, particularly for large cities. Adding affordable housing as a measure did affect some of the rankings as last year’s top-ranked city, San Francisco, fell to 24^th place this year. Many of the top performing places this year were from the West, particularly cities in Utah and Idaho, but also Colorado and Arizona. 

Figure 2:  Large and Small Tier 1 Cities