Arizona leaders push job stimulus

Tax breaks aim to boost construction, lure firms
The Arizona Republic
Wednesday, June 18, 2008
Mary Jo Pitzl

A tax break for an entertainment district south of Chase Field. Tax credits for manufacturers of solar components. Incentives that could lead to a new baseball stadium in Tucson.

Together, these could create jobs necessary to revive Arizona's sagging economy, some Arizona lawmakers believe. They unveiled their plan Tuesday and hope to push it through the Legislature during the final two weeks of the session.

"This is about creating jobs for people who might not have them within a year," said Rep. Michele Reagan, R-Scottsdale, chairwoman of the House Commerce Committee.

Reagan and other proponents are touting the job package as the one ray of sunshine in a drawn-out legislative session that has been dominated by budget doom and gloom.

They say the still-evolving plan would create jobs almost immediately through construction projects, with a minimal impact on the state budget. The proponents said they can't yet estimate the size of the economic jumpstart their package would generate, nor do they know the number of jobs that would be created. But they said the incentives are essential to preventing long-term deficits.

"If we don't have this shot of adrenaline, we'll be in budget deficits for the next five years," Reagan said. The state faces a deficit of $1.9 billion for fiscal 2009, which comes on the heels of last year's $1.2 billion deficit.

House Speaker Jim Weiers, R-Phoenix, endorsed Reagan's work. "I believe stimulus is good in a downturn economy," he said.

The package also has support from many business groups that have backed elements of the package.

Reagan, with Weiers' backing, corralled several projects that have been floating around Capitol corridors this year. She believes that, taken together, they can revive the state's moribund economy.

Skeptics, however, question the wisdom of viewing construction jobs as an economic life preserver.

The elements of the still-shifting package are:

• Financing for an entertainment district that developer Dale Jensen would like to create south of downtown Phoenix's baseball stadium and basketball arena. The Legislature would be asked to return to the developer the sales tax paid on the construction expenditures for the district.

• Permission for Pima County officials to seek voter approval for a tourism and sports authority, with taxing power. If approved, the authority would build a new baseball stadium to shore up Tucson's ability to retain spring-training teams from Major League Baseball.

• Expansion of tax credits for research and development, aimed at start-up firms. The amount of credit would be pegged to the level of investment in R&D. Reagan, a longtime proponent of such plans, said such activity is what spurs new jobs and industries.

• Creation of tax credits for companies that manufacture solar components or for solar companies that locate their headquarters in Arizona. Backers, such as the Greater Phoenix Economic Council, say the state lacks the incentives needed to compete with other states that are trying to attract solar companies.

Initial discussions included a university-construction plan in the package, but supporters now say that would be better addressed through budget negotiations.

The university plan would include the completion of the downtown Phoenix medical campus, repair of aging campus buildings statewide and construction of new buildings. The money would come by bonding against state lottery dollars.

The package will be reviewed Thursday morning before the House Commerce Committee. A formal hearing, and a vote, is scheduled for 1 p.m. Monday before the committee as part of the bill's fast-track process. The Legislature is expected to wrap up work by the end of the month, so speedy work is needed.

But not everyone is on board - or even clued in. Reagan has forged a moderate coalition that so far has not included some of the Legislature's more conservative members.

"They're not doing it for the policy," said Rep. Eddie Farnsworth, R-Gilbert, "they're doing it to appear like they're doing something for the economy."

Farnsworth, who cautioned that he only knows of the proposed package through third-hand sources, said he doubts the projects would generate enough jobs quickly enough.

If lawmakers want to provide a broad-based stimulus, they should revisit their plans to eliminate the state's education-equalization property tax, said Kevin McCarthy, executive director of the Arizona Tax Research Association. That tax, which is on hold through next year, was repealed by lawmakers earlier this year, only to be vetoed by Gov. Janet Napolitano. The governor said it was premature to consider a repeal.

McCarthy was particularly critical of the plan for an entertainment district in downtown Phoenix. In his view, it diverts money that would otherwise be going into statewide services.

"The politics that result from this are ugly," he said. That's because once one project gets a break on some of its state-imposed taxes, other developers will follow suit."

Others, however, say the plan is one of the few pieces of good news that could emerge from the legislative session. The state faces a $1.9 billion budget deficit, which must be closed.

"I think this is an exciting opportunity to ensure the economic strength of our state in the future," said Rep. Kyrsten Sinema, D-Phoenix. Like other lawmakers, she said the solar-tax credits hold great promise. The credit would be equal to 10 percent of the total capital investment by a solar firm, payable over 10 years.

Reagan said the jobs generated by the projects should help Arizonans across the income spectrum and rejected suggestions that the package is a favor to business groups.

"This can't be presented as we're giving money to business instead of education and poor people," she said. "This is about stimulating jobs."

Reporter Matthew Benson contributed to this article.