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February 3, 2011

Host: Ted Simons

Challenges of Local Government

  |   Video
  • State lawmakers have introduced a number of bills that would impact cities and towns in a variety of ways. Here to discuss what Arizona's local governments are facing is Ken Strobeck, Executive Director of League of AZ Cities and Towns.
  • Ken Strobeck - Executive Director, League of AZ Cities and Towns
Category: Government   |   Keywords: local government,

View Transcript
Ted Simons: State lawmakers have introduced a number of bills that would impact cities and towns in a variety of ways. Here to tell us what Arizona's local governments are facing is Ken Strobeck, executive director of the league of Arizona cities and towns. Good to see you again. Thanks for joining us.

Ken Strobeck: Thanks, Ted.

Ted Simons: Before we get started now, an overview of some of the things going through the pipeline, we just had a segment regarding competitive bids for city services. What do you think about that idea?

Ken Strobeck: It strikes me just a little as a solution in search of a problem. Right now cities in Arizona are incredibly well run. We have national awards for excellence in city management; we have a very accountable structure with the council manager form of government, and elected officials that are accountable to the public. I don't have any problem in seeing if there are efficiencies we can take care of and do things a little better, but we really don't need state laws telling us that we have to send everything out for bids and micromanaging the council process quite so much. I think it would be better to say, let's send a few things out and see what we can do, but let the city do that voluntarily rather than with the state law.

Ted Simons: So the idea of getting better ideas by using this particular process, you think, isn't necessary right now?
Ken Strobeck: I don't think so. I think we can get better ideas and try them without passing more laws that go into the state law books and stay there forever.

Ted Simons: There are a number of other bills, I want to get to them, but as a general overview, give us a state of cities and towns, and what they're facing, and what you're looking at as far as legislation and the governor's budget.

Ken Strobeck: It's a mixed message for cities and towns. Obviously we're in the same economy that the state is in, and so over the last three or four years we've seen our revenues just plunge. The average city budget is about 25 to 30% smaller than it was just three years ago. So we've really had to make a lot of cuts. We've had to also balance our budgets, as required by state law. We can't spend any more than we take in. So we've had to go through a variety of program cuts, personnel cuts, reductions, in order to actually make those budgets balance.

Ted Simons: How does state shared revenue work? Because we hear about folks wanting to cut back, there's a bill right there now, cutting back for 20 years to current levels, these sorts of things. How does it work?

En Strobeck: State shared revenue, the urban revenue sharing program is something that distributes 15% of the state's collected income tax back to cities and towns on a per capita basis, and the state keeps 85%. This was the result of a 1972 ballot initiative that said we're going to preempt cities from having their own local income tax, and instead we're going to have one income tax in the state rather than 90 different ones in all the cities. And that will be distributed back because it's in the best interest of the state to have strong cities and towns. That's really where the economy happens, that's where people live. But it's on a two-year delayed basis. And so as the state income tax collection two years ago were still going down, we're still going down in our shared revenue amounts for this year. It's down about another 18% this year, even as the state is kind of bottomed out and maybe seeing a little turnaround.

Ted Simons: So the idea of keeping that shared revenue at current levels for the next 20 years, or whatever the bill winds up being, considering the economic climate we're in, still a bad idea you say?

Ken Strobeck: Really a bad idea. As recently as four years ago, the shared revenue fund was $200 million more than it is today. It's only $424 million for this upcoming year. It was over $700 million a few years ago. And so when we see that kind of decline and say, what is the purpose of this, the bill that you're talking about, dedicates the city portion of shared revenue to pay off the bonding debt that the state incurred last year. Well, this was frankly the state's obligation; we believe that it's not right for cities and towns to have to shoulder that burden for the next 20 years.

Ted Simons: But for those on the other side who would argue it's all hands on deck, we're in a crisis right now, we've got to find things to work as best we can and take it from there, you say --

Ken Strobeck: It is all hands on deck. And we're being as cooperative as we can be. We've told the governor's office we're going to be supporting her budget proposals, even though it does impact us to the tune of at least $20 million that will come from cities and towns. The cities and towns voluntarily gave up their share of the increase prop 100 sales tax last year. That amounts to over $200 million a year. Last year they eliminated the L-TAF transportation fund, $32 million. So we have been participating, we continue to participate, but this freezing be of shared revenue is a terrible idea. When the economy turns around, we should all benefit the rising tide should lift all boats, not just the state government.

Ted Simons: There's another bill out there that talks about the model city tax code, without getting too inside baseball here. But just in general, why shouldn't all Arizona cities have the same taxes as the state, and let the state collect those taxes as well? Why not, in other words, centralize this particular aspect of tax policy?

Ken Strobeck: Because cities and towns are different. And when they're very different, they're very local. The economy of the city of Safford is very different than that of Scottsdale. You're not going to have agricultural taxes in Scottsdale or tourist taxes in Safford. The model city tax code has some options that cities can use to tax separately, and what this bill proposes to do is take all of those away. It doesn't benefit the state, it doesn't transfer money to the state, it simply says, all those taxes you're collecting locally cities, they're zeroed out, you can’t collect them anymore. It's really crippling for cities and towns in our flexibility.

Ted Simons: Bill also calls for state audits of local governments. Don't those happen already?
Ken Strobeck: They happen already. The auditor general gets a report on every single city and town that's audited every year on an annual basis.

Ted Simons: So is that increase in frequency do you think?

Ken Strobeck: I don't think so. It's pretty tough to go through an annual audit. They take a number of weeks already.

Ted Simons: Another bill out there limits shared revenue with local governments, and we talked about that one. There are other ones that -- just in general seem to say, again, that we -- that cities and towns maybe have too much in the way of flexibility. The state doesn't have -- the state needs that kind of flexibility right now. How do you respond?

Ken Strobeck: What’s interesting is that over 25 years ago when the model city tax code was created, the definitions for the state and the definitomn for the city were very similar. Today they're quite different in a number of areas, and if you look at who moved, it's the state that's done the changes. Every year there's special interest groups that ask for exemptions for loopholes, for special treatment, and in fact we've got those bills going through this year. So the fact of the matter is, it's really the state that every year creates new loopholes, new exceptions, they do this in the name of, we've got to be helpful to these businesses, and those kind of things, but it moves it away and shifts the tax burden on to somebody else. That is what has created the difference between the local tax base and the state tax base.

Ted Simons: So what do you tell lawmakers when you see these bills, when they come to you, when you do to them with your concerns regarding these, what do you tell lawmakers about these bills? They live in cities too.

Ken Strobeck: They liver in cities, over 83% of the population in the state lives in a city and over 90% of the tax revenues generated in the city. Frankly, it's a matter of education, because many of the folks in the state legislature do not have municipal or local government experience. They come into the legislature and they're told by lobbyists by people who have made contributions to their campaign we've got to have this exemption are, or we got to have this change in the policy, and you should do this to the cities. But our mantra is, let us make those decisions locally. We're locally elected, locally accountable, and flexibility is really what we need to have at the local level.

Ted Simons: Real quickly, a couple of others, the sales taxes on residential rentals also being talked about, development fees impact on development fees as well. Do you see any of these bills as something that cities and towns could live with?

Ken Strobeck: You know, for the last six years we've negotiated with the home builders every year on impact fees. We've talked about it on this program and debated that in fact. And impact fees are very important with the principle that growth should pay for itself. This new bill, senate bill 1525, throws that completely out the window and all the negotiations that we've done over the last six years I think the home builders see this as an opportunity to go for the gold and get everything that they've ever wanted in impact fee bill, and I don't know that it's amendable. It really will be very harmful for that principle.

Ed Simons: OK. So last question, I'm the lawmaker, tell me about cities and towns. Your biggest concern right now?

Ken Strobeck: Our biggest concern right now is that the state legislature is really getting into a lot of things that may have a lot of unintended consequences. Cities and towns are working very well right now, we're the economic engine of the state. I think it's better to leave those things alone, let us continue to do what we're doing well and let's all share in the benefits of increased economy.

Ted Simons: Alright Ken, good to have you on the show. Thanks for joining us.

Ken Strobeck: Thank you.

SB 1322

  |   Video
  • State lawmakers help a press conference today on SB 1322. Supporters say the bill will save taxpayer money by requiring Arizona's largest cities to seek competitive bids for the delivery of certain city services. Senate Majority Leader Scott Bungaard and Phoenix City Councilman Sal DiCiccio explain.
  • Scott Bungaard - Senate Majority Leader
  • Sal DiCiccio - Phoenix City Council
Category: Business/Economy   |   Keywords: SB1322, money,

View Transcript
Ted Simons: State lawmakers held a press conference today on senate bill 1322, supporters say the bill will save taxpayer money by requiring Arizona's largest cities to seek competitive bids for the delivery of certain city services. Here to explain is senate majority leader Scott Bundgaard, and Phoenix city councilman Sal Diciccio. Good to see you both. Thanks for joining us. Let's fine tune here. What exactly does this bill do?

Scott Bundgaard: Basically the intention of the bill is to create some competition for city services. At this point we believe that the private sector can better deliver a lot of the services that are currently provided by cities and to do it more effectively, more efficiently, and create a whole lot of jobs in the private sector in the process.

Ted Simons: Similar question, different angle, why is this necessary?

Sal DiCiccio: Well, what it does is it puts a billion dollars into the economy. It allows small business owners to compete for services that have never been able to compete before. It opens up services, providers, innovative ideas; it will bring in new ideas, refreshing ideas into local governments. What it does it is looks at every function of government, every function at the local level that's over $50,000, requires those cities to competitively bid that out. Does not require the cities to take the bid, but what it does is allows -- it requires them to bid it out, so you have new ideas, different ways of delivering that same service. We believe this will create a national model for cities, states, all around the country, because no one has really done this. One of the things we talked about earlier is that it looks at things in a vertical way. So we all agree that you want to deliver police, right? Under police you've got multiple functions of government in order to get that police officer on the street. One of those is automobile repair. So do you want to prepare the automobiles, or do you think it’s better for us to bid those services out? And it looks at every single layer under the function of putting that police officer on the street, and whether or not if that could be competitively bid.

Ted Simons: The idea of cities, we're talking originally 500,000 and up, but that's changed?

Scott Bundgaard: It's changed to 200,000 and up. And I think that's about seven or eight of our larger cities. SO it’s a great place to start. It's more like a pilot project, and we know that within some of the larger cities there's quite a bit of administration and efficiency that can be achieved through this legislation.

Ted Simons: Give us another example of how this would work. It sounds like it's a good idea for information gathering, but if you don't mandate it, what's going on here?

Scott Bundgaard: What we're trying to do with the legislation is that -- create a statewide policy on this matter. So we're starting with seven or eight of these cities, and hope to take it statewide. The goal is to create more jobs, to create more efficiencies in government, to let taxpayers know that they're getting some value for the tax money that they're spending. Ultimately this will extend out over even pension savings for instance. So we've read in the newspaper and heard a lot in the media about the cost of pensions, the defined benefit contribution -- defined benefit system. So when we roll this out, if a private businesses replace the public sector, then we're going to achieve long-term savings, substantial savings. So we're just scratching the surface with this.

Sal DiCiccio: It creates a lot more transparency, is what it does. It puts everything under the microscope. The reason that 150,000 threshold is put in there is it allows smaller businesses to compete, and large ones will be able to do the bigger projects. The smaller ones will be done by smaller business. It doesn't require any city to take the bid. It just allows -- requires them to bid everything out. The other thing it doesn't do it is doesn't bid out police, fire, strategic functions, judges, tax collections. There's certain functions that are strategic that it does not bid out that you want to maintain by that local government.

Ted Simons: So if it doesn't require the cities to take the bid, is it more of an idea where I've got a better idea, the city council hears my idea, they don't necessarily take my bid, they don't necessarily take my job, but they say, maybe we can do something differently or better.

Sal DiCiccio: It creates more ideas to come in. But it also -- at some point the cities will be compelled to take those bids. If they're better bids by far, then they're going to be beholden to the taxpayer. Right now there's only one way much delivering that service, and that's through local government. There are multiple ways of delivering service better smarter and more efficient.

Ted Simons: Are there multiple ways as far as oversight? What kind of managerial oversight are we talking about here?

Scott Bundgaard: The oversight is going to come largely from the taxpayers and small businesses challenging the status quo. Because as the process currently exists, you've got a bureaucracy that's set up to protect the bureaucracy. Starting with the procurement process, an entity can actually create a request for proposal that allows them to essentially sole source or sole select a contract. They've also -- they'll also be able to narrow -- be very selective about the contractors that they will issue bids to. So that -- so when you limit competition like that, then you reduce transparency, reduce accountability, you reduce the ability to achieve cost efficiencies, and that's what we're really trying to do, is use taxpayer money more wisely, and to create jobs in the process. And as Sal mentioned, this has an opportunity of creating a billion dollars in economic opportunity here for the state of Arizona.

Ted Simons: But if you have -- take the opposite side. If you have four different companies doing different things for one particular division of the city, who has the oversight? Who makes sure these four companies are doing what they're supposed to be doing?

Sal DiCiccio: That's what your managers do. It's done to the RFP process as well. What you do is you write in there specific standards they have to do, they don't abide by them, you fire them, just like the private sector. This brings business principles into government. No different than people run their operations, whether it be a small business or a large business. What it does, it will be the first model to say that government has to be run and look at functions of government just like would you in business. And it creates the transparency that the Senator Bundgaard was talking about because now it's all open. If they don't take those bids, and let's say there's a savings of $10 million, and the city decides not to take that, that council member that voted against that is now beholden to the taxpayer. It requires the taxpayers to be active.

Ted Simons: Are these council members, are these city leaders, aren't they beholden now? What would that change?

Sal DiCiccio: They are, but the system is geared to protecting itself, Ted. I've been in local government, local government, at least in the city of Phoenix, is literally geared to protect their own bureaucracy and they do not bring any innovative ideas that this will do it. This will bring it into the large-scale to even from the lowest level to the largest level where people are in business are saying, hey I can deliver that service better. Let me give it a shot at that.

Ted Simons: For those who are saying, ok we have a business, let’s say we're not happy with the business, we want them out of there. Right now we have city leaders who aren't doing the job. We want them out of there. Is it better -- you got your city leaders, you know who they are, you know how to get rid of them, but if you have all sorts of smaller companies doing all sorts of different things, oversight, what do you do?

Scott Bundgaard: The elected officials are accountable, but in the case of local governments, city managers are accountable typically with the city council. But whether you're at the local level or at the state level, the point is that the bureaucracy works to protect itself. Sal had raised two different issues that happened at the city of Phoenix, where they spent $34 million on repairing their own vehicles. As opposed to competitively bidding that. They also dot same with their printing services. These are two areas where government doesn't do a better job than the private sector. They're a private sector individuals out there who will do a fantastic job, and create jobs, and save the taxpayer money in the process.

Sal DiCiccio: This breaks the special interest hold on local governments is what it does. Literally there was a special interest hold by labor groups that control what happens at the local level. What this does is it says, well wait a second, we want to see what the best way of providing that service, is it is better, it is smarter, more efficient, and this requires to us do that.

Ted Simons: Last question real quickly, if Ted's automotive supply has a better idea but I know going to the city isn't necessarily going to win me the contract, you may just take my idea and run with it in another direction. What makes Ted's automotive supply want to go there?

Sal DiCiccio: Well if you're that much better, I would be surprised if a local official did not vote for that. Sooner or later the taxpayers will end up revolting if that was the case. The reason we did the 50,000, is it requires multiple bids, and the reason we picked the 200,000 threshold, those cities have the infrastructure in place to do this and do it efficiently.

Ted Simons: Alright gentlemen, we got to stop it right there. Thanks for joining us.

Synthetic Marijuana Ban

  |   Video
  • The Arizona House of Representatives passed an emergency bill aimed at banning the sale of synthetic marijuana. Representatives Amanda Reeve and Matt Heinz discuss the bill.
  • Amanda Reeve - State Representative
  • Matt Heinz - State Representative
Category: Medical/Health   |   Keywords: marijuana,

View Transcript
Ted Simons: Earlier today the Arizona House of Representatives passed an emergency bill aimed at banning the sale of synthetic marijuana known as spice. House bill 2167 now awaits action by the senate. Here to tell us about the bill is two of its sponsors, Republican representative Amanda Reeve, she's a paralegal from Phoenix, and Democratic representative Matt Heinz, he's a doctor from Tucson. Good to see you both here. Thanks for joining us. Let's start with the defining terms. What is spice?

Amanda Reeve: Actually spice is this incense that's being sold in smoke shops, and it has this chemical that is sprayed on it so people are smoking the incense, so there's 10 chemical compounds, there’s actually probably more than that, Matt can jump in at any time, because he knows some of this a little bit. But there's 10 chemical compounds that we're banning that can be used to be sprayed on this incense or these leaves and you can smoke it. It's marketed as incense, but it's a bad, dangerous drug.

Ted Simons: How dangerous is this drug?

Matt Heinz: In my practice at the Tucson Medical Center, I've actually admitted patients to the hospital who have ingested these toxins, these compounds, for observation. Because it's an unpredictable compound. We don't even know what's necessarily in it. And the effect can range from seizure like twitching of the extremities, to persistent nausea and vomiting, headaches, blurred vision, in one particular case the gentleman I admitted, for example, couldn't actually speak. He became aphasic as a result of ingesting this compound. Yet the three friends that he had who brought him in for emergency medical services were unaffected.

Ted Simons: Interesting. So let's get to the bill now. What does the bill do?

Amanda Reeve: The bill bans 10 chemical compounds that are known to the -- to make up the spice, and it provides our law enforcement to actually enforce being able to prosecute and enforce on these.

Ted Simons: Are these 10 chemical compounds that are used for other things though? Is there a danger that some other benefits might be lost in all this?

Amanda Reeve: No. Actually, as a matter of fact, we -- bill Montgomery, his office and the -- the Arizona department of public safety's crime lab personnel work order drafting the language for this bill, and they left out one compound, we were going to put down 11 originally, they ended up leaving one out because there has been proven that this one compound has been used in other ways beneficially. So the 10 on the list are not -- there's no use for them beneficially of any kind. So that’s why they're on the list because they're nothing but a dangerous --

Matt Heinz: I think it's important to point out these are investigational compounds that were never intended for consumption by humans or by anyone; by any creatures. So these were never intended to be smoked, and the stealth marketing business related stealth marketing is unacceptable and provides for this public safety risk.

Ted Simons: So if I own a smoke shop and I have this stuff on the shelves, and the stuff has been selling, this law says get that stuff off the shelves?

Matt Heinz: Absolutely.

Amanda Reeve: Exactly. Yes.

Ted Simons: Just like that?

Matt Heinz: Yep.

Amanda Reeve: Absolutely. As soon as the governor signs the bill, that's what will happen.

Ted Simons: Again, drug enforcement agency has already had a one-year moratorium on five of these things. You're saying now 10. Explain why this bill is necessary if the DEA is already addressing it?

Amanda Reeve: Well actually the DEA only put five, and it has not gone into effect yet. That has not happened yet. And the reason why this is important is because even though the federal government may ban something, it doesn't give the state, local authorities the ability to prosecute and enforce the laws necessary. So that's why we have to do it at the state level to make sure they have that ability.

Ted Simons: As a doctor, obviously this is something of major concern. This thing went through the legislature faster than almost anything except for what happened down in Tucson. But in terms of speed, this moved fast. Is it moving fast as far as what you're seeing? Was this a problem even two years ago, five years ago?

Matt Heinz: The amazing thing, it wasn't. One of the first experiences I had in the hospital, admitting that 21-year-old gentleman I referred to before, was actually in the late part of May, as I recall. And I had heard some stories that this was an issue sweeping through especially college and University towns, the target age group for these -- for the folks that market this is of course about 17-25 years of age. And I started seeing it in the emergency department, contacting the poison control centers, and they started accumulating reports of ingestion of what was being build as a legal version of marijuana for all these unexpected and unpredictable side effects.

Ted Simons: What kind of reaction are you getting from law enforcement on this bill?

Amanda Reeve: 100% support. They’re actually -- they've been at all the stakeholder meetings, they been working with us very closely on this. We have 100% support on this.

Ted Simons: Is there a concern, and this is -- I know this may not make sense initially, maybe it does, is there a concern that by banning this, by banning anything, you are arousing curiosity? You are only stimulating interest in something like this?

Matt Heinz: You know, that certainly is a potential, because here we are talking about it on the air. But I think it's important to educate, especially our young adults about the dangers. This is not marijuana. This is not safe. And if it's highly unpredictable and having it banned, again, allows our law enforcement officials to have the tools to make -- to secure this product away so to make sure it's not on the shelves.

Ted Simons: The idea of education with a ban or maybe education more so than a ban, some would say the minute you ban something, all of a sudden you make it nice and shiny fore a lot of folks. What do you think about that?
Amanda Reeve: Actually, right now we're seeing reports that are showing us the younger children are very -- they're already experiencing this stuff. They're out there and using it thinking it's a safe form or legal form of a dangerous drug. And it's not. There's nothing safe about this. So I don't know -- I think even people who are using it are finding they don't ever want to use it again. That's what we're hearing. So we need to educate them and let them know this is not safe. There's grave -- there are really serious risks with this.

Matt Heinz: Multiple constituents have actually, young constituents have contacted my office and I'm sure representative Reeve's office as well, saying, thank you , thank you both for doing this, we used it, didn't have a great high, had a horrible experience, and then my friend went through this, or I went through this. And so we actually have people who are testifying to that.

Amanda Reeve: We're learning new horror stories all the time, trust me.

Ted Simons: All right. Well thank you both very much for joining us tonight on "Horizon."

Amanda Reeve: Thank you.

Ted Simons: My pleasure.