March 30, 2011
Host: Ted Simons
Economic Growth: Invest Arizona
- Senate Bill 1041, the Invest Arizona bill, establishes tax incentives for companies that meet certain job creation and investment thresholds. Barry Broome, president and CEO of the Greater Phoenix Economic Council, and Farrell Quinlan, state director of the National Federation of Independent Businesses (NFIB) Arizona, debate the merits of the bill.
- Barry Broome - President and CEO, Greater Phoenix Economic Council
- Farrell Quinlan - State Director, National Federation of Independent Businesses (NFIB)
Ted Simons: To encourage job creation, state lawmakers are considering a bill that gives tax breaks to companies meeting certain capital investment and employment thresholds. Here now to talk about the bill is Barry Broome, president and CEO of the Greater Phoenix Economic Council and Farrell Quinlan, state director for the National Federation of Independent Business. Good to see you both here.
Barry Broome: Thank you.
Ted Simons: All right, Barry, why is this idea of tax credits for new and expanding businesses, why is that a good idea?
Barry Broome: A couple things. First off if you are going to rebuild the economy your economy has got to be about having a strategy. And here in Arizona one of offer challenges is University of Arizona just came out with a report that downgrades our recovery beyond 2015, and states that in 2014 Arizona will still have 8% unemployment. The way you build out of this economy is through a broad-based strategy and part of that is attracting and driving capital intensive industries. Arizona's wealth will come from export industries. And competitive states and other markets that we compete with offer comparable opportunities and Arizona needs to compete for industries like defense, aerospace, semi-conductor and, of course, doing a broad based way which is what 1041 does.
Ted Simons: Needed for Arizona to compete?
Farrell Quinlan: I agree with everything he said except for that very last part, which says that that's what 1041 does. In terms of a broad base, we saw that in the jobs bill that was passed earlier this year. House bill 2001 which lowered property taxes for everybody on the business side. It lowered the corporate income tax and included a number of other more targeted incentives that I am sure Barry could talk about, but that was the approach that you just described. That’s very broad-based. There are no winners and losers in the fact that new people coming in or incumbent businesses are all treated the same. The problem we have with 1041 is that it's in a way, it's a robbing Peter to pay Paul. It's shifting property tax burdens from the new folks coming in to the folks who already have been here for most cases decades.
Ted Simons: Go ahead, please.
Barry Broome: There's a couple of things. First off, this I think is one of the mistakes we have made in Arizona. You don't do one instead of the other. The Greater Phoenix Economic Council with NFIB endorsed 2001. Part of your strategy has to be how do you bring broad based tax strategy online? The budget and the price tag those benefits don't really occur until 2018 and Arizona stays in a recession for another 15 without any policy achievements helping us with California companies. There's two, one mistake or misnomer that I would say for Farrell's statement, this does not have a property shift clause. This only provides a reduction and net new investment. It doesn't take existing investment or existing buildings off the tax rolls. And that's why we have the support of the league of cities as well as business leaders because it's only on new investment and that's why there's no fiscal note on 1041 in the current format.
Ted Simons: Farrell's idea of robbing Peter to pay Paul, the idea of picking winners, the state should not be in the business of picking winners? How do you respond to that?
Barry Broome: There's a couple of things. I got a kick out of that when I heard. In Arizona, there's no robbing Peter to pay Paul because Peter's house has been foreclosed on and Paul is unemployed. We are leading the nation in bankruptcies, foreclosures. This is about jobs for Arizona. We don't represent business. We are a business leaders. We represent what's good for the economy. And this does not have an industry strategy in it. So it really is any industry. Any industry that makes the investment and creates the job and it mirrors exact same program that the tax credit has in the governor's package. So it isn't -- and it's provided for Arizona businesses.
Ted Simons: How do you respond to that?
Farrell Quinlan: The problem business it -- it does create a tax shift especially on the secondary side for bonds and overrides. When you expand the size of the property tax base on that, there will be a shift. And it's significant shift. You have got right now businesses pay at a 20% assessment ratio. A homeowners are at 10% assessment ratio. This would take businesses all the way down to 5%, the new guys. Right across the street could be the same exact type of business, with the same profile who has been in the community for decades, been supporting the community, paying property taxes, supporting the schools, the Little League, all that, and they are paying four times as much in terms of property taxes and the new guy that comes in who has been getting these subsidies.
Barry Broome: Here's first of all of businesses are going to the same opportunity. And when you have to create 300,000 jobs in three years just to get parity you need to build a strategy on all businesses and all strategies. The other part of that, that just as necessarily being talked about is what's going to make us effective? House bill 2001 we are last in the mountain west region in our position for industry. And we remain last clear up until 2018. Which at that time we only pass California. When you take an economics development program like invest Arizona and add it to the complimentary tax based policy, Arizona goes to third in the mountain west region in 2018 because of the leaderships work on House bill 2001, with become the number one market in the mountain west region and that's what this is about. This is about getting Arizona in the number one position and as far as targeted property reclassification goes there's a reason why Intel has invested $16 billion in Chandler. Look at the announcements occurring in Arizona now, for solar, up to 48,000 jobs. They are all getting a special tax treatment on that capital investment or they can't make it in Arizona.
Ted Simons: Do you have to play this particular game to get these particular industries? Something like aerospace and defense, when you got the Oklahoma’s of the world and other states throwing all this business around, can we afford to sit around and watch?
Farrell Quinlan: Can we afford to play in that game? That’s another question. Are we actually real players in this? Are our incentives sweet enough? The question is, what really brings sustainable growth, not just chunks of jobs in the hundreds or the low thousands but the 324,000 jobs that have gone away since December of '07. We need to do things that impact all businesses and create a climate that will have people feel comfortable investing their money. The great thing about the original jobs bill was that it locked in some certainty about future tax rates and that they’re coming down. Especially with our budget deficit. There's a lot of uncertainty. How is that budget deficit going to be shrunk? And I think that will have a huge impact even though the rates themselves won't be coming down for until after 2016.
Ted Simons: But doesn't this bill basically say that's great, but we need to do something now? Isn't that what the focus of this bill is? We can't afford to wait around for the next session --
Farrell Quinlan: The problem with it, is that what it does is it takes the, it shifts the burden for paying taxes to people who have already been here who have already been suffering through this recession, a lot of them had to cut back, they have already made their investment. And they have stuck it out. And they are asked to shoulder the burden of new people coming in who are basically shopping around for the best deal. That's hard. And it's not just businesses. It's homeowners, too, who are going to be asked to shoulder this shift.
Ted Simons: The idea, some critics are saying this basically subsidizes jobs that would have been created anyway. How do you respond to that?
Barry Broome: We are 48th in job performance right now and 43rd in personal income and the University of Arizona is projecting us, which the state forecast from projecting us to be at 8% unemployment until 2014. We have looked in the last two and a half years there's not been a single investment of $5 million in the valley without a class 6 treatment. And those have been the renewable programs, the G Platt which is what cancer treatment centers of America got and Intel and the companies that are going to be getting this primarily 75% of this benefit is going to go to Arizona companies that are already here because you have companies like Honeywell and Boeing that aren't making investments in Arizona and they are making them in the south. The southern states are giving Honeywell, Boeing, and Raytheon a chance to compete globally by locating in the south. That's the largest single industry cluster in Arizona, aerospace. We do this for Intel, we did it for first solar but Boeing and Honeywell and Raytheon are not eligible for that type of benefit. Those are the capital intensive industries and by the way -- let's talk about wages. They pay $72,000 a year. Arizona is sitting on a statewide wage of about $29,000. And if you are going to bring in those kind of jobs, and move away from retail and construction, and housing, and industries that have not proved to be sustainable, you are in competition for them and you don't get to pick your competitive environment.
Ted Simons: There are requirements for median age, medium wage, I should say and all sorts of other things. Number of jobs and the number of positions and such. Why isn't that good enough?
Farrell Quinlan: Well, it may ultimately be unconstitutional. There is a pretty strong body of legal opinion that shows that treating like taxpayers differently is something the courts won't abide so we will lure all those companies in, have them make big investments and pull the rug out from underneath them? That’ll really hurt --
Barry Broome: But Intel won that case. Someone brought the uniformity clause up with Intel and they lost. Uniformity clause basically says this in the court case the state of Arizona has broad sweeping capabilities to use a tax tool to create jobs. That's what upheld Intel and by way the way Arizona used other tools like this for the last 25 years. It's more than in compliance.
Ted Simons: Good discussion, gentlemen. Thank you for joining us.
- A weekly update of legislative news with a reporter from the Arizona Capitol Times.
- Jim Small - Arizona Capitol Times
Ted Simons: A fort McDowell tribe is investigating a secret contract between the Fiesta Bowl and an associate of the tribal president. Fired Fiesta Bowl CEO John Junker could only provide sketchy details of the associate's duties and did not offer an explanation as to why the contract was secret. This is the latest in a scandal that's also touched state lawmakers who received free tickets from the bowl. Here with our weekly legislative update is Arizona Capital Times reporter Jim Small. Good to see you. What is the reaction at the capitol over this whole Fiesta Bowl thing?
Jim Small: Well, I think everyone is kind of really marveling at what was actually going on there. I think the news stories that came out yesterday when the report was released and the ones that came out today kind of expounded on it were, they really revealed everything that was allegedly going on at Fiesta Bowl. And I think a lot of people are just looking at that and going holy cow. Look at all these allegations and look at all the tentacles that are reached out and all the people that are, implicated in a bad way but that are certainly mentioned in the report. You go throughout report and it's literally it's almost like a who's who of political figures in a lot of ways.
Ted Simons: I was going to say the beneficiaries of some of the Fiesta Bowl largesse include everyone from the governor's son, who was hired as part of the investigation. We can get to that in a second. But fundraisers for then speaker Jim Wires, Tempe Council, we had fundraiser for J.D. Hayworth that was mentioned, something for John McCain that was mentioned as well, name after name. Again, these folks are saying, they had no idea all this funny business was going on.
Jim Small: I think that's probably very likely the case. You had a lot of politicians who, you know, as the course of their campaign are raising money and they are getting in checks and they wouldn't have any, wouldn't even have any position to know that the check they got from, you know, from the chief operating officer of the Fiesta Bowl was, in fact, being paid by the Fiesta Bowl. That's not something they would really have a way to even know. They just took the checks in or went to the fundraiser hosted by the Fiesta Bowl which is perfectly legal and there's nothing wrong with that. And picked up checks from that and deposited them into their campaign accounts.
Ted Simons: We had trips and tickets as well, and Senate president Russell Pearce at the time, believe in the house at the time but either way, a trip to Chicago for a football game he and his wife in '05 and '08 and a trip to Boston with he and his wife and son to see a college football game but Russell Pearce also sponsored legislation to help get the BCS title game over there. Again, a lot of names are touched. How much damage is this doing?
Jim Small: To the individual legislators, I don't think that it's doing a whole lot of damage. Things like that look bad. These lawmakers went to football games and Fiesta Bowl spent $12,000 to fly people out there, put them up in the Ritz Carlton and take them to these games. Does it kind of look bad. But it's actually perfectly legal under the state law. And really what state law says you can give high-dollar gifts. Generally they are banned. I couldn't -- you couldn't go up to senator Russell Pearce and say I want to give you tickets to a Diamondbacks game. But what you can do is say I’ve got tickets to the Diamondbacks game. I am give them to every single lawmaker, maybe them available to all 90 legislators, make the same offer so anyone who wants to show up can show up and that's kind of -- that's really the loophole and the work around here. And that's exactly what we saw with these tickets and these flights and things like that.
Ted Simons: I was going to say I kind of doubt that Steve Farley was offered too many football tickets.
Jim Small: In order for this to be legal they had to be offered to everybody. I know that the Fiesta Bowl has done this for a long time. They will do it for bowls here. The cardinals do it. They did it earlier this season. The cardinals invited every lawmaker to come and sit at a game in a Suite and there were probably two dozen lawmakers that showed up.
Ted Simons: Interesting. So, that's the key, make sure everyone gets the same offer.
Jim Small: Correct.
Ted Simons: Grant Woods does not look good in this final report. What happened to his political career? Taken a big hit here?
Jim Small: That's, you know, it could. It depends on how much of a political career, how much he really wanted to have in terms of being a candidate and things like that. Obviously, he was hired to do independent, quote-unquote, independent investigation that according to this report, shows it really wasn't that independent and was almost orchestrated to not reveal any wrongdoings. So I think in that respect it looks bad. I think it looks bad for him. It certainly looks bad for the legal counsel, Gary Husk who is one of the public affairs consultants implicated in this and by all accounts in that report it looks like he and -- Grant Woods worked on this thing together and that certainly points Grant Woods and others said it was Gary Husk who was directing how the investigation went.
Ted Simons: We don't have too much time left and I wanted to get to the budget as well. There's so much going on around the Fiesta Bowl but let's get to the budget because it sounds like things are starting to happen down there. What's going on?
Jim Small: Yeah, about three days now Republican leaders and the governor's office have been meeting almost all day every day and just late this afternoon, an agenda came out, the budget is set to be heard in the appropriations committee in the house tomorrow morning at 9:00. So we haven't seen bills, we don't know if there's a deal in place but as of right now they are planning to go ahead and get the budget ball rolling.
Ted Simons: Is this something that we could literally have something close to a done deal here in a few days or something that could be talked about, debated and then sit around for a while?
Jim Small: I think both are probably equally likely. It's entirely possible that by the end of the day tomorrow a budget is done, that these bills go through committee, they go to the floor, and they get voted on by tomorrow night. It's also equally likely that this committee doesn't even happen tomorrow. We have seen that in the past where a committee will be scheduled and say, OK, we have got the bills ready, we will put them through and then everyone shows up at 9:00 in the morning and waits, and by noon everyone is getting grumpy and by 3:00 everybody is really angry and 4:00 they say, sorry, we are not going to do this today.
Ted Simons: It indicates to a certain degree that the governor, house, Senate, that something is going on here. That --
Jim Small: Yeah. I think without a doubt they are close. I don't think there's anyone who would disagree with the fact they are very close to a deal. It's always those last couple details that tend to really, really hold things up and if they can iron those out and get everything moving there I think that we should be seeing a bunch of budget probably within the week at the latest.
Ted Simons: All right. Good stuff. Jim, thanks. Appreciate it.
Medical Marijuana Rules
- The State Department of Health Services has issued the final rules that will govern Arizona’s medical marijuana program that starts in mid-April. DHS Director Will Humble explains how the system will work.
- Will Humble - Director, State Department of Health Services
Ted Simons: Last fall Arizona voters approved a medical marijuana measure. The State Department of health services was given time to come up with rules to implement the new law. The department recently finished that work and I recently talked to health services director Will Humble about the updated rules. Will, good to see you. Thanks for joining us.
Will Humble: Hey, thanks.
Ted Simons: So this four-month rule making process is now completely over.
Will Humble: Yeah, took about 120 days. My staff really did a great job pulling together what we think is a really responsible rule package that sets the stage for a medical marijuana program as opposed to a recreational one as is the case almost every other state that has one of these medical marijuana laws.
Ted Simons: Let's get some fine-tuning here out of the way. How many public forums did you have? How many comments? How emotional did all this get?
Will Humble: We had 3,000, more than 3,000 electronic comments. On our website, we really tried to make this sort of an electronic comment period. The first rule making that I’ve ever seen done almost purely electronically in terms of the written comments. Then we had four public meetings across the state, one in flag, one in Tucson and two here in Phoenix. Those became emotional at times. But that's to be expected. In fact, most public meetings that we have are emotional in one way or another.
Ted Simons: Were these folks basically saying is there too many hoops we got to jump through?
Will Humble: That was the general theme throughout all the public meetings were the people who were prospective dispensary owners saying, hey, you are making it too hard on us. And there was also a different factions, people with money who wanted high standards to keep out the guys with no money, the guys with no money wanting a pure lottery system. So there were some interaction between people with and without means as well.
Ted Simons: The final changes looks like dispensary applications, dispensary distribution, these sorts of things talk to us about the final changes.
Will Humble: Yeah, so probably the biggest change with regard to the dispensaries is the way we allocate them initially and what would happen over time. And so we wanted to build some incentives in to make sure that the dispensaries were located in the rural parts of the state, not just the urban core. That way we would have better access for medication for people in the rural parts of the state. Recognizing that there may not be that many qualified patients in the rural parts of the state, we needed to build some extra incentives in for people to locate in place like Ajo and Wilcox and the like. And so we built a wholesale market, provision inside the rules so that let's say you have the dispensary in Ajo. You would have a very small store front dispensary and perhaps a large cultivation facility that grows far more marijuana than you need for your dispensary and then you can use that marijuana, sell it to the urban core, for example, to the dispensary in Tempe or something like that. So that was one provision. Another thing we did was allow dispensaries after three years to move anywhere. So we're migrating the dispensaries out across the state for the first three years. After three years of operation they can then move somewhere else inside the state subject to local zoning approval.
Ted Simons: But I know that the state was kind of divided into certain areas for these first three years. Does that mean that certain areas won't have any dispensaries?
Will Humble: By Arizona's very nature there's very frontier and very rural places that will most likely not ever see a dispensary within 25 miles and those will be self-growth communities. We think during this initial phase over the next three years we will have pretty darned good coverage across the state and very few areas that don't have access to marijuana. Over time, we expect to see a migration towards those areas with the higher density of qualified patients and then as new dispensary allocations come open, we will allocate those out to the rural parts of the state as a preference so we are trying to back-fill those areas of the state that actually lose dispensaries over time to the urban core.
Ted Simons: Interesting. All right. Let's get some facts here. Two and a half ounces every two weeks from dispensaries? Correct?
Will Humble: That was in the initiative. That's state law. That wasn’t in the rule but that was the maximum amount people can get every two weeks, two and a half ounces.
Ted Simons: You have, what, 12 plants you can cultivate if you are 25 miles or more away.
Will Humble: We don't have any dispensaries yet and we probably won't have any until October so between now and October, we are pretty much a self-grow state. So if you have a qualified patient card and you apply to the department after April 14th when we start accepting applications, you will have a little seal on there that allows you to cultivate up to 12 plants for your own use. You can't divert it, can’t give it away, throw parties, can't do any of that kind of stuff. It's just for your medical use. And so that privilege will go away when a dispensary moves within 25 miles of your address.
Ted Simons: Oh, OK. You mentioned April 14th, that is the start date for patient applications?
Will Humble: April 14th we are taking the applications online. No other way. Just on line the reason we are doing that is to minimize our administrative costs so that, over time, we can reduce the fees that we are charging.
Ted Simons: But I understand that there are already some prescriptions being written out for this. What is happening here?
Will Humble: There have been physicians that have been writing what they believe are certifications really since the holidays. They are charging $100, $150 to see patients and give them a sheet of paper. Those patients have been walking away with sheets of paper for weeks now that they believe are certification. The fact is we will only be accepting applications on the form that we posted up on our website yesterday that includes the series of affirmative attestations physicians need to make that they have done, say, a physical examination, they have looked at a year's worth of medical records, they have a medical record to back up the diagnosis, they have talked to the patient about the pluses and minuses of marijuana, et cetera, and then sign that form. We are trying to build a platform to ensure the physicians are really doing a full assessment of that patient's medical condition. So that over time, we can identify those physicians that act unprofessionally and write certifications for recreational use because physicians at this point are really in control of whether this becomes a recreational program over time. We want to be able to identify them quickly so that their boards can take action for the unprofessional conduct.
Ted Simons: That's the biggest concern, I take it from your end, that this becomes a recreational use?
Will Humble: From the very start we have been trying to prevent from becoming recreational and part of that reason really, honestly, from my perspective, is that when folks walked into that ballot box and connected that arrow it said medical. And it said regulated by the Department of Health Services so we are taking that seriously. That's exactly what we are trying to tie into these final rules so that we have a program that is medical.
Ted Simons: Last question. Starts the 14th but not fully operational until the end of the year. What happens in the interim?
Will Humble: Well, starting on the 14th, people can apply online for their medical marijuana cards or designated caregiver, patient can ask for a designated caregiver. We accept applications for dispensaries beginning June 1st. The cutoff date is June 30th. We will evaluate those applications throughout July. And we will be awarding the initial registration certificates for the dispensaries August 15th or thereabouts so there will be about a month or two for build out so probably this fall is when you will start to see the first dispensaries.
Ted Simons: Alright. Will, thanks so much for joining us. We appreciate it.
Will Humbe: Thanks for the opportunity.