Horizon, Host: Ted Simons

January 6, 2005


Host: Michael Grant

Affordable Housing


  • Gregg Holmes, a residential real estate developer, also president of Stardust companies, a development company, is here to talk about the regional task force on quality workforce housing.
Guests:
  • Janet Napolitano - Arizona Governor
  • Gregg Holmes - a residential real estate developer, President of Stardust companies, a development company


View Transcript
>> Michael Grant:
Tonight on "Horizon," Governor Janet Napolitano is urging an early special election on a constitutional amendment to ban gay marriage. Now that Proposition 200 is the law of the land, state agencies are working to make sure it's implemented. And more storms are expected to batter Arizona, which is already soaked. We'll talk to Governor Napolitano about those issues and more next on "Horizon." Good evening. I'm Michael Grant. Earlier this week Governor Janet Napolitano, she's going to argue with me on this point, said she would like to see a constitutional amendment to ban gay marriage go on the ballot this year instead of next. Republicans were quick to criticize the move as a political ploy. We'll talk to the governor about that and other issues appeared ask her some questions sent in by viewers on first Thursday, the governor on "Horizon." Speaking of which, here now is Governor Janet Napolitano. Okay, now, you say you just said, well, why --

>> Governor Janet Napolitano:
I asked the question.

>> Michael Grant:
Why not told an election in 2005?

>> Governor Janet Napolitano:
We do it in 2005. They are talking about special elections for lot of other areas such as state trust land reform. I oppose gay marriage. I have opposed gay marriage since I began running for marriage but it seems to me if there is going to be a special election we can go ahead and put these things on the ballot.

>> Michael Grant:
So it's not a serious proposal on your part?

>> Governor Janet Napolitano:
It's a question I'm asking the legislature.

>> Michael Grant:
It would cost three to $4 million. Does that make sense?

>> Governor Janet Napolitano:
Depends. Again, the definition of marriage is a fundamental issue for many, many Arizonans, for many of us, and it's hard to put a price tag on some of that.

>> Michael Grant:
Now, on the other hand, though, if it goes on the '06 balance ballot, the theory sit energizes the ride and the Democrats suffer the '06 election.

>> Governor Janet Napolitano:
Yes but I think people are looking at the states and what happened that had gay marriage on the ballot. It didn't bring all that many new voters or different voters than would have voted anyway. In '06, that's two years from now. There's going to be a lot of issues that Arizonans have to confront, continued education of our children, expansion of our economy, how we deal with the water and land issues all around us.

>> Michael Grant:
It's an interesting observation because there's and old saw about everybody runs last year's election and so you never get it right for next year' east election --

>> Governor Janet Napolitano:
It will be a very different election. It will be a different time.

>> Michael Grant:
Yeah, you have been steady on being against gay marriage, but a lot of people who are against gay marriage don't necessarily support a constitutional amendment to that effect.

>> Governor Janet Napolitano:
Well, in Arizona there is already a statute that precludes gay marriage. The statute has already been upheld by the courts. I don't think there's a material difference really in putting it in the constitution. That's different than the federal constitution. I think a lot of people had a problem putting something like this in the federal constitution because of the way the issue was being raised and being articulated and because we're very slow to put matters into the federal constitution. State constitution is a little bit different.

>> Michael Grant:
Do you see civil unions any differently?

>> Governor Janet Napolitano:
Hard to say. I think people ought not to react until they see the exact language and what is proposed but I don't believe anybody in Arizona ought to be discriminated against. I don't think they ought to be discriminated against economically or otherwise because of whether or not they're married or whether or not, you know, they may be in a household with older people, younger people, other people. I think we have a pattern in Arizona of nondiscrimination and I think that's what we have to fight for.

>> Michael Grant:
So bottom line is you will not be seeking a legislator to introduce a bill to have a special election in 2005?

>> Governor Janet Napolitano:
Merely asking the question.

>> Michael Grant:
David Gonzalez doesn't want to be Department of Public Safety director. That kind of came out of the blue.

>> Governor Janet Napolitano:
Yeah, it did. It's a disappointment. I've known David for a number of years. I think he got up to the point where he had to file his paper worked and said, I got a pretty good gig as U.S. marshal. I'll stay there. We'll have a national search and make sure our agency has a very high quality director.

>> Michael Grant:
Can you bridge the gap -- when is -- I am sorry, his name escaping me --

>> Governor Janet Napolitano:
Commander Garrett. Garrett leaves next week and lieutenant Dave Felix will serve as interim commander. He is a long-time veteran of the agency and I don't think we'll miss a beat and like I said, we'll now do what we have done for other agencies like the department of corrections, Department of Economic Security. We'll conduct a nationwide search.

>> Michael Grant:
State of the state address is on Monday. How much can I pry out of you in term of its text and its content in?

>> Governor Janet Napolitano:
Well, it's written. It will hit several major themes that I think we can address in Arizona and ought to address in Arizona. It will have a heavy component on education. I think we've just really begun to scratch the surface there. It will touch on our economy and the need to have higher wage jobs. We'll be looking at issues like land and water, which even though it's been raining hard these last few weeks, water remains problematic for us for the long term.

>> Michael Grant:
Speaking of which, we are staring another storm in the face that may be sort of dangerous from the standpoint that it could be a warm storm coming down on the snowfall left by the last couple of storms. Are we -- I don't think you're ever ready for that kind of thing, but are preparations for the worst under way?

>> Governor Janet Napolitano:
Yes. We will be opening our emergency operations center by tomorrow afternoon. We have pre-positioned a number of things, like sandbags and around the northern counties of the state. We're in constant contact with those northern counties. We will have National Guard troops on alert as we have had over the past few days, and we will do everything in that way possible while we wait to see whether it rains, how much and where.

>> Michael Grant:
It's ironic, I think the last time you were on we were talking about various drought issues, and now we've got these incredibly heavy storms. Did you get up to the Sedona-oak creek area?

>> Governor Janet Napolitano:
Yes.

>> Michael Grant:
How bad was it?

>> Governor Janet Napolitano:
It was amazing. I flew up there in a helicopter a week ago when we had the first wave of storms come through, and I flew oak creek, the Verde River then I hopped over and I flew the Agua Fria down into Black Canyon City. The water was really gushing through there. The thing that stuck out in my mind was you looked up at the hillsides and there literally were big water falls off the hillsides. That was the first wave. It saturated the ground. Now we've had storms since then. We've seen what happened in Flagstaff, for example. We've had a couple of fatalities, unfortunately, due to the weather and now we're preparing for this next big warm one.

>> Michael Grant:
It's too bad so much of this has fallen on the Verde watershed because the Verde lakes filled up and now we're seeing 20 to 30,000 cubic feet per second go down the Salt River when we sure could use the storage, but unfortunately they can't move it from the Verde system of the lakes to the salt system of lakes.

>> Governor Janet Napolitano:
That's something I think that we want to be taking a look at, moving forward, and the ability to siphon water off into back channels and those sorts of things but really the last couple years since I have been governor we have been dealing with the absolute drought, no rain at all so now we have almost too much but we know you have to look at this over the long term and what our water looks like over the next 20 years and even these rains do not break our drought.

>> Michael Grant:
Let me pick up a viewer question for you because we've got about two or three here and I would like to try to get to those. Our first viewer question is about Arizona's AIMS test. I teach high school English in Mesa and want to know why our sophomores who take the AIMS reading and writing tests in September must wait until September to learn whether or not they passed these critical test. Arizona's previous contract with the testing companies that scored these tests required the scores be communicated to the state within five business weeks however this was never enforced by the state Department of Education.

>> Governor Janet Napolitano:
I believe the current superintendent intends to enforce those requirements. We know the schools, teachers, students and parents need to know their scores to know what challenges they have before them. We know that over half of this year's high school juniors who have to pass the AIMS test to get a state high school diploma have not yet passed all three sections. That's why the superintendent and I have already moved $10 million to make it available for one on one tutoring for these students. If we're going to have a high stakes test we have to give the students a chance to pass.

>> Mike Grant:
Dale Vershure said he will introduce a bill to repeal the AIMS test requirement. You're not a big fan of the high stakes test --

>> Governor Janet Napolitano:
I don't like having a single high stakes test but I don't think we should be giving any false representations to high school juniors or sophomores that this is going to go away. No child left behind, the federal laws, requires some sort of test, and it doesn't have to be a high stakes test. So they're always going to have an AIMS test and the high stakes nature of it will be something I think that is maintained in law and that will be part of graduating from our high schools.

>> Michael Grant:
Tom Horne's point is if you pulled back on the AIMS test at this point in time the system would lose all credibility. You agree with that?

>> Governor Janet Napolitano:
Well, I think that the system needs to gain credibility. It's so new, and one of the things that made me favorable to moving a significant amount of money to help this year's high school juniors is that this class, in a way, because they're the first ones that have to pass, became the guinea pigs for the whole thing as the testing instrument has changed, as the methodology has changed, as the curriculum in the schools have changed to match the tests. That's why I think we need to make sure that we're doing everything week. Now, the students have to do their part. The parents have to do their part to focus on the test.

>> Michael Grant:
I think the $10 million for the tutoring was a good move but it does raise the question, are we going to start teaching to the test? Because it seems to me that that is not really what you want to do. You want to invest someone with an education, not the ability to pass a single test.

>> Governor Janet Napolitano:
The more -- yeah, I think a fundamental question is, why is it that so many students by the time they're juniors can't just pass the test as a natural outgrowth of the learning they've already had. I think that means really looking at the curriculum and how we're teaching that curriculum in our schools, and I hope that our schools are undergoing that fundamental re-examination even as we go through these first years of the AIMS test.

>> Michael Grant:
Proposition 200, the federal court, of course, allowing it to go into effect late last month. Implementation, how is it going?

>> Governor Janet Napolitano:
So far so good. We conducted a lot of training of our employees, went back and looked at what we needed to do to comply with the proposition. I issued an executive order to all the agencies that it was now the law, and it would be put into effect immediately upon the District Court's ruling, and it was. No doubt we will hear things, episodically, as we go along but as I told the cabinet when we had our first cabinet meeting of the year, prop 200 is the law, we'll enforce it.

>> Michael Grant:
Have you gotten any feedback in terms of if people actually have been -- have applied, been reported?

>> Governor Janet Napolitano:
I have not, but one of the things I added to the executive order, which was not part of Proposition 200, but I think will help us as we move along in enforcing it is an ability to go back and audit when we've made eligibility determinations and so forth to ensure that people who are receiving those welfare benefits, indeed legally entitled to them.

>> Michael Grant:
Does most of this fall on Department of Economic Security? Are they the eligibility benefit one-stop-shop?

>> Governor Janet Napolitano:
They're not quite the one stop shop, but for the things that prop 200 covers, yes, DES is the primary agency.

>> Michael Grant:
Okay. Our next viewer question is from a person who is worried about the downside of increasing property values. Is there any legislation in progress in the State of Arizona to stop property taxes from increasing for residents who do not sell-their homes?

>> Governor Janet Napolitano:
You know, again, I don't know, again, the session has not started. Remind the viewers there is no statewide property tax at all. So this is really an issue of valuation and then local taxation. But I have not heard of anything in the legislature this year.

>> Michael Grant:
There actually is a homeowner property tax rebate.

>> Governor Janet Napolitano:
There's a rebate --

>> Michael Grant:
Comes from the state.

>> Governor Janet Napolitano:
But I've heard no action on that one way or the other.

>> Michael Grant:
Let's go to the next viewer question, which actually has to do with sort of a state budget related concern. The final viewer question concerns a perennial issue in state government, worker pay. Governor, Arizona state employee salaries are 26\% below other western states and 20\% below other government employers. What do you plan to do about this major problem in an effort to retain qualified, knowledgeable state employees?

>> Governor Janet Napolitano:
I don't know about those percentage things but I do know that state employees are not paid enough. So as we've gone through the budget, we have looked for ways to enhance compensation. I don't want to say anything more because the budget itself will be released on Friday but one of the things that happens when you fall so out of kilter, even with other public employers, is that you lose your highly experienced, highly qualified employees, particularly in specialty areas. We just can't go out on the street and fine somebody. And we end up being penny wise and pound-foolish. So I think the issue of compensation, fair compensation, for our employees needs to be on the table this year, and it will be.

>> Michael Grant:
Several years ago there was an effort not necessarily to target the broader base of all state employees, but, in fact, to target, I think, the people that you are referring to try to get some of the mid-level professionals, specialty employees, those kinds of things, on a better or sounder footing in comparison with what they could earn elsewhere. Does that subject need to be revisited in addition to perhaps pulling up the entire -- pulling up the entire base for the state employees?

>> Governor Janet Napolitano:
I think so. I think in certain areas the state government we've got pay issues that actually affect public safety and so forth, and so as I make my proposals to the legislature and realize that I don't have a magic wand and we don't have an infinite amount of money, we have to make sure that we're being intelligent and smart about where we're investing, and there needs to be discussion about state employee pay in certain areas.

>> Michael Grant:
You going to present a balanced budget? State legislative leaders say it's time to balance the budget and stop borrowing money.

>> Governor Janet Napolitano:
I don't know what they mean by that. I've always given them a balanced budget. We have not raised taxes and I will duty same on Friday. We will balance the budget, not raise tax but we will continue to invest some things that in the long term that I think will pay off for Arizona.

>> Michael Grant:
Let me cycle back to something we discussed in November because it's now a closer subject. Obviously there's been a pretty good sea change in both houses of the legislature. I know you are optimistic, confident, perhaps even whistling past the graveyard, but this is going to be a more difficult session for you, is it not?

>> Governor Janet Napolitano:
Well, I think going in there's that anticipation. On the other hand, I've had good meetings with President Bennett and Speaker Weirs over the interim of the election and now. I've said I will work closely with them. Arizonans have created a divided government between the governor and the legislature, but they've also sent us here to get our work done and get it done as well as we can, and it means that both sides are going to have to compromise and come to a reasonable middle and we're going to have to keep moving the state forward.

>> Michael Grant:
Have the discussions literally been on that level? Have legislative leaders communicated to you at all any of the their priorities that they would like to move forward on and enlist your aid on?

>> Governor Janet Napolitano:
Yes, we've had some good discussions. I think we all agree that water needs to be looked at by the legislature. State trust land reform is probably ripe for legislative exploration this year. Some of those things. But, of course, the major work of the legislature, and the thing that really wraps up the priorities of the state, is wrapped up in the budget negotiations themselves.

>> Michael Grant:
All right. State of the state address on Monday. Governor Janet Napolitano, we appreciate it.

>> Governor Janet Napolitano:
Thank you very much.

>> Michael Grant: Good luck.

>>> Michael Grant:
It's a tale of two housing markets, the housing market in the Valley and the state continues to boom, with new records set almost every year. Yet at the same time, housing affordable to those in the workforce, such as teachers, firefighters and law enforcement, is on the decline. Last year Governor Napolitano convened a summit on workforce housing. And the result was the creation of a regional task force on quality workforce housing. We'll talk to the leader of that task force, but first here's a quick look at how well the housing market is doing in our state.

>> Mike Sauceda:
In 2003, Arizona had 65,649 single-family building permits issued another record. In Maricopa County, just over 41,000 single-family housing permits were issued in 2003. That will be even higher in the Valley in 2004.

>> Elliott Pollack:
Single-family market is just explosive. Last year was a record and so far this year we're 29\% ahead of that in terms of new sales and 25\% ahead of that in terms of resells. This is obviously because of low interest rates that affect affordability, higher incomes, favorable demographics, both war baby boom generation looking for second homes and investor buying, essentially speculative buying that's pushing the market to record levels of demand.

>> Reporter Mike Sauceda:
One of the big factors in the booming housing market is a low interest rate. But when it comes to interest rates, what comes down must go up.

>> Elliott Pollack:
Do I anticipate long term rates going up? I'll tell you one quick story. There are only two types of economist, those that can't forecast interest rates and those that don't know they can't forecast interest rates and I actually belong to both those groups. So I can't tell you. But based on Anthony and Lee's forecasts, you would not expect long term rates to have substantial pressure over the next year. So the housing market still should be very good.

>> Michael Grant:
Here now to talk about the regional task force on quality workforce housing is Greg Holmes, a residential real estate developer, also president of Stardust companies, a development company. Gregg, it's good to see you again.

>> Gregg Holmes:
Good to be here.

>> Michael Grant:
What's the problem? It's a booming housing market.

>> Gregg Holmes:
I think we've had a significant number of starts, record setting number of starts. But what I don't think is on the radar screen is there is a significant declining percent of the population now able to afford the median priced home in the market. That has a ripple effect in terms of the economic implication. When people are commuting excessively, they're paying a lot more for fuel, their quality of life is distracted as a result of the productivity being down, and profitability in the workplace is decreased. The concern I have is the fact that teachers, as you mentioned in your opening statement, firefighters, bank tellers, people at that level are working very hard, but they simply don't have the capacity to live and work in the same community. We need to look at the barriers to affordability and availability of workforce housing in this marketplace and address them.

>> Michael Grant:
You know, what's a little frightening about this issue is we're talking about this issue at a time when interest rates remain at an all-time low. So it's -- it's not the cost of mortgage money that's --

>> Gregg Holmes:
No, it's not. When you think about it, in this marketplace n Maricopa County, the average -- 71\% of the jobs pay $36,000 a year. To qualify for the median priced resale home, you need to be making $49,000 a year. It's going to get worse when those interest rates go up.

>> Michael Grant:
Why doesn't the private market address that? I mean, you just identified a market segment that has money to spend. I mean, they may not have a lot of money to spend but they have some money to spend. Why doesn't the private market move in and fill that need?

>> Gregg Holmes:
Well, I think that's what this task force is going to help to address. It's going to look at all those barriers. It's going to be looking at things like design requirements and entitlement process and looking at how well we're utilizing the financial resources that are available from a state and federal level. Looking at how we utilize land. This is not one where we're pointing a finger at any particular entity. This is getting public and private sector leaders together and saying, we've got a crisis that's emerging. Let's get in and address it before it becomes a full-blown problem.

>> Michael Grant:
Now, what are the key barriers? What's --

>> Gregg Holmes:
I think they fall into categories like policy, the process that's used to build a home. In some cases design issues. The entitlement process. How well we're utilizing financial resources. In some cases, as you and I were talking earlier, it's the perception that keeps our communities from wanting and allowing workforce housing to be in their community.

>> Michael Grant:
Well, in fact, in -- you're using the term workforce housing, and I read some materials on this yesterday, and what immediately struck me was the term affordable housing was not being used because I think it has negative implications.

>> Gregg Holmes:
It's kind of got this connotation of government subsidized slums. The reality is when you're talking about a hard working teacher, a firefighter, a bank teller, a pharmaceutical technician, those people work very hard. They deserve the right to live and work in the same community. And economically there's a financial benefit to all of us for us to have a greater availability of workforce housing in the Valley. When I think about our economic development strategy in this marketplace, which is to grow high-wage jobs, one of the key ingredients to companies who are looking at this market is what is your quality of life? And when the anchor of that quality of life centers around the quality of the housing infrastructure, and we don't have it, they're going to play in a sandbox somewhere else. That has a real economic impact on us.

>> Michael Grant:
You mentioned policy. How much of the problem is driven, for example, by building fees, permit fees, impact fees, government fees?

>> Gregg Holmes:
They're all part of the equation. I think it's unfair to categorize them as the issue. It's just simply a part of the package of barriers.

>> Michael Grant:
But that's an element.

>> Gregg Holmes:
Sure, it is. I think it is. It's not unfair to the city to expect that they should realize income from the housing industry, but we simply need to look at what are the barriers that are preventing a home builder from building an affordable product in a given market so it's available across the Valley.

>> Michael Grant:
Gregg, the other aspect of that is, to the extent that new development puts a new load on government, you also don't want to cost-shift necessarily to established residents to ask them to pick up -- they should pick up, I suppose, a portion of that load, but not a disproportionate portion of that load, and that's one of the justifications used to rationalize impact fees.

>> Gregg Holmes:
Yeah. This is not an issue about trying to redistribute wealth. This is an issue about really trying to provide a greater diversity in our housing stock so that people at all ends -- that are making between 20 and $42,000 a year can live and work in the same community and we can sustain it such that our neighborhoods are stronger and allow for a Bert quality of life.

>> Michael Grant:
Do we have to go to higher density?

>> Gregg Holmes:
We could, but we don't have to be Manhattan. We don't have to go straight up. But we could use a few more homes to the acre and not depress or negatively affect the quality of the environment that we live in. This is a great community. We need to keep it that way. We need to focus on it by providing good quality workforce housing for the entire Valley and really looking into the future and avoiding a crisis that I think is emerging quickly.

>> Michael Grant:
Okay. Greg Holmes, thank you very much for joining us this evening.

>> Gregg Holmes:
My pleasure.

>> Michael Grant:
You can check out a transcript of tonight's show or see what's coming up on "Horizon" at hour web site. You will find that at www.azpbs.org when you get to the homepage scroll down and click on the word "Horizon".

>>Mike Sauceda:
Every year on "Horizon" three local journalists gather with host Michael Grant to make their predictions for big news events for the upcoming year and review their hits and misses on predictions they made for the year just ended. It's a fun-filled, yet informational half-hour as the journalists make predictions on politics, people and even temperatures. That's Friday at 7:00 on "Horizon."

>>> Michael Grant:
They tipped the results. It was a tie. Hope you can join us tomorrow for the Friday edition of "Horizon." Thank you very much for joining us on this Thursday evening. I'm Michael Grant. Have a great one. Good night.

First Thursday: The Governor on HORIZON


  • Governor Janet Napolitano is urging an early special election on a constitutional amendment to ban gay marriage. Now that Proposition 200 is the law of the land, state agencies are working to make sure it's implemented. And more storms are expected to batter Arizona, which is already soaked. We'll talk to Governor Napolitano about those issues.
Guests:
  • Janet Napolitano - Arizona Governor
  • Gregg Holmes - a residential real estate developer, President of Stardust companies, a development company


View Transcript
>> Michael Grant:
Tonight on "Horizon," Governor Janet Napolitano is urging an early special election on a constitutional amendment to ban gay marriage. Now that Proposition 200 is the law of the land, state agencies are working to make sure it's implemented. And more storms are expected to batter Arizona, which is already soaked. We'll talk to Governor Napolitano about those issues and more next on "Horizon." Good evening. I'm Michael Grant. Earlier this week Governor Janet Napolitano, she's going to argue with me on this point, said she would like to see a constitutional amendment to ban gay marriage go on the ballot this year instead of next. Republicans were quick to criticize the move as a political ploy. We'll talk to the governor about that and other issues appeared ask her some questions sent in by viewers on first Thursday, the governor on "Horizon." Speaking of which, here now is Governor Janet Napolitano. Okay, now, you say you just said, well, why --

>> Governor Janet Napolitano:
I asked the question.

>> Michael Grant:
Why not told an election in 2005?

>> Governor Janet Napolitano:
We do it in 2005. They are talking about special elections for lot of other areas such as state trust land reform. I oppose gay marriage. I have opposed gay marriage since I began running for marriage but it seems to me if there is going to be a special election we can go ahead and put these things on the ballot.

>> Michael Grant:
So it's not a serious proposal on your part?

>> Governor Janet Napolitano:
It's a question I'm asking the legislature.

>> Michael Grant:
It would cost three to $4 million. Does that make sense?

>> Governor Janet Napolitano:
Depends. Again, the definition of marriage is a fundamental issue for many, many Arizonans, for many of us, and it's hard to put a price tag on some of that.

>> Michael Grant:
Now, on the other hand, though, if it goes on the '06 balance ballot, the theory sit energizes the ride and the Democrats suffer the '06 election.

>> Governor Janet Napolitano:
Yes but I think people are looking at the states and what happened that had gay marriage on the ballot. It didn't bring all that many new voters or different voters than would have voted anyway. In '06, that's two years from now. There's going to be a lot of issues that Arizonans have to confront, continued education of our children, expansion of our economy, how we deal with the water and land issues all around us.

>> Michael Grant:
It's an interesting observation because there's and old saw about everybody runs last year's election and so you never get it right for next year' east election --

>> Governor Janet Napolitano:
It will be a very different election. It will be a different time.

>> Michael Grant:
Yeah, you have been steady on being against gay marriage, but a lot of people who are against gay marriage don't necessarily support a constitutional amendment to that effect.

>> Governor Janet Napolitano:
Well, in Arizona there is already a statute that precludes gay marriage. The statute has already been upheld by the courts. I don't think there's a material difference really in putting it in the constitution. That's different than the federal constitution. I think a lot of people had a problem putting something like this in the federal constitution because of the way the issue was being raised and being articulated and because we're very slow to put matters into the federal constitution. State constitution is a little bit different.

>> Michael Grant:
Do you see civil unions any differently?

>> Governor Janet Napolitano:
Hard to say. I think people ought not to react until they see the exact language and what is proposed but I don't believe anybody in Arizona ought to be discriminated against. I don't think they ought to be discriminated against economically or otherwise because of whether or not they're married or whether or not, you know, they may be in a household with older people, younger people, other people. I think we have a pattern in Arizona of nondiscrimination and I think that's what we have to fight for.

>> Michael Grant:
So bottom line is you will not be seeking a legislator to introduce a bill to have a special election in 2005?

>> Governor Janet Napolitano:
Merely asking the question.

>> Michael Grant:
David Gonzalez doesn't want to be Department of Public Safety director. That kind of came out of the blue.

>> Governor Janet Napolitano:
Yeah, it did. It's a disappointment. I've known David for a number of years. I think he got up to the point where he had to file his paper worked and said, I got a pretty good gig as U.S. marshal. I'll stay there. We'll have a national search and make sure our agency has a very high quality director.

>> Michael Grant:
Can you bridge the gap -- when is -- I am sorry, his name escaping me --

>> Governor Janet Napolitano:
Commander Garrett. Garrett leaves next week and lieutenant Dave Felix will serve as interim commander. He is a long-time veteran of the agency and I don't think we'll miss a beat and like I said, we'll now do what we have done for other agencies like the department of corrections, Department of Economic Security. We'll conduct a nationwide search.

>> Michael Grant:
State of the state address is on Monday. How much can I pry out of you in term of its text and its content in?

>> Governor Janet Napolitano:
Well, it's written. It will hit several major themes that I think we can address in Arizona and ought to address in Arizona. It will have a heavy component on education. I think we've just really begun to scratch the surface there. It will touch on our economy and the need to have higher wage jobs. We'll be looking at issues like land and water, which even though it's been raining hard these last few weeks, water remains problematic for us for the long term.

>> Michael Grant:
Speaking of which, we are staring another storm in the face that may be sort of dangerous from the standpoint that it could be a warm storm coming down on the snowfall left by the last couple of storms. Are we -- I don't think you're ever ready for that kind of thing, but are preparations for the worst under way?

>> Governor Janet Napolitano:
Yes. We will be opening our emergency operations center by tomorrow afternoon. We have pre-positioned a number of things, like sandbags and around the northern counties of the state. We're in constant contact with those northern counties. We will have National Guard troops on alert as we have had over the past few days, and we will do everything in that way possible while we wait to see whether it rains, how much and where.

>> Michael Grant:
It's ironic, I think the last time you were on we were talking about various drought issues, and now we've got these incredibly heavy storms. Did you get up to the Sedona-oak creek area?

>> Governor Janet Napolitano:
Yes.

>> Michael Grant:
How bad was it?

>> Governor Janet Napolitano:
It was amazing. I flew up there in a helicopter a week ago when we had the first wave of storms come through, and I flew oak creek, the Verde River then I hopped over and I flew the Agua Fria down into Black Canyon City. The water was really gushing through there. The thing that stuck out in my mind was you looked up at the hillsides and there literally were big water falls off the hillsides. That was the first wave. It saturated the ground. Now we've had storms since then. We've seen what happened in Flagstaff, for example. We've had a couple of fatalities, unfortunately, due to the weather and now we're preparing for this next big warm one.

>> Michael Grant:
It's too bad so much of this has fallen on the Verde watershed because the Verde lakes filled up and now we're seeing 20 to 30,000 cubic feet per second go down the Salt River when we sure could use the storage, but unfortunately they can't move it from the Verde system of the lakes to the salt system of lakes.

>> Governor Janet Napolitano:
That's something I think that we want to be taking a look at, moving forward, and the ability to siphon water off into back channels and those sorts of things but really the last couple years since I have been governor we have been dealing with the absolute drought, no rain at all so now we have almost too much but we know you have to look at this over the long term and what our water looks like over the next 20 years and even these rains do not break our drought.

>> Michael Grant:
Let me pick up a viewer question for you because we've got about two or three here and I would like to try to get to those. Our first viewer question is about Arizona's AIMS test. I teach high school English in Mesa and want to know why our sophomores who take the AIMS reading and writing tests in September must wait until September to learn whether or not they passed these critical test. Arizona's previous contract with the testing companies that scored these tests required the scores be communicated to the state within five business weeks however this was never enforced by the state Department of Education.

>> Governor Janet Napolitano:
I believe the current superintendent intends to enforce those requirements. We know the schools, teachers, students and parents need to know their scores to know what challenges they have before them. We know that over half of this year's high school juniors who have to pass the AIMS test to get a state high school diploma have not yet passed all three sections. That's why the superintendent and I have already moved $10 million to make it available for one on one tutoring for these students. If we're going to have a high stakes test we have to give the students a chance to pass.

>> Mike Grant:
Dale Vershure said he will introduce a bill to repeal the AIMS test requirement. You're not a big fan of the high stakes test --

>> Governor Janet Napolitano:
I don't like having a single high stakes test but I don't think we should be giving any false representations to high school juniors or sophomores that this is going to go away. No child left behind, the federal laws, requires some sort of test, and it doesn't have to be a high stakes test. So they're always going to have an AIMS test and the high stakes nature of it will be something I think that is maintained in law and that will be part of graduating from our high schools.

>> Michael Grant:
Tom Horne's point is if you pulled back on the AIMS test at this point in time the system would lose all credibility. You agree with that?

>> Governor Janet Napolitano:
Well, I think that the system needs to gain credibility. It's so new, and one of the things that made me favorable to moving a significant amount of money to help this year's high school juniors is that this class, in a way, because they're the first ones that have to pass, became the guinea pigs for the whole thing as the testing instrument has changed, as the methodology has changed, as the curriculum in the schools have changed to match the tests. That's why I think we need to make sure that we're doing everything week. Now, the students have to do their part. The parents have to do their part to focus on the test.

>> Michael Grant:
I think the $10 million for the tutoring was a good move but it does raise the question, are we going to start teaching to the test? Because it seems to me that that is not really what you want to do. You want to invest someone with an education, not the ability to pass a single test.

>> Governor Janet Napolitano:
The more -- yeah, I think a fundamental question is, why is it that so many students by the time they're juniors can't just pass the test as a natural outgrowth of the learning they've already had. I think that means really looking at the curriculum and how we're teaching that curriculum in our schools, and I hope that our schools are undergoing that fundamental re-examination even as we go through these first years of the AIMS test.

>> Michael Grant:
Proposition 200, the federal court, of course, allowing it to go into effect late last month. Implementation, how is it going?

>> Governor Janet Napolitano:
So far so good. We conducted a lot of training of our employees, went back and looked at what we needed to do to comply with the proposition. I issued an executive order to all the agencies that it was now the law, and it would be put into effect immediately upon the District Court's ruling, and it was. No doubt we will hear things, episodically, as we go along but as I told the cabinet when we had our first cabinet meeting of the year, prop 200 is the law, we'll enforce it.

>> Michael Grant:
Have you gotten any feedback in terms of if people actually have been -- have applied, been reported?

>> Governor Janet Napolitano:
I have not, but one of the things I added to the executive order, which was not part of Proposition 200, but I think will help us as we move along in enforcing it is an ability to go back and audit when we've made eligibility determinations and so forth to ensure that people who are receiving those welfare benefits, indeed legally entitled to them.

>> Michael Grant:
Does most of this fall on Department of Economic Security? Are they the eligibility benefit one-stop-shop?

>> Governor Janet Napolitano:
They're not quite the one stop shop, but for the things that prop 200 covers, yes, DES is the primary agency.

>> Michael Grant:
Okay. Our next viewer question is from a person who is worried about the downside of increasing property values. Is there any legislation in progress in the State of Arizona to stop property taxes from increasing for residents who do not sell-their homes?

>> Governor Janet Napolitano:
You know, again, I don't know, again, the session has not started. Remind the viewers there is no statewide property tax at all. So this is really an issue of valuation and then local taxation. But I have not heard of anything in the legislature this year.

>> Michael Grant:
There actually is a homeowner property tax rebate.

>> Governor Janet Napolitano:
There's a rebate --

>> Michael Grant:
Comes from the state.

>> Governor Janet Napolitano:
But I've heard no action on that one way or the other.

>> Michael Grant:
Let's go to the next viewer question, which actually has to do with sort of a state budget related concern. The final viewer question concerns a perennial issue in state government, worker pay. Governor, Arizona state employee salaries are 26\% below other western states and 20\% below other government employers. What do you plan to do about this major problem in an effort to retain qualified, knowledgeable state employees?

>> Governor Janet Napolitano:
I don't know about those percentage things but I do know that state employees are not paid enough. So as we've gone through the budget, we have looked for ways to enhance compensation. I don't want to say anything more because the budget itself will be released on Friday but one of the things that happens when you fall so out of kilter, even with other public employers, is that you lose your highly experienced, highly qualified employees, particularly in specialty areas. We just can't go out on the street and fine somebody. And we end up being penny wise and pound-foolish. So I think the issue of compensation, fair compensation, for our employees needs to be on the table this year, and it will be.

>> Michael Grant:
Several years ago there was an effort not necessarily to target the broader base of all state employees, but, in fact, to target, I think, the people that you are referring to try to get some of the mid-level professionals, specialty employees, those kinds of things, on a better or sounder footing in comparison with what they could earn elsewhere. Does that subject need to be revisited in addition to perhaps pulling up the entire -- pulling up the entire base for the state employees?

>> Governor Janet Napolitano:
I think so. I think in certain areas the state government we've got pay issues that actually affect public safety and so forth, and so as I make my proposals to the legislature and realize that I don't have a magic wand and we don't have an infinite amount of money, we have to make sure that we're being intelligent and smart about where we're investing, and there needs to be discussion about state employee pay in certain areas.

>> Michael Grant:
You going to present a balanced budget? State legislative leaders say it's time to balance the budget and stop borrowing money.

>> Governor Janet Napolitano:
I don't know what they mean by that. I've always given them a balanced budget. We have not raised taxes and I will duty same on Friday. We will balance the budget, not raise tax but we will continue to invest some things that in the long term that I think will pay off for Arizona.

>> Michael Grant:
Let me cycle back to something we discussed in November because it's now a closer subject. Obviously there's been a pretty good sea change in both houses of the legislature. I know you are optimistic, confident, perhaps even whistling past the graveyard, but this is going to be a more difficult session for you, is it not?

>> Governor Janet Napolitano:
Well, I think going in there's that anticipation. On the other hand, I've had good meetings with President Bennett and Speaker Weirs over the interim of the election and now. I've said I will work closely with them. Arizonans have created a divided government between the governor and the legislature, but they've also sent us here to get our work done and get it done as well as we can, and it means that both sides are going to have to compromise and come to a reasonable middle and we're going to have to keep moving the state forward.

>> Michael Grant:
Have the discussions literally been on that level? Have legislative leaders communicated to you at all any of the their priorities that they would like to move forward on and enlist your aid on?

>> Governor Janet Napolitano:
Yes, we've had some good discussions. I think we all agree that water needs to be looked at by the legislature. State trust land reform is probably ripe for legislative exploration this year. Some of those things. But, of course, the major work of the legislature, and the thing that really wraps up the priorities of the state, is wrapped up in the budget negotiations themselves.

>> Michael Grant:
All right. State of the state address on Monday. Governor Janet Napolitano, we appreciate it.

>> Governor Janet Napolitano:
Thank you very much.

>> Michael Grant: Good luck.

>>> Michael Grant:
It's a tale of two housing markets, the housing market in the Valley and the state continues to boom, with new records set almost every year. Yet at the same time, housing affordable to those in the workforce, such as teachers, firefighters and law enforcement, is on the decline. Last year Governor Napolitano convened a summit on workforce housing. And the result was the creation of a regional task force on quality workforce housing. We'll talk to the leader of that task force, but first here's a quick look at how well the housing market is doing in our state.

>> Mike Sauceda:
In 2003, Arizona had 65,649 single-family building permits issued another record. In Maricopa County, just over 41,000 single-family housing permits were issued in 2003. That will be even higher in the Valley in 2004.

>> Elliott Pollack:
Single-family market is just explosive. Last year was a record and so far this year we're 29\% ahead of that in terms of new sales and 25\% ahead of that in terms of resells. This is obviously because of low interest rates that affect affordability, higher incomes, favorable demographics, both war baby boom generation looking for second homes and investor buying, essentially speculative buying that's pushing the market to record levels of demand.

>> Reporter Mike Sauceda:
One of the big factors in the booming housing market is a low interest rate. But when it comes to interest rates, what comes down must go up.

>> Elliott Pollack:
Do I anticipate long term rates going up? I'll tell you one quick story. There are only two types of economist, those that can't forecast interest rates and those that don't know they can't forecast interest rates and I actually belong to both those groups. So I can't tell you. But based on Anthony and Lee's forecasts, you would not expect long term rates to have substantial pressure over the next year. So the housing market still should be very good.

>> Michael Grant:
Here now to talk about the regional task force on quality workforce housing is Greg Holmes, a residential real estate developer, also president of Stardust companies, a development company. Gregg, it's good to see you again.

>> Gregg Holmes:
Good to be here.

>> Michael Grant:
What's the problem? It's a booming housing market.

>> Gregg Holmes:
I think we've had a significant number of starts, record setting number of starts. But what I don't think is on the radar screen is there is a significant declining percent of the population now able to afford the median priced home in the market. That has a ripple effect in terms of the economic implication. When people are commuting excessively, they're paying a lot more for fuel, their quality of life is distracted as a result of the productivity being down, and profitability in the workplace is decreased. The concern I have is the fact that teachers, as you mentioned in your opening statement, firefighters, bank tellers, people at that level are working very hard, but they simply don't have the capacity to live and work in the same community. We need to look at the barriers to affordability and availability of workforce housing in this marketplace and address them.

>> Michael Grant:
You know, what's a little frightening about this issue is we're talking about this issue at a time when interest rates remain at an all-time low. So it's -- it's not the cost of mortgage money that's --

>> Gregg Holmes:
No, it's not. When you think about it, in this marketplace n Maricopa County, the average -- 71\% of the jobs pay $36,000 a year. To qualify for the median priced resale home, you need to be making $49,000 a year. It's going to get worse when those interest rates go up.

>> Michael Grant:
Why doesn't the private market address that? I mean, you just identified a market segment that has money to spend. I mean, they may not have a lot of money to spend but they have some money to spend. Why doesn't the private market move in and fill that need?

>> Gregg Holmes:
Well, I think that's what this task force is going to help to address. It's going to look at all those barriers. It's going to be looking at things like design requirements and entitlement process and looking at how well we're utilizing the financial resources that are available from a state and federal level. Looking at how we utilize land. This is not one where we're pointing a finger at any particular entity. This is getting public and private sector leaders together and saying, we've got a crisis that's emerging. Let's get in and address it before it becomes a full-blown problem.

>> Michael Grant:
Now, what are the key barriers? What's --

>> Gregg Holmes:
I think they fall into categories like policy, the process that's used to build a home. In some cases design issues. The entitlement process. How well we're utilizing financial resources. In some cases, as you and I were talking earlier, it's the perception that keeps our communities from wanting and allowing workforce housing to be in their community.

>> Michael Grant:
Well, in fact, in -- you're using the term workforce housing, and I read some materials on this yesterday, and what immediately struck me was the term affordable housing was not being used because I think it has negative implications.

>> Gregg Holmes:
It's kind of got this connotation of government subsidized slums. The reality is when you're talking about a hard working teacher, a firefighter, a bank teller, a pharmaceutical technician, those people work very hard. They deserve the right to live and work in the same community. And economically there's a financial benefit to all of us for us to have a greater availability of workforce housing in the Valley. When I think about our economic development strategy in this marketplace, which is to grow high-wage jobs, one of the key ingredients to companies who are looking at this market is what is your quality of life? And when the anchor of that quality of life centers around the quality of the housing infrastructure, and we don't have it, they're going to play in a sandbox somewhere else. That has a real economic impact on us.

>> Michael Grant:
You mentioned policy. How much of the problem is driven, for example, by building fees, permit fees, impact fees, government fees?

>> Gregg Holmes:
They're all part of the equation. I think it's unfair to categorize them as the issue. It's just simply a part of the package of barriers.

>> Michael Grant:
But that's an element.

>> Gregg Holmes:
Sure, it is. I think it is. It's not unfair to the city to expect that they should realize income from the housing industry, but we simply need to look at what are the barriers that are preventing a home builder from building an affordable product in a given market so it's available across the Valley.

>> Michael Grant:
Gregg, the other aspect of that is, to the extent that new development puts a new load on government, you also don't want to cost-shift necessarily to established residents to ask them to pick up -- they should pick up, I suppose, a portion of that load, but not a disproportionate portion of that load, and that's one of the justifications used to rationalize impact fees.

>> Gregg Holmes:
Yeah. This is not an issue about trying to redistribute wealth. This is an issue about really trying to provide a greater diversity in our housing stock so that people at all ends -- that are making between 20 and $42,000 a year can live and work in the same community and we can sustain it such that our neighborhoods are stronger and allow for a Bert quality of life.

>> Michael Grant:
Do we have to go to higher density?

>> Gregg Holmes:
We could, but we don't have to be Manhattan. We don't have to go straight up. But we could use a few more homes to the acre and not depress or negatively affect the quality of the environment that we live in. This is a great community. We need to keep it that way. We need to focus on it by providing good quality workforce housing for the entire Valley and really looking into the future and avoiding a crisis that I think is emerging quickly.

>> Michael Grant:
Okay. Greg Holmes, thank you very much for joining us this evening.

>> Gregg Holmes:
My pleasure.

>> Michael Grant:
You can check out a transcript of tonight's show or see what's coming up on "Horizon" at hour web site. You will find that at www.azpbs.org when you get to the homepage scroll down and click on the word "Horizon".

>>Mike Sauceda:
Every year on "Horizon" three local journalists gather with host Michael Grant to make their predictions for big news events for the upcoming year and review their hits and misses on predictions they made for the year just ended. It's a fun-filled, yet informational half-hour as the journalists make predictions on politics, people and even temperatures. That's Friday at 7:00 on "Horizon."

>>> Michael Grant:
They tipped the results. It was a tie. Hope you can join us tomorrow for the Friday edition of "Horizon." Thank you very much for joining us on this Thursday evening. I'm Michael Grant. Have a great one. Good night.

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