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February 26, 2013

Host: Ted Simons

Focus on Sustainability: Compressed Natural Gas Garbage Trucks

  |   Video
  • The city of Phoenix has unveiled its new compressed natural gas (CNG) solid waste trucks, which collect trash and recyclables for nearly 400,000 Phoenix households. Currently, the Public Works Department operates six CNG solid waste trucks and within two months, 20 percent of its fleet of solid waste trucks will be CNG vehicles. John Trujillo, Acting Director of the Phoenix Public Works Department, will tell us more about the CNG trucks.
  • John Trujillo - Acting Director, Phoenix Public Works Department
Category: Energy   |   Keywords: sustainability, compressed, natural, gas, garbage trucks, ,

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Ted Simons: Our focus tonight on sustainability issues looks at how the city of Phoenix is looking to run its fleet of garbage trucks on natural gas. Here to tell bus it is John Trujillo, acting director of the Phoenix public works department. Thanks for joining us.

John Trujillo: Thank you.

Ted Simons: let's start with defining terms. What is CNG fuel?

John Trujillo: There's different types of fuel. This is a compressed natural gas that we you -- that we use to fuel our current garbage trucks now, which is currently six.

Ted Simons: Are garbage trucks the only city vehicles with this, or are there other city vehicles?

John Trujillo: There's others that are utilizing compressed natural gas, but it's mostly smaller equipment. Smaller vehicles. Cars, trucks, that sort of thing. This is more of a heavier equipment that really we haven't done before to this extent. We have practiced and done some, which is we used LNG, now we have tried CNG. We fell the CNG fuel is the best way to go.

Ted Simons: Can power a big, old garbage truck and those arms that go up and down.

John Trujillo: yes, it can.

Ted Simons: Let's look at a garbage truck being fueled. It just looks like the same old thing as when you go to a gas station.

John Trujillo: you wouldn't notice the difference, but the drive gets out, gets a hose, when he gets back from his route he plugs it in and it starts fueling while he's off site. So it's an overnight process.

Ted Simons: Okay. It takes a while then.

John Trujillo: yes. About a six to ten hour process.

Ted Simons: those gauges basically show how much is being compressed, when you hit a certain spot, knock it off?

John Trujillo: It stops automatically. When they come to work in the morning they pull it off and go on their routes.

Ted Simons: were these diesel vehicles before?

John Trujillo: No, we're not retrofitting the equipment. As the older equipment goes away we bring in newer equipment for compressed natural gas technology.

Ted Simons: I was wondering what it cost to replace, the cost from what it was to what it is.

John Trujillo: it is a higher cost to purchase CNG garbage trucks versus the regular diesel trucks, however the cost of fuel compared between diesel and CNG, there's a big gap between the two. CNG currently is approximately $1.50 per gallon versus 3.50 for diesel.

Ted Simons: Interesting, I heard CNG described as an economically stable fuel.

John Trujillo: yes, it is. There's others too. Back in 2000, CNG and diesel were equal in cost, but between 2000 and now there's been a big spike in diesel and CNG has not spiked as much, so it's more stable fuel, easier to budget for compared to diesel.

Ted Simons: do we know why it has not spiked?

John Trujillo: I think because it's produced here domestically. It's not dependent on oil prices, on a global level, and this is based on natural gas prices on our local national level.

Ted Simons: we have seen the state dabble, better or worse at times, in compressed natural gas, trying to promote that particular operation, but when it comes to the city and garbage trucks, are there concerns with that kind of heavy machine rip on natural gas?

John Trujillo: No. We have been testing alternative fuels since 1994. So we have done CNG in the past, it hasn’t worked well. The technology wasn't quite there yet. We tried liquefied natural gas and it didn't quite work. Now the technology has caught up. We have been testing CNG in our garbage trucks the last year and it's worked very well to this point.

Ted Simons: are there plans to switch more city vehicles to CNG?

John Trujillo: Yes, there are. We will by the ends of this year have 20% of our garbage trucks with compressed natural gas, and by 2015, 50% of our garbage trucks will be fueled by compressed natural gas, which we feel will be the largest municipal garbage trucks that will be fueled by compressed natural gas in the nation.

Ted Simons: was this mottled after other cities? Why was the push for CNG at this particular time?

John Trujillo: We have been doing this and other cities are using liquefied natural gas. A lot of them are going to compressed natural gas because it's more stable, more readily available. We have the infrastructure in place to do this now.

Ted Simons: it's a little quieter.

John Trujillo: It is a lot quieter. As you realize a lot of our residents put out garbage based on the sound of a garbage truck, so they have to be on their toes because it's a lot quieter.

Ted Simons: those arms still make a lot of noise.

John Trujillo: they do. They do.

Ted Simons: Alright so we will hear it come rumbling down the alley. Congratulations. Sounds like -- more ahead, correct?

John Trujillo: That's correct this is a ramped up process. Hopefully within by 2016, 2017 we could have 90% of our garbage trucks fueled by compressed natural gas.

Ted Simons: Thanks you for joining us. We appreciate it.

Impact of Tax Cuts on the Economy

  |   Video
  • A study recently released by the non-partisan Grand Canyon Institute reveals that two decades of tax cuts in Arizona have not spurred economic growth. David Wells of the institute will tell us more about the report.
  • David Wells - Grand Canyon Institute
Category: Business/Economy   |   Keywords: business, economy, taxes, tax cuts, ,

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Ted Simons: Two decades ago Arizona's tax burden for individuals was at the national average. It's now about 25% less thanks to a steady stream of tax cuts. State lawmakers who passed the cuts promised a boost in economic growth but that's not happened according to a report by the Grand Canyon institute. David wells is here to tell us more. Good to see you.

David Wells: thank you.

Ted Simons: what exactly did this study look at?

Ted Simons: Well, Tom Rex, one of our fellows, wrote the study. He looked going back to 1969 in terms of our taxes relative to the national average and especially in the last two decades where Arizona has had a strong policy of reducing taxes to see how our economic growth compared to the national average. We were primarily interested in productivity improvements that we would see.

Ted Simons: so that's what you're looking at and you found that two decades of these tax cuts of concerted efforts to cut individual taxes especially, no economic growth at all?

David Wells: It's hard for people to think about. They say Arizona even Jim just mentioned Arizona is going to be one of the top five job growth states. We have been like that for 50 years -- '69. 43 years. We have been that way when our taxes were relatively higher and lower. It's not the job growth that we see any difference. The other thing we looked at, Tom analyzed, we want to think about there's a gap. Arizona workers are paid less than the national average. You're looking for improvement in our productivity. An indication of productivity improvement whether they closed that gap so that we were more in line with the national average. They haven't. We still have a gap between where we are and the national average.

Ted Simons: sounds like looking at your report, the tax cuts over the past 20 years costing the general fund about $3 billion?

David Wells: Right. About 3.1 billion. When you think about the fact that the general fund currently is about $9 billion, that's an additional third more than what we currently have.

Ted Simons: But doesn't -- I can see critics saying that's $3 billion a year. That is back into the pockets of people who will help stimulate the economy by spending that money.

David Wells: Well, certainly but it's also taken away from government services. You have to think about both sides of it. So there are lots of folks -- generally the government employs people, they put money into the economy, provide infrastructure, those are lowers in Arizona as a consequence of not having that money. Certainly it went to primarily upper income individuals. The taxes cut were primarily income tax. People with higher incomes generally pay higher tax.

Ted Simons: You're saying it's perhaps offset by the loss in terms of infrastructure and other government services?

David Wells: In terms of over all economic growth. There was no net gain. A lot of people would argue when you cut taxes it's supposed pay for itself with economic growth. An economist named Aruthur Lander in the late '70s who argued if you had a zero percent tax rate you would have no government revenue. If you had 100% no one would want to do any work and would almost have no government revenue. The idea somewhere in between the curve shifted. The idea if taxes are too high if you could lower the taxes you could get more economic growth but the tax rate in Arizona has never been that far off the national average. State and local taxes are less than 2% for a typical business and they pay their officers the same amount. It's not a significant business cost and we haven't really focused on business taxes, mostly on individual taxes.

Ted Simons: Lets do that. supply side economics, we have gone through that, and it's the dominant thought, especially at the Arizona legislatures as far as a way to stimulate the economy and yet when we look at business taxes, those really haven't changed all that much, have they?

David Wells: Yeah, and that's surprising. They didn't focus as much on business taxes because our business taxes are average whereas our individual taxes are significantly lower. We're one of the lowest even in the southwest. And business taxes would have more of an impact but even there it won't have a massive impact. The legislature has been slower to do. One of other things Tom noticed in his analysis was that a lot of the cuts happened when the economy was already doing pretty well. Generally the covers were flushed at the capitol and they a cut taxes. More of an ideological statement of reducing the size of government rather than effective tool to make the economy grow.

Ted Simons: It sounds like if you cut taxes at a certain time the impact isn't as strong. If the taxes are very high and you cut them, you get a pretty good impact. If the taxes aren't so high and you cut them you don't get much impact at all.

David Wells: Right. Right. That's really critical. I the temporary sales taxis about to expire. No one says when the tax goes down suddenly economic growth will be bigger and pay for itself. When in fact we'll have less revenue.

Ted Simons: with the business tax reductions phased in I think through 2018, with that phased in, is that the kind of thing where, yes, because business taxes haven't really been cut all that much we could see some stimulation there but by the time we get to 2018, any further business tax cuts will thought see much stimulation at all?

David Wells: That's what Tom Rex came up with, what we expect. It's about a $500 million cost. We don't expect it will pay for itself. It may generate economic growth because we're currently under utilizing our resources and our taxes are average.

Ted Simons: I want to get back to the idea that benefits are offset by state and local government cuts and that sort of idea. How do you measure that sort of thing? What do you look at?

David Wells: So essentially the study looked at job growth for each of the -- this is over an economic cycle. Looking at employee pay as well as per capita levels of income, we're essentially trying to see whether or not there's any indication that Arizona has a systematic improvement as a result of tax cuts. We didn't find that. It was about the same. We're not finding a fundamental structural shift in our economy. We really need to invest in things that will improve our human capital base. You want people with higher levels of education to get the higher level paying jobs. We haven't closed the gap there.

Ted Simons: Could it also be argued without these tax cuts things could have been worse?

David Wells: They could have been worse --

Ted Simons: You're saying there's no economic growth after two decades of tax cuts. Without tax cuts we could really have seen no economic growth.

David Wells: Arizona -- pretty similar to the national average. The idea is we would have seen something similar if we had not employed tax cuts. Of course what happened in 2008 was going to happen regardless. That was a nationwide housing crisis and financial crisis. That was going to hit Arizona regardless.

Ted Simons: what do we take from this report? What do you want people to learn?

David Wells: I think we need to be more careful when we think about the consequences to tax cuts. The legislature is looking forward if you look at the JOBC numbers you see $9 billion going through 2016. That's as far as they are budgeting out. Even though the economy is growing we're not having this added amount of revenue and we have a pent-up demand. We're not funding school repairs and construction. There are lots of things we're not funding. We don't have the money for it. We need to rethink the smartness of some of our tax cuts and think about whether or not they have been effective. Part of the budget deal under Governor Napolitano was she agreed to a 10% income tax reduction. We still have that. That was supposed pay in part for all day kindergarten. We don't have that any more. We have lost certain pieces but we still have the tax cuts.

Ted Simons: Very good. good to have you here.

David Wells: Appreciate it.

The Sequester

  |   Video
  • On March 1, automatic budget cuts in the federal budget known as the “Sequester” will kick in unless Congress acts to stop them. Local economist Jim Rounds of the Elliott D. Pollack Company will discuss the impact of possible cuts on Arizona.
  • Jim Rounds - Economist, Elliott D. Pollack Company
Category: Business/Economy   |   Keywords: economy, budget, ,

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Ted Simons: Good evening. Welcome to "Arizona Horizon." I'm Ted Simons. The deadline to avoid $85 billion in across the board federal budget cuts is Friday with little evidence a solution is in the works. For Arizona, the sequester would mean significant cuts to military and education funding. Other areas impacted would range from child care to nutrition programs for seniors. Here to tell us more about the sequester's possible effect on Arizona is economist Jim Rounds of Elliott D. Pollock and Company. Good to see you.

Jim Rounds: Good to see you.

Ted Simons: More or less than other states do you think?

Jim Rounds: It's difficult to say. A decent percentage of our economy is based on military operations, which is the dominant discussion we're hearing from the sequester material. But I think it depends on what the state of the economy is compared to some of the other states. Arizona is a top five state in terms of employment growth. We can probably accommodate a lot of the sequester related job cuts much more so than, say, a California or some of the other states that are just barely bouncing along avoiding another recession.

Ted Simons: Let's talk about the impact. How many jobs? I have seen everything from 20,000 to 50,000 jobs lost and the impact on the economy from four to $5 billion over all. Are these ballpark figures?

Jim Rounds: People are guessing quite a bit I think. A lot of studies, I have read a number of them, there seem to be significant flaws. They start with values that are way higher than we're discussing, the $85 billion. The impact on the economy in general I don't think they are really picking up the fact that this stuff has to be phased in. For example one study said we would lose 50,000 jobs in Arizona. It is assuming that this will happen right away, this doesn't happen right away. You have direct business activity that could be cut. The military operations, the contractors, but then it might take another year or so before you see the full dynamic impact. Whatever impact is realized is going to be spread over a couple years. Our job growth projections are pretty decent for the next couple years so it's a pretty small percentage of our projected job growth.

Ted Simons: but does that job growth dorks those predictions, are they predicated on things staying somewhat the way they are because of if the sequester goes through they won't be the way they are.

Jim Rounds: If the sequester doesn't go through we're looking at adding in Arizona 130 to 150,000 jobs in the next two years. Our best estimate from reading everything out there is that Arizona will lose about 30,000 jobs over a two-year period, probably worst case scenario. I have a feeling, though, we won't realize that. It will probably be half of that, so still a relatively small percentage of the economy. That's statewide. Even the greater Phoenix area may be able to weather this okay. It's not as dire as what we are reading but you talk about communities like Sierra Vista onto others that are very dependent on military spending, they could run into some problems over the next decade or so.

Ted Simons: The growth rate in the valley, some are projecting a 3% growth rate for the greater Phoenix area. Ballpark figure there, how much is that impacted by this?

Jim Rounds: If the full sequester impact is realized based ongoing our estimate of the worst case about 30,000 jobs over two years, that cuts 20 to 25% off of our growth. So we're still going to be adding jobs at a pretty decent clip. We'll still be a top five state in terms of our over all employment growth and I think we'll be just fine. It comes down to having a more regional impact. Smaller regions in Arizona will be much more impacted in the state but I'm not worried statewide based on our economic recovery to this point.

Ted Simons: smaller regions and areas around military bases you're not only talking jobs lost with department of defense employees but contractors down to someone who runs a restaurant frequented by these people.

Jim Rounds: right. The spending cuts occur. If they can't work out some kind of compromise it's going to translate into reduced money for contractors, maybe working fewer days each week or just some significant cuts all together. Then over the next several months you see whenever we do economic impact studies we say here's the impact from that company and here's all the other thousands of other spinoff jobs. When you lose activity, you lose those spinoff jobs. Those are the jobs that I think will be lost over the longer period, over maybe two year period. That's why we think is more of a phased in analysis rather than we're going to realize a cliff and we fall off and everything is impacted right now.

Ted Simons: You're saying most of that would be focused at or near military bases.

Jim Rounds: Well, the lion's share of the cuts have to do with Department of Defense because some of the entitlement programs, there's protected programs. We're not going to see cuts to Social Security. I think Medicaid listed as something that won't be impacted. Medicare only in a limited way. They have to focus in certain areas. That's why you hear the sequester that will have a little bit of an impact, four, 5% in terms of cuts, but to certain industries like military I think it was an 8% reduction estimate that’s assuming that the full impact will occur.

Ted Simons: Have we already seen the effects of sequester even though it has not taken effect yet? Has the threat impacted the economy?

Jim Rounds: Yes. The uncertainty -- not only from the budget cuts but also from the tax increases that we talked about a couple of months ago, those have been impacting the economic numbers for last half year or so. Some of that is already in the base. Companies have started to adjust knowing that Department of Defense spending is going to be going down in the future and they are trying to reconfigure what kinds of products they are making, so not the old type of defense industries we have been talking about, some companies are talking about how can we shift to new types of defense spending and maybe private sector operations that are very similar. So there's already been some adjusting occurring.

Ted Simons: So we should mention education, $17 million in Arizona regarding primary and secondary education, could be a few hundred jobs at risk there, the environment, public health programs, grants to prevent and treat substance abuse, these are all thrown in there as well. These will have an impact as well.

Jim Rounds: yes, there's a little bit for everybody in the budget cuts.

Ted Simons: But we were talking about how this is something that is spread over time, so when March 1 hits and nothing is done the curtain doesn't fall and all you know what breaks loose.

Jim Rounds: Think about what sequester is. It just means there are some forced cuts in the budget what. Can you do? You can change that the next time Congress meets about the budget. So the first thing they will do is try to give a little more flexibility on where the cuts occur. Instead of across the board everywhere, they will be able to cherry pick a little bit more. So they can weed out some of the programs that maybe aren't as efficient, aren't as needed. Then it's going to take several months before these things can be implemented and by then Congress will have plenty of time and lots of their constituents complaining to them about how their state is being impacted. I think there will be at least a little bit of compromise. While it sounds like we're hitting a wall, something has to happen this date, it's not quite that clear.

Ted Simons: So in other words, the deadline is there but until something tangible happens, folks back there are just waiting around.

Jim Rounds: Well, I think that's a strategy. I think because it's something where it is more of a soft date than what you hear about typically from the national media, it gives some the ability to do some political posturing and not take action so you might have Boehner say let's sit back and see what happens, let's negotiating on where the cuts occur then reduce the over all impact. What I would like to see happen is the economics behind it and how budgeting works is going to spread this over a couple of years but if they can phase these in over a two or three year period and get to the point where the full impact isn't realized until the economy nationwide, and even in Arizona is in better shape around mid-decade, it won't be nearly as bad. I'm hoping some common sense will come into play, but that's a coin flip in Washington.

Ted Simons: bottom line as far as the effect of these cuts, do you think they are underrated or overrated?

Jim Rounds: It's greatly exaggerated in terms of the Draconian economic impact in my opinion. It's still going to hurt some people, but at some point we have to balance our budget. I'm not totally opposed to sequesteration. I would like to see the government start to get things understand control, but I think we can maybe do it a little more strategically than what they put into play several months ago
Ted Simons: Alright, Jim, thanks for joining us. We appreciate it.