Ted Simons: Arizona's economy relies heavily on the housing industry and jobs in construction. Today, the Arizona senate passed a bill that aims to diversify our economy by adding more renewable energy jobs to the mix. I'll talk with the sponsor of the bill in a moment, but first, David Majure has more on Senate Bill 1403.
Michael Bidwill: Over the last decade or so, Arizona has ranked as one of the top job-producing economies in the United States. Up until about 2006 and --
David Majure: At a recent meeting on commerce and economic development, representatives of the greater Phoenix economic council talked about the state of Arizona's economy.
Michael Bidwill: We dropped 17th and then 49th and now last in job creation among the 50 states.
David Majure: Arizona's economy is largely built on growth. The more people who move here, the more homes must be built but the current economic recession is proof that Arizona can't rely so heavily on construction.
Barry Broome: The question for us is how do we diversify this economy? And the first question is what industries are going to be big enough and strong enough to shift the market away from simple economic outcomes like housing and construction into export industries.
David Majure: One of GPEC’s answers to that question is solar and renewable energy. In recent years GPEC's been trying to get solar manufacturing companies to locate in Arizona.
Barry Broome: We've lost for almost two years, almost every major opportunity we've pursued.
David Majure: GPEC says Arizona is not competitive with other western states when it come to the cost of capital.
Michael Bidwill: Right now we've got 13 companies looking to build projects valued at $3.5 billion, probably 5,000 high paying jobs with benefits that could come to Arizona, waiting on the passage of Senate Bill 1403.
David Majure: Senate Bill 1403 provides income and property tax incentives to companies that locate their headquarters or manufacturing in Arizona.
Michael Bidwill: Senate Bill 1403 will give us an opportunity to compete and that's why GPEC is supporting it.
David Majure: The bill is intended to produce high paying jobs. To qualify for the incentives, a company must pay more than half of its full-time employees an annual salary of at least 125% of the state’s median income. Currently about $46,300, and cover at least 80% of their health insurance premiums. A company can earn an income tax credit up to 10% of its capital investments depending on the number of jobs it creates.
Barry Broome: The program has an annual cap of $70 million for five years. The way the tax credit is positioned, the company comes in and there's a formula so we know whether or not we're making money on the credit.
David Majure: In addition to income tax incentives, Senate Bill 1403 also provides a property tax break. To companies that invest $25 million or more in new facilities, equipment and infrastructure.
Ted Simons: The state senate passed Senate Bill 1403 today by a vote of 16-12. It now goes to the house for further consideration. Joining me now is the sponsor of Bill 1403, State Senator Barbara Leff, a Republican from Paradise Valley. Good to see you.
Sen. Barbara Leff: Nice to see you too.
Ted Simons: This legislation is designed to do what?
Sen. Barbara Leff: Legislation is designed to bring jobs to Arizona. We desperately need to diversify this economy and need jobs and this legislation is a combination of bringing jobs to Arizona and incenting the renewable energy companies to come for manufacturing, research and development and regional and national headquarters. We really want to bring those companies to this state. We have plenty of exciting generation happening, especially on solar, but don't have the manufacturing jobs and those are the high-paying jobs we want to bring.
Ted Simons: Why don't we have those jobs here? Again, it's a cliche, but you walk outside and there's sun all the time.
Sen. Barbara Leff: You don't need sunshine to do manufacturing and we would like to see the companies do everything here. The generation is going to happen anyway, there are going to be solar panels and we're going to generate electricity through solar. What we don't have are the manufacturers coming and there's a lot of competition among a lot of states to incent them to come to their states. Oregon and New Mexico are competing and offering lucrative incentives because they understand that those companies, when they come, they bring lots of business with them. They'll bring all of the supply companies and research with them and those high-paying jobs.
Ted Simons: What kind of incentives?
Sen. Barbara Leff: Talking about income tax and property tax incentives. Especially it's a problem for Arizona, for capital investment in Arizona. Our property tax for business is just too high and it's hard for capital intensive companies to come to Arizona without offsetting that cost.
Ted Simons: Critics say giving tax credits to one industry isn't fair. Your response?
Sen. Barbara Leff: I think most states do have healthy economies pick out certain industries they want to incent. We have aerospace and semiconductor, bioscience, optics and it's a smart move because you have a lot of growth and other companies that come and the entire economy improves because of that. Look at Chandler with Intel. We're trying to incentivise them. If you sit around and say, whoever comes, fine, you don't end up with the synergy you need to create the economic engine that Arizona needs.
Ted Simons: Again from the critical aspect. The idea of instead of picking one industry, just lowering the tax rate of all businesses, lower it all and solar will follow.
Sen. Barbara Leff: That would be great if we could figure out the way to lower the property tax for business in the state. If you lower that, all residential property tax rates go up.
Ted Simons: Is there a concern that we're talking subsidies with no guarantee of success? It's a new growing industry -- we're not sure what's going to happen. Should we subsidize something we don't know what the return is?
Sen. Barbara Leff: Before a company gets any tax credit, they have to have built their company and spend all of the money and pay the construction taxes and hired all of the employees and show that they're providing 80% of the comprehensive health insurance for the employees and pay above the -- more than half the jobs have to be above the median wage in Arizona. The companies will be here and hire people and people will be working before they can get one penny in a tax incentive back.
Ted Simons: How does that compare with Oregon or New Mexico or Texas or California? Similar or a little bit different?
Sen. Barbara Leff: It's a little bit different. Some states -- I believe New Mexico has a deal closing funds, Oregon has very, very high incentives for companies to manufacturer in Oregon, everybody that wants to be around California. That's the key. California is going to be a large renewable footprint and companies are looking to be around California, not in California, because their tax structure is difficult for business. And different states do different things. This makes us competitive. Not number one, but competitive. We keep losing job after job to other states, and right now there are 13 companies waiting to see what we do, to see if Arizona is saying come to our state. We need and want you and will help you get started.
Ted Simons: I know there was one lawmaker who suggested we're too far behind on this already, why even bother?
Sen. Barbara Leff: Well, that's not true in renewables. Renewable energy is a brand new industry. It's going to only get better. We are not ever going to turn the clock back and not look at renewable energy sources. This is exactly the time to say this is a new industry, come here, grow here. We have no idea what the potential is going to be. I think it's going to be tremendous.
Ted Simons: How many jobs talking here?
Sen. Barbara Leff: Thousands of jobs.
Ted Simons: What parts of the state? Cities, rural areas?
Sen. Barbara Leff: City -- well, probably not in cities. Rural areas, some parts of the city. And then companies in addition to the ones we're incenting will supply those companies and we talked to a glass manufacturing company. They're talking about coming to rural Arizona so they can get their glass products near where the manufacturing is going to occur.
Ted Simons: The incentives? General, how much will it cost the state, initially?
Sen. Barbara Leff: I would say it depends on the definition of cost. We're capping at $70 million a year total of all the companies to come. In order for that to be given, a condition, has to spend $700 million in capital investment. Over a 5 year period there's a $350 million tax credit potential, but that leaves $3.5 billion in capital investment will have occurred in Arizona already if that happens.
Ted Simons: For the person watching right now that runs the nursery or restaurant or any other type of business not getting this kind of incentive, how do you convince that business owner that this kind of break is a good idea?
Sen. Barbara Leff: You have jobs and when you create jobs those jobs create money for people. That money is used by those people to go to those other businesses that you talked about. Look at Chandler and Intel and what's created around it. They'll go to those other businesses and spend their money. Everybody gets helped when you have large numbers of jobs in your community. Arizona is hurting because we don't have enough jobs outside of housing and construction.
Ted Simons: Thanks for joining us. We appreciate it.
Sen. Barbara Leff: Thank you.