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Zach Colick
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Posted: Tue Jun 16th, 2009 09:03 pm |
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Editor's note: The following story appears in the June 17 Town of Paradise Valley Independent. Post comments by hitting reply in the upper right-hand corner. Comments will be posted in an upcoming issue of the Town of Paradise Valley Independent.
Diversifying the Economy
Senate Bill 1403 gaining more support
By Zach Colick
Independent Newspapers
The solar and renewable energy sector may soon have greater reason to enhance its presence in Arizona, especially if a key piece of legislation drafted by one local senator is adopted this week.
Senate Bill 1403, introduced by Sen. Barbara Leff (R-Paradise Valley), would offer tax incentives to renewable-energy companies that choose to relocate to Arizona.
The bill has the support of the Greater Phoenix Economic Council, which believes such enticements are badly needed at a time when many companies are shunning Arizona and choosing to operate elsewhere.
Arizona has the fundamentals already in place — the workforce, climate and ample sunlight — to produce solar and renewable energy, according to GPEC officials. GPEC officials say passage of Senate Bill 1403 could be the first of many solar initiatives for Arizona in the years to come.
The state, however, does not have the proper tax structure in place for existing renewable-energy companies to contemplate moving operations from states such as New Mexico, Colorado, Oregon and California to Arizona.
Sen. Leff, a longtime Paradise Valley resident, believes Arizona needs to diversify its economy if it wants to better weather economic downturns.
“Arizona should be the solar capitol of the world as a producer, distributor and consumer of solar energy,” she said to the Independent in March. “We should be the leader in manufacturing, research, development and headquarters — but we are not.”
As a result of not having any tax incentives in place to attract the renewable-energy sector, the state has lost out on 3,800 jobs and $2.3 billion that have gone to other states, according to the GPEC. Arizona’s opportunity to capture the renewable-energy industry is large, totaling an estimated $5.2 billion in capital investment and 5,260 new jobs.
Some highlights of the bill:
• The bill would offer factories that make renewable-energy equipment a 10 percent income tax credit on capital investment.
• Companies that spend at least $25 million would be able to reclassify their property taxes, which may account for as much as an 80 percent discount of that tax.
• To be eligible, they also would have to provide health-care coverage and meet other requirements.
Signs already look positive for Senate Bill 1403. Last week, the state Senate’s Commerce and Economic Development Committee voted 5-2 in favor of encouraging the solar and renewable-energy sector to set up shop in Arizona.
The bill was expected to be heard June 12 in front of the full Senate, with discussions continuing this week.
Without passage of Senate Bill 1403 and an amended tax structure in place, GPEC President Barry Broome said he believes Arizona will become a second-tier state when it comes to solar technology.
Mr. Broome said more than 150 companies have looked at Arizona as a viable renewable-energy marketplace during the past two years, but all walked away after finding out special incentives available in nearby states were not available in Arizona.
“The Legislature has to demonstrate some ability to manage its affairs and be more forward-thinking. I think this bill is a good example of where the state should be headed,” he said.
“It’s really important that Arizona does something other than flounder, and right now the state’s floundering. There needs to be another message sent to the marketplace other than we’re floundering.”
Opponents of Senate Bill 1403, including the Arizona Free Enterprise Club, contend lawmakers are “picking winners and losers” by offering tax incentives to one industry, while disenfranchising others.
The club believes Arizona’s economy would benefit more by lowering taxes on all businesses rather than singling out renewable-energy manufacturers.
“It’s just another example where the state is trying to do something to benefit the economy, but is being shortsighted about it by just granting these huge tax benefits and subsidies for just one industry,” said Arizona Free Enterprise President Steve Voeller.
Mr. Voeller supports another bill Sen. Leff is sponsoring that would reduce the corporate income tax. Senate Bill 1324 would reduce the corporate income tax rate to 4.54 percent from 6.97 percent during the next five years.
Senate Bill 1403 is capped at $70 million per year for five years. The total $350 million sum could lower the state’s corporate income tax rate from the current 6.97 percent to 4.5 percent — just like Senate Bill 1324.
“My argument to the committee was you’re going to spend $350 million, so why do it for everyone? Why do we continue to tell some businesses you get to stick around in this state and pay for us to subsidize new businesses? You don’t qualify, but you have to pay for it,” Mr. Voeller argued.
“I just think that’s inherently unfair. That’s why we continue to argue against these types of incentive schemes.”
Mr. Voeller also said he dislikes the notion that the income tax credit associated with Senate Bill 1403 could be transferred to other companies, meaning renewable-energy companies could sell the credit to any company — even non-renewable-energy companies — if they want.
“It’s something we haven’t done in this state before and for good reason — it’s terrible tax policy,” he said. “If low taxes are good for one industry, they should be good for all industries. There is no free lunch.”
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