The Arizona Free Enterprise Club

A lot has changed in the economy over the past several decades with the explosion of technology.  The traditional work environment has transformed with more individuals able to stay connected and work from nearly anywhere in the world.  This evolution has made it easier than ever for people to start and own businesses, and conform their work to the flexibility of their own homes.

Home-based businesses (HBB) allow millions of Americans to earn a living or supplement their wages, while accommodating realities such as raising children, managing a disability, and/or stretching their current available resources.  That is why 52 percent of the over 28 million small businesses in the United States run their operations out of the convenience and comfort of a personal residence.

Many of these businesses are in our own neighborhoods.  They are real estate agents, accountants, and contractors.  Yet for most of these businesses, we have no idea they’re taking place in our own backyards.  Ostensibly, these businesses are operating with little to no visibility to the residents around them.

Although the nature of home-based businesses has vastly changed, the regulatory environment has not.

Many cities and counties across the country still retain the same zoning ordinances and land use requirements from a half century ago.  As a result, many jurisdictions promulgate a culture and regulatory environment which stifles home-based businesses.

Common restrictions include not being able to use a garage, backyard, or “accessory dwelling” unit for a HBB. Often there is a limit on the allowable square footage to be used within the home.  Prohibitions on signage or seeing any customers or employees.  In most jurisdictions, certain types of businesses such as salons or food-making businesses are altogether banned, or require extensive special use permits that take months and thousands of dollars to obtain.  Lots of cities limit a business’s hours of operations.  Many of these regulations are ambiguous, arbitrary and downright unenforceable.

After all, how is the government supposed to know if someone is using one room versus two rooms in their house for their business?  How would they be able to tell if an individual is selling items on eBay or answering business emails at 1:00 AM, after the accepted “hours of operation?”  The only conceivable way to consistently enforce these types of regulations is a frightening prospect indeed; with major Fourth Amendment questions and implications.

The Small Business Administration studied the issue in 2004 and determined more should be done by states and localities to eliminate burdens for HBB.  They highlighted several states that have passed state-level reforms.  Maryland for instance allows for a “no-impact” home occupation – eliminating licensure for thousands of businesses that pose no threat to the livability of surrounding homes.  Vermont, a small-business friendly state, has statutory protections for HBB, stating a person has the “right” to operate a business out of their home.  Even California has a special regulatory carve-out for home day cares; they void contractual agreements such as HOA CC&Rs that prohibit them.

Creating regulatory space for HBB is not only the right thing to do, it has immeasurable benefits.  Aside from providing a flexible environment for people with a variety of needs as well as creating safer neighborhoods by having watchful daytime eyes, these fledgling businesses are the petri dish of the economy.  They allow a measured approach to the risk of starting a business.  If the entire country disallowed people from having a business in their garage, giants such as Amazon, Apple, Disney, Google, Harley Davidson, Microsoft, and Nike, that employ hundreds of thousands of people, might not exist.

Just like our economy and ideas about the work environment, it’s time for the states and local counties and cities to change with the times.  Home based businesses are vital to the health, wealth, and happiness of millions of Americans.  Government should not be stifling their efforts, but doing everything they can to allow their growth.

Over the last several years, lobbyists for the movie industry have made multiple attempts to bring back special tax breaks for Hollywood studios in Arizona. After failing to resurrect the unpopular tax credit program that expired in 2010, they pivoted to a new subsidy: a taxpayer financed state film office.

Movie producers claimed a film office is needed because Hollywood studios didn’t know who to call when filming in Arizona if they needed access to state monuments, freeways, etc. This argument was obviously nonsense—movies have been filmed in AZ for decades at special locations without such an office, and securing film locations is an issue easily addressed by the private sector.

Thankfully, the legislature saw through their claims and rejected two separate proposals to fund a state film office and provide subsidies to the industry.

This should have been the end of the story, except last month the Arizona Commerce Authority announced a joint venture with a local film studio to provide taxpayer funding for a state film office, along with additional grants and discounts to moviemakers.

How the Commerce Authority is unilaterally funding a state film office with taxpayer money after the legislature rejected such an expenditure raises several questions:

Who at the ACA authorized such an expenditure? Where in statute does the ACA have the power to fund such a program? Does the ACA have a secret fund to pay for special interest projects the legislature rejects? If the ACA can fund a film office, what projects can’t it fund in the future?

The ACA’s untethered purse strings is a major issue that must be investigated. The good news is lawmakers will soon have an opportunity to get answers. The Commerce Authority is once again up for sunset review, and will have to go before the legislature in the Fall for reauthorization. Last time the ACA received only a 2-year renewal, specifically because of their lack of transparency and poor results.

They promised to do a better job and clean up their act, and we assume that they will make the same promises. Judging by their questionable actions, they must think that it is far easier to ask for forgiveness than ask for permission. Hopefully lawmakers won’t be duped again and will finally reign in this rogue agency.

Since 1987, Pinal County taxpayers have paid a dedicated ½ cent sales tax to build transportation improvements in the region. More than $350 million dollars later the results have been a failure.

Now the County Board of Supervisors and Regional Transportation Authority (RTA) are back asking residents to approve Proposition 417, an additional $640 million dollar sales tax increase to fund road construction. The entire plan is ill-conceived, unnecessary, tilted to benefit the politically well connected and is likely illegal.

Among the reasons Prop 417 should be rejected is that the existing ½ cent transportation tax has been misused and wasted over the past 15 years, which is why the proponents of the ballot proposition do everything they can to pretend the current tax doesn’t exist.

The abuse has been well documented in several State Auditor General reports. Since 1998, several municipalities have used their disbursements for unknown credit card expenses, an employee appreciation breakfast, and even Christmas bonuses. Mammoth used the money they received to backfill deficits in non-transportation departments. In the case of Superior, the town literally siphoned off millions of dollars.

Apache Junction, Kearny, and Eloy were cited for such offenses as poor accounting, inadequate planning processes for future projects, and deficient record keeping for road projects. Despite the multiple infractions, the current proposal awards millions more to these same offenders. Superior, Kearny, Mammoth, and Eloy each receive $6 million in Prop 417 for undefined “local projects.”

Of the funds not being abused and wasted, most of the rest has been doled out to fund local street projects in municipalities throughout the county. Using a regional tax to build city streets was never the purpose of the tax, and is a major reason why Pinal County lags behind Maricopa (which has the same ½ cent transportation tax) in regional freeway and roadway construction. Rather than passing a new transportation tax, Pinal taxpayers would be better served by fixing the existing tax and directing the funds to worthy county projects.

The entire planning process used to craft Prop 417 was gamed by the political establishment in Pinal County.  Communities with representation on the Regional Transportation Authority are the winners in the plan.  The rest of the county’s residents are the losers.

San Tan Valley – a community of nearly 90,000 people and approximately 22 percent of the entire county population, sees zero benefit from Prop 417.  Saddlebrooke doesn’t fare much better. The only project going to the community of 26,000 is a proposed 6/10ths mile stretch of road at a cost of $1 million, 0.1% of the total revenue included in the $640 million dollar plan.  If you live in Arizona City, all you get is a park-and-ride.  Gold Canyon is left out of the plan entirely.

Well over 1/3 of County taxpayers will be paying a tax in which they receive no benefit in return.

Additionally, Pinal County already has the highest sales tax in the region at 6.7 percent.  If the new tax were to pass, Pinal’s sales tax would be a penny higher than both Maricopa and Pima.  Pinal County already struggles to compete for new jobs and businesses, Prop 417 will only make matters worse.

It would be hard to dream up a worse plan to punish taxpayers and paper over past mistakes, which is probably why the proponents of Prop 417 are trying to sneak this proposition through in November. A vote to raise taxes could have been put on the ballot in 2018 at a regularly scheduled election, but the political establishment believes that a low turnout election later this year increases their chance of success.

Hopefully voters will see through their electoral ploy and reject this poorly crafted, uneccessary tax increase.