News and Updates

Each year there is a constant debate at the Legislature centered around a bevy of bills that preempt the authority of local government.

For the most part, the proponents of “local control” for cities and counties hang their hat on the explanation that the superior government is always the one closer to the people. This argument it is rarely explored, explained, or expounded upon further than a convenient slogan meant to excuse government overreach and conflate the idea of federalism with granting more power to local government.

And that is the crux of the dispute. In virtually every case when state lawmakers have decided to preempt local government, the debate has not been about how much power the state should have, but whether more autonomy and freedom should be granted to individuals, families, and businesses. Indeed, if cities were truly concerned with having the most local entity be in control, they would be fighting for the individual.

Instead, advocates for more local power continue to make the absurd claim that cities deserve the same relationship the States share with the Federal Government. This flawed argument ignores that fact that, unlike the States that created the federal government, cities and counties are political subdivisions of Arizona. Any authority that they do have has either been expressly delegated to them through state law or the constitution. Even the State Supreme Court ruled that (with one very narrow exception) local governments are not sovereign entities and must adhere to Arizona law.

Furthermore, attempting to elevate local governments in Arizona to the same status enjoyed by States in the US Constitution is a poor argument for more local power and demonstrates a philosophical misunderstanding of federalism. As expressed in the bill of rights and Declaration of Independence, America was founded on the idea that rights belong to the people, and that government remains the biggest threat to protecting those rights.  If politicians decide to use their power to infringe on those freedoms, the geographic distance of that government is inconsequential.  After all, is local tyranny better than state or federal tyranny?

It also cannot be ignored that in crafting a constitution of limited enumerated powers, the States granted the Federal Government the authority to regulate interstate commerce. This was a wise inclusion as it was a bulwark against states implementing protectionist laws that would infringe upon the free travel and commerce of citizens throughout the country.

Arizona’s constitutional framework similarly allows state lawmakers to oversee and regulate intrastate commerce in order to protect individuals and businesses operating in different jurisdictions.  It was never the intent to allow cities to create a patchwork of onerous and inconsistent business regulations on issues such as minimum wage, plastic bags or bans on no-impact home-based businesses. When these situations do arise, it is the obligation of our state policymakers to step in and intervene.

It is high time that the local control argument be unpacked and receive the intellectual scrutiny it deserves.  There have been too many instances where the local control defense has been used to justify freedom crushing eminent domain abuse, suppress voter turnout, and to infringe upon our free speech rights.  If we are to argue for local control, let that control be divested to individuals, families, and businesses.  After all, the spirit of America is not city council-determination, but self-determination.

A liberal San Francisco billionaire has decided to bring his radical environmentalist agenda to Arizona. Earlier this month a group called NextGen announced their plans to fund a ballot initiative to amend our state constitution requiring utility providers generate at least 50 percent of their energy from renewable sources by 2030.

Of course, this mandate won’t affect the backers of the measure, since NextGen is a California-based organization funded by liberal billionaire Tom Steyer. It doesn’t matter to him or NextGen that draconian renewable energy mandates will harm hardworking families and small businesses in Arizona. They like the idea that rural communities will pay a steep price as a result of sky high energy prices and hefty job losses due to the shuttering of Arizona’s coal power plants.

The intellectual dishonesty surrounding this measure is offensive. Though the media loves to paint Mr. Steyer as an altruistic “climate change crusader,” they continually ignore the fact that his lucrative hedge fund is heavily invested in the solar industry. It’s Steyer’s right to invest in any company he wants but forcing people to use solar through renewable mandates that pad his bottom line is corporate welfare at its worst.

Making the initiative even more destructive is their definition of renewable energy does NOT include nuclear power.  This means that one of our most reliable, sustainable and clean sources of power (Palo Verde Nuclear Generating station) would not count toward the mandate. Instead, our grid would be forced to transition toward costly, unreliable sources such as wind and solar. Compliance with the 50 percent mandate is anticipated to result in an average utility rate increase of $500 per year for Arizona families.

Just as absurd, the language exempts Salt River Project (Arizona’s second largest utility) from the energy mandate. Apparently, NextGen and Tom Steyer believe that SRP customers are ‘cleaner’ than other utility customers, and therefore will still be allowed to purchase cheap conventional power though everyone else is stuck picking up the tab. This is grossly unfair, and likely was done to reduce their political opposition at the ballot box.

The reality is this measure isn’t about improving our environment or making Arizona healthier. This is a power play by wealthy California interests that see our state as an easy target for their liberal ideas. To them, spending a couple million dollars sneaking their renewable mandate into Arizona’s constitution is a drop in the bucket compared to the hundreds of millions Steyer has spent the last two election cycles throughout the country.

NextGen doesn’t have any real grassroots support, so they have brought in an out of state paid circulator firm to canvass our streets to collect the necessary 225,000 signatures to qualify for the ballot. We urge Arizona residents when they see these hired guns to not sign their petition and tell NextGen to take their liberal ideas back to California.

Last year’s Rural Tax Credit bill has popped up again at the legislature, a $30 million hit to the budget when Arizona can least afford it.  Proponents of the bill are drawing support by selling this idea as a way to spark investment and growth in rural areas of Arizona.

The crux of the legislation is $30 million in salable tax credits which the few eligible “investment firms” use to raise a maximum of $50 million in investible capital.  The tax credits may be utilized to offset corporate income, individual income, or premium insurance taxes for the qualified investors for the fund.  The money is essentially raised leveraging a taxpayer-subsidized risk pool and then used to invest in rural businesses.

HB 2590 is very similar to programs tried in other states under the name CAPCO (Capital Companies,) that have had dismal results. CAPCO has been widely regarded as one of the most inefficient ways to raise capital, and ineffective ways to invest capital.  Because CAPCO has earned a terrible reputation for wasting millions of dollars, the program is continually rebranded and repackaged when pitched in different states.

Proponents of the bill claim this legislation is different and includes significant accountability provisions that make it different than other CAPCO plans.

These “protections” include a business plan, commitments for jobs created and retained, prohibition on charging management fees, requirement to have the approved credit-eligible capital 100 percent invested, and a demonstration that the investment result in greater local and state tax revenues than the aggregate of the tax credits received.

A two-part series written by the Pew Charitable Foundation points out the easy gamesmanship of many of these reporting requirements, concluding that “the investment firm typically bolster their claims using reports written by academics they hired.  Independent policy analysts say the authors of the studies use methods that inflate the economic benefits of the programs.”  Under HB 2590 it will be very easy to inflate the benefits since the language allows the investment fund to take credit for both created and “retained” jobs. In other words, they can invest in a company that never grows and they would claim 100% of the business activity in their economic analysis.

Management fees have been a source of abuse in other programs which stemmed the amount of money that made it to businesses.  Though the legislation prohibits management fees, the mechanics of the investing structure is so complex it is not clear that other types of fees could not be charged using a different accounting label.

And though all of the approved credit-eligible capital for the program (up to $50 million) must be continuously invested in rural business for at least 3 years, this provision doesn’t make it a better deal for taxpayers.  After all, the investment firm makes profit off monetizing the tax credit to begin with, as well as selling the investments.

Last year, lawmakers funded a $10 million special investment tax credit program, which can be used by these same investors to funnel investment dollars into rural Arizona.  We encourage lawmakers to reject HB2590 and instead support better alternatives that don’t pick winners or losers or require taxpayers to subsidize the risk of investors.


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The Arizona Free Enterprise Club is a free market policy and advocacy group dedicated to promoting a strong and vibrant Arizona economy.