As was reported last week, the Arizona Coyotes and the NHL sent a letter to the State Legislature notifying lawmakers that if they do not agree to provide $225M in taxpayer money for a new hockey arena, they are going to leave Arizona for icier pastures.

The shakedown letter was an astonishing (some would consider desperate) maneuver by the team and the NHL, especially since it exposed the truth that the Arizona Coyotes have been intentionally misleading Glendale taxpayers and elected leaders for over a decade in order to receive unconstitutional subsidies from taxpayers.

This fact was not lost on former Mayor Elaine Scruggs, who penned a scathing letter detailing the history of the Coyotes in Glendale.  Throughout her two page response, Mayor Scruggs cited each broken promise and dishonest claim made by the team as the city poured an estimated $500 million dollars of taxpayer money into the failed endeavor.

For several years, the NHL and Coyotes repeatedly told anyone that would listen that hockey was an economically viable product in Glendale and that the team was not receiving hidden subsidies to cover its operating losses.

The ownership group was well aware of the constitutional, legal, and political issues of a professional sports team receiving direct subsidy payments from taxpayers. In 2010, the Goldwater Institute threatened to sue the city for violating Arizona’s gift clause when it was considering a deal to cover up to $100M in losses if the team didn’t turn a profit. That deal subsequently collapsed.

Three years later a new ownership group came on the scene and negotiated behind closed doors a lucrative 15 year, $225 Million “management agreement” with Glendale.  The team and the city stated publicly that it was a reasonable agreement to operate and manage the taxpayer-financed arena, and was not a clever trick to do an end run around the gift clause.

Now the truth is out. The one-sided agreement was never about managing the arena.  The Coyote’s claims since Glendale lawfully terminated the agreement have been, by their own admission, proven false.  They were not being “evicted” by Glendale or being forced to accept substandard management of the arena. The Coyotes were just mad that they had foolishly violated state law and had the subsidies cut off.

And now the Coyotes and the NHL are pushing Senate Bill 1149, legislation that would give the team 30 acres to develop a taxpayer subsidized arena, hotel, restaurants and bars. They are trying to lure another city into a deal that will keep the subsidies flowing. The Club’s recommendation to taxpayers: you see the Coyotes coming, skate for the exits.

Legislators Say ‘No’ to Refundable Tax Credits

THANK YOU to the legislators who voted on the floor today to oppose HB2492 – a bill that would allow a few large corporations to make their R&D tax credits refundable.

No confusion here, refundable tax credits are direct subsidies to corporations without the complications (transparency) of the appropriations process.   The heroes of the tax payers today were:

Rep. Lela Alston (District 24)
Rep. Richard Andrade (District 29)
Rep. Wenona Benally (District 7)
Rep. Isela Blanc (District 26)
Rep. Rusty Bowers (District 25)
Rep. Kelli Butler (District 28)
Rep. Cesar Chavez (District 29)
Rep. Ken Clark (District 24)
Rep. Eric Descheenie (District 7)
Rep. Kirsten Engel (District 10)
Rep. Eddie Farnsworth (District 12)
Rep. Charlene Fernandez (District 4)
Rep. Mark Finchem (District 11)
Rep. Sally Ann Gonzales (District 3)
Rep. Anthony Kern (District 20)
Rep. Jay Lawrence (District 23)
Rep. Vince Leach (District 11)
Rep. Phil Lovas (District 22)
Rep. Ray Martinez (District 30)
Rep. Darin Mitchell (District 13)
Rep. Paul Mosley (District 5)
Rep. Jill Norgaard (District 18)
Rep. Becky Nutt (District 14)
Rep. Kevin Payne (District 21)
Rep. Pamela Powers Hannely (District 9)
Rep. Rebecca Rios (District 27)
Rep. Jesus Rubalcava (District 4)
Rep. Macario Saldate (District 3)
Rep. Athena Salman (District 26)
Rep. David Stringer (District 1)
Rep. Maria Syms (District 28)
Rep. Bob Thorpe (District 6)
Rep. Kelly Townsend (District 16)
Rep. Michelle Ugenti-Rita (District 23)
Rep. JD Mesnard (District 17)

We see a lot of bad ideas down at the legislature.  A lot.  But every once in a while, one comes along that is so awful even we are mildly surprised by it.

Behold HB2492.

Special property tax giveaways for some business but not others? Payroll tax handouts for large employers to subsidize new hires? Refundable tax credits that allow businesses to claim a refund even though they have no tax liability?

Wrap all these into one big monstrous giveaway and you have HB2492.

For starters, some of the large corporations that will benefit from this bill already do not pay Arizona corporate income taxes. A decade ago the legislature removed the cap on the Research & Development tax credit, which resulted in some companies to claim an unlimited amount of tax credits to offset their corporate tax liability.

But unlimited R&D credits are only part of the benefit. If these credits exceed the companies’ actual income liability in a given year, they are able to carry-forward their credits for up to 15 taxable years.  Essentially, it is quite possible that these companies will never again have to pay corporate income taxes in Arizona.

Now HB2492 takes these subsidies to a new level. HB2492 would allow corporations to take their unused R&D credits and convert them into refundable credits to offset any sales tax incurred for infrastructure and other capital expenditures they make in the state.  If it seems strange to link two completely unrelated activities (R&D and private infrastructure spending), you’d be right.  Perhaps muddying the waters is what it takes to hide a subsidy of this magnitude.

Since the current R&D tax credit program has been so popular, several corporations have accumulated an astronomical amount of unused credits to cash in on this deal.  The latest report from the Joint Legislative Budget Committee shows that companies currently hold $1 Billion in carry-forward R&D tax credits.  If HB 2492 passes, taxpayers will be writing subsidy checks to corporations for a long, long time.

Just as the Arizona legislature has been wise to reject risky public finance schemes such as Tax Increment Financing (TIF), they have also successfully never crossed the threshold of allowing refundable tax credits of this magnitude.  The best tax system for economic growth is one in which taxes are as low as possible, but shared among the broadest base.  Carving some taxpayers out of the pie, not only makes the pie smaller, but raises taxes for everyone left in the pie.

The legislation passed out of House Ways & Means last week by a vote of 5-4, for the sake of Arizona taxpayers let’s hope it doesn’t proceed any further.

Latest Tweets

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