State Senate committee to hear bill to reverse economic progress

The state Senate Government Committee on Thursday is scheduled to consider an amendment to a bill that would dismantle the Arizona Commerce Authority, the state’s lead economic development agency. 

If passed, the bill would eliminate several tax credit programs, resulting in a massive tax increase and slamming the brakes on projects across the state, including in rural communities. 

Danny Seiden, the president and CEO of the Arizona Chamber of Commerce & Industry, blasted the proposal. 

“This amendment would be laughable were it not for its potentially catastrophic consequences,” he said. 

The state House last month passed a bill to extend the life of the ACA by four years, but that bill has yet to get a hearing in the Senate. 

“We were hopeful that the state Senate would quickly follow suit,” Seiden said. “Unfortunately, senators instead have proposed an amendment that would effectively gut the ACA, overturn years of progress in attracting jobs to the state, raise taxes on job creators, and inflict tremendous harm on the Arizona economy.” 

Today’s committee hearing comes one day after President Biden was in Phoenix to celebrate the expansion at Intel’s Ocotillo campus in Chandler. 

Arizona has become an advanced manufacturing juggernaut since the formation of the ACA more than a decade ago and has emerged as a global semiconductor manufacturing hub. 

The president was in Arizona last year to mark the $40 billion investment at a north Phoenix site by semiconductor maker TSMC, a project the ACA led. 

Tax credits eliminated 

The ACA administers several tax credit programs, among them programs that encourage firms to invest in new, good-paying jobs, as well as the construction of new facilities. 

Under the proposal, those programs would be eliminated, delivering a tax increase of more than $145 million over five years. 

Rural broadband expansion halted 

The ACA oversees the management of millions of dollars to expand broadband across rural Arizona, which advocates say is essential for communities outside the metropolitan areas to attract jobs. 

Under the Senate proposal, that function would shift exclusively to a department under the direction of the governor, putting current expansion projects in jeopardy. 

“It’s as if this amendment were intended to eliminate jobs in rural Arizona,” said Julie Pastrick, president and CEO of the Greater Flagstaff Chamber of Commerce. “Our financial resources are limited in Flagstaff and all across rural Arizona, which leads to a great collaboration working with the ACA to encourage new business attraction. It’s baffling that legislators want to end a decade of very successful collaboration with communities statewide and, instead, put our forward momentum on economic mobility at critical risk.” 

Pastrick pointed to the ACA’s involvement in the attraction of UACJ Automotive Whitehall Industries to Flagstaff in 2021. The auto parts manufacturer is seen as a critical component of Arizona’s red-hot electric vehicle supply chain. 

“Thanks to the partnership between Flagstaff and the ACA, our community is now home to hundreds of high-paying jobs that could have otherwise gone somewhere else,” she said. 

Statewide impact

Ted Maxwell, the president and CEO of the Southern Arizona Leadership Council said the proposal would harm his region’s job attraction efforts.

“If you consider the cooperation between the ACA, Sun Corridor Inc. and our other regional economic development organizations, it’s never been better,” he said. “Tucson and the surrounding area are more economically competitive today than we were prior to the ACA’s formation.”

As an example, Maxwell pointed to the $1.2 billion capital investment by American Battery Factory, a battery maker constructing a two-million-square-foot manufacturing facility in Tucson.

“These are the types of investments that other states are clamoring for,” Maxwell said. “But thanks to the ACA, Tucson was positioned as the best place to win the estimated 1,000 high-paying jobs that are coming with this project. I’d hate to think what would have happened without the ACA’s leadership.”

A new bureaucracy 

Also included in the bill is language to overhaul the ACA’s governance structure to revert to a model more like the Department of Commerce that preceded it. 

That formulation was viewed by the business community as ineffectual, prompting the creation of the ACA following the Great Recession and its public-private governance structure. 

Assuming the bill passes the Government Committee, it will head to the Rules Committee and then to a vote of the full Senate. Since the bill calls for raising taxes, it would need a two-thirds vote of support to pass. 

The bill would require a final vote in the House before it could proceed to the governor’s desk, where it would then be vetoed.