Surprise, AZ News blog

Tax Incentives

Cities need to stop crying about overdue limits on tax incentives

With a stroke of her pen, Arizona’s governor has rightly affirmed that tax rebates used by municipalities to lure retail developers are a waste of taxpayers’ money.

Gov. Janet Napolitano signed into law a measure that fines cities that put taxes in developers’ pockets in exchange for their business. She deserves commendation. 

She saw through flaccid arguments of cities wanting to maintain local control and needing tax incentives to spur economic development. In reality, all that the municipalities wanted was a competitive economic edge over surrounding communities.

“These tax breaks have gotten out of control and have been offered to a host of businesses, many of whom were likely to locate in Arizona regardless of whether they were offered a tax incentive,” Napolitano said. “The use of tax incentives to pit Maricopa County towns and cities against each other is not in the interest of Arizona or its taxpayers.”

Cities could keep offering incentives, but their state-shared revenues would be reduced, dollar-for-dollar.

Unfortunately, the new law can’t unravel the hundreds of millions of dollars worth of deals in Phoenix, Glendale, Surprise and other cities. That money is lost.

Even still, some city leaders are bemoaning the new law, saying it will derail economic development in their communities. They also claim the law will devalue state trust land because cities no longer will be able to offset costly land improvements .

Those officials are in “the sky is falling” mode.

Get over it.

They have no one to blame but themselves. For at least three years, a measure aimed at quashing sales tax rebates used to entice retail development has floated about legislative hallways. Rather than work together to craft their own compromises and slow the runaway giveaways - as they repeatedly pledged they would - city leaders used their political muscle to kill proposals.

Make no mistake, flaws exist in the current law, which takes effect Jan. 1.

For instance, the law doesn’t apply to the cities of Peoria and Marana because neither is located entirely in Maricopa or Pinal County. That loophole gives those communities a competitive advantage over neighbors - ironic, because the law is aimed at preventing that type of unfair competition.

And that leads to the second major flaw: It does not apply statewide. Lawmakers deliberately carved up the state, selectively applying the law only to cities and towns in the Phoenix metropolitan area. Left out, for example, was the Tucson metropolitan area, a region where incentives are on the upswing.

The new law is good as far as it goes. After so many legislative missteps, so much rhetoric, so many empty promises of mayors that state intervention wasn’t necessary, to have the new law on the books is a victory for taxpayers. In time, it might mean that cities won’t have to pass special bond issues, for example, to add new police and firefighters. The money saved might be sufficient to buttress public safety budgets.
 

Leave a Reply

You must be logged in to post a comment.