by Staff Reporter | Feb 24, 2025 | Economy, News
By Staff Reporter |
The Phoenix-based Nikola Corporation filed for bankruptcy this week — Arizona gave millions in incentives and tax credits to the company over the past five years.
Nikola develops electric- and hydrogen-powered vehicles. The company’s bankruptcy comes after years of federal investigations for fraud concerning the company’s innovation and development claims.
In 2019, Nikola received $1.3 million in pre-approved incentives based on projections. That year, projected new jobs were estimated at 400 and the average wage of projected new jobs was estimated at $80,500. The Arizona Commerce Authority (ACA) earned Project of the Year by the Area Development Magazine for bringing on the company.
In 2020, ACA awarded Nikola the highest single pre-approved A-1 incentives grant out of seven awardees for the Arizona Competes Fund Program: $3.5 million. That year, ACA projected Nikola capital investment to be at around $1 billion. Projected new jobs were estimated at over 2,000, with the average wage of projected new jobs at $65,000.
That was the year Nikola had an estimated value of $30 billion.
ACA also gave Nikola a pre-approval for a $7.1 million tax credit. In 2021, ACA then post-approved Nikola for a $6 million tax credit as part of the Qualified Facility Incentive Program. Nikola was one of 19 businesses to receive the award that year.
The company paid $125 million in a settlement to the Securities and Exchange Commission (SEC) that year, though Nikola didn’t claim wrongdoing.
In 2023, ACA pre-approved Nikola for a $3.74 million tax credit as part of the Qualified Facility Incentive Program. Nikola was one of 24 businesses to receive the award that year.
That year, Nikola founder Trevor Milton was convicted of fraud and sentenced to four years in prison for making false and misleading claims to encourage investor demand. Despite resigning from the company in 2020 and the federal investigations into Milton, ACA continued to give millions in financial incentives to Nikola.
The Department of Justice (DOJ) in its announcement of Milton’s sentencing described Nikola’s promise as a mirage:
“Milton made false claims regarding nearly all aspects of Nikola’s business, including: (i) false and misleading statements that the company had early success in creating a ‘fully functioning’ semi-truck prototype known as the ‘Nikola One,’ when MILTON knew the prototype was inoperable; (ii) false and misleading statements that Nikola had engineered and built an electric- and hydrogen-powered pickup truck known as ‘the Badger’ from the ‘ground up’ using Nikola’s parts and technology, when MILTON knew that was not true; (iii) false and misleading statements that Nikola was producing hydrogen and was doing so at a reduced cost, when MILTON knew that in fact no hydrogen was being produced at all by Nikola, at any cost; and (iv) false and misleading claims that reservations made for the future delivery of Nikola’s semi-trucks were binding orders representing billions in revenue, when the vast majority of those orders could be cancelled at any time.”
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by Daniel Stefanski | Jan 22, 2025 | News
By Daniel Stefanski |
One of Arizona’s leading watchdog organizations is starting off the new year with a significant lawsuit.
Last week, the Goldwater Institute announced that it had challenged “Arizona’s unconstitutional tax subsidies for filmmakers.” The lawsuit, McEwen v. Arizona Commerce Authority, was filed in the Superior Court of the State of Arizona for Maricopa County.
In that lawsuit, attorneys for the Goldwater Institute wrote that “this case challenges the constitutionality of a state program that subsidizes the film industry and private film companies to the tune of millions of dollars in refundable tax credits each year.” The filing adds that “The Arizona Motion Picture Production Program violates the Arizona Constitution’s Gift Clause, both facially and as applied to two film production projects approved to receive taxpayer-funded subsidies.”
Parker Jackson, a Staff Attorney at the Goldwater Institute, wrote a blog post about the lawsuit after it was filed with the court. He said, “…In 2022, when the state legislature controlled a $5.3 billion surplus, film industry executives and lobbyists who for years had failed to revive a subsidy program seized their chance to get back in on the action. They cobbled together enough votes to enact the Arizona Motion Picture Production Program, which provides up to $125 million in refundable tax credits each year to qualified film production projects. ‘Refundable’ means that if a film company qualifies for more in credits than they owe in taxes, the state cuts them a check! That’s even worse than the old program, which only allowed for ‘transferable’ credits (meaning the recipient could transfer or sell the credit to someone else, but the state didn’t directly send them cash).”
Jackson shared that “After delays due to administrative rulemaking and recent strikes that rocked the film industry, the state is set to finally begin issuing the first round of credits this year. The Arizona Commerce Authority has begun the process of approving subsidies up to $1.2 million for a single project.”
The Goldwater attorney finished his piece, saying, “These types of abuses are exactly why the Arizona Constitution prohibits the state from subsidizing or otherwise giving out money for private purposes unless taxpayers receive direct benefits in return. That means that the state can contract with private companies to perform services or provide supplies at fair market rates, but donations, grants, subsidies, and other forms of corporate aid are not allowed.”
Daniel Stefanski is a reporter for AZ Free News. You can send him news tips using this link.
by AZ Free Enterprise Club | Jul 3, 2024 | Opinion
By the Arizona Free Enterprise Club |
After months of debate surrounding the controversial reauthorization of the Arizona Commerce Authority (ACA), the tension finally broke on the last day of session when HB2210 was raced through the House and Senate and signed by Governor Hobbs.
Everyone at the capitol was aware of the problems surrounding the Commerce Authority. Our elected officials were briefed on the innumerable deficiencies, questionable activities, and likely illegal behavior of the agency. Yet when it came time to act, the legislature capitulated to the special interest benefactors of the agency, passing a reauthorization with no real reforms. The included changes were so inconsequential that an agency dealing with months of negative press about illegal CEO junkets had nothing but accolades for legislative leadership.
What did the final ACA package look like? In exchange for a five-year reauthorization (one of the longest reauthorizations ever granted to the ACA), the agency agreed to add to their board an attorney practiced in litigating Gift Clause violations, a requirement that their board meetings be videoed and hosted online for public review, a cap of “only” 100 state-paid full-time employees, and some reporting requirements for permitting and approval times by local cities and towns.
So, what started out as a hopeful and robust opportunity for reform quickly disintegrated into window dressing changes…
>>> CONTINUE READING >>>
by AZ Free Enterprise Club | Jun 23, 2024 | Opinion
By the Arizona Free Enterprise Club |
Last weekend, the Arizona legislature completed its constitutional duty and finally passed a state budget, concluding its business for the year. Looming over the entire process was a budget deficit that needed to be filled—fluctuating from around $1.6 billion to just over $2 billion over the 3-year budgeting period.
Though the left and the media wanted to blame historic tax cuts and landmark school choice expansion for the shortfall, the real problem was record spending that resulted in Arizona’s budget growing by over 50% in the last five years. So, when lawmakers gaveled into session in January, the solution was to right-size state spending. Our organization even provided a roadmap for a successful budget process:
- Cut spending to align with current and future funding projections
- Don’t raid the rainy-day fund
- Don’t use budget gimmicks to balance the sheets
- Don’t roll back our school choice programs
- Don’t raise taxes
So how did the legislature do? Here is a breakdown of the good and the not so good results from the budget:
>>> CONTINUE READING >>>
by AZ Free Enterprise Club | Jun 12, 2024 | Opinion
By the Arizona Free Enterprise Club |
There are plenty of problems with the Arizona Commerce Authority. Since its inception in 2011, criticisms were raised concerning its freewheeling powers to dole out taxpayer money with practically no legislative oversight and broad exemptions from important guardrails such as the prohibition of using outside counsel (rather than the Attorney General’s office.) These issues have resurfaced over the years in critical Auditor General reports that have highlighted the insufficient reporting and record keeping for the administration of grants and awards provided by the agency to private businesses. This led to a mere 2-year extension of the agency in 2016, and a controversial reauthorization in 2018 when Republicans and Democrats alike banged the table for reforms. And most recently, the agency has come under fire by the Attorney General herself, for unconstitutional gifts in the way of wining and dining and Super Bowl tickets for CEOs.
Despite consistent criticism across the aisle and over the years, the ACA has evaded any real substantial reforms. That could very well change this year.
There now seems to be bipartisan interest in reining in an unaccountable agency with a $226M budget and a multi-million-dollar slush fund…
>>> CONTINUE READING >>>
