by AZ Free Enterprise Club | Jan 27, 2024 | Opinion
By the Arizona Free Enterprise Club |
A contentious fight is brewing in the Arizona legislature, the possible reauthorization of the Arizona Commerce Authority (ACA). Governor Hobbs has made the reauthorization a top priority of her administration this session, mentioning it in her State of the State address. But the debate has an ironic element considering the history of its inception.
In 2011, the state was crawling out of a crippling recession, having lost literally hundreds of thousands of jobs and even selling off the state Capitol buildings to dig out of a deficit. The legislature, in collaboration with the Brewer Administration, introduced an omnibus bill sold as a “jobs package” which refashioned the bureaucratic Department of Commerce into the Arizona Commerce Authority, and incorporated both new targeted tax credit programs and incentives, as well as phased in corporate income and commercial property tax cuts.
Democrats a Decade Ago Opposed the ACA
The bill at the time was uniformly opposed by Democrats, including then Representative Katie Hobbs. Republicans mostly coalesced around the bill, with a handful of key conservatives voting in opposition of the legislation, largely in protest of the corporate welfare and multi-million-dollar “deal closing” fund with no legislative oversight. For those unfamiliar with the deal closing fund, it is a large pot of money appropriated to the Director of the Commerce Authority to throw at corporations to convince them to relocate to Arizona.
After the ACA was passed and signed into law, it would seem that only a few conservative voices and the Club itself would prove prophetic at the lack of oversight and inevitable gift clause violations, which is a constitutional protection from the government subsidizing private industry…
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by Corinne Murdock | Jan 18, 2024 | News
By Corinne Murdock |
On Tuesday, Attorney General Kris Mayes announced that the Arizona Commerce Authority (ACA) violated the Arizona Constitution’s Gift Clause.
Mayes determined that the ACA’s high-dollar “CEO Forums” — in which ACA would court CEOs with accommodations, experiences, and refreshments — were unconstitutional, namely noting the massive expenditures without returns last year under Hobbs. In a letter to ACA general counsel, Mayes explained that the gifts corporate executives were impermissible because they didn’t create concomitant public value.
“The current structure of the CEO Forums confers significant value on invited private executives and their guests without obtaining any identifiable value for the state,” said Mayes.
ACA is a state agency dedicated to growing and diversifying the state economy by attracting, expanding, and retaining businesses. ACA is managed as a public-private partnership.
Mayes’ findings confirmed a report from the auditor general last September which determined that the ACA may have misspent about $2.4 million to court private CEOs between 2018 and 2023. A majority of that — over $2 million — occurred last year alone under Hobbs’ first year as governor.
From 2018 to 2022, ACA spent about $356,000 in total on forums for corporate executives: an average of $89,000 per year, about 4.5 percent of what ACA spent on last year’s forum.
Last year marked the most expensive CEO Forum under investigation. The forum was planned around the Super Bowl and Waste Management Phoenix Open; ACA spent over $2 million on corporate executives, and Gov. Katie Hobbs was one of the recurring featured experiences.
In Mayes’ decision on Tuesday, she pointed out last year’s forum specifically.
“While the ACA may hold forums that confer a nominal value on attendees, its past forums, including last year’s $2 million Super Bowl forum and its planned 2024 Forums, do not come close to meeting that requirement,” said Mayes.
As part of last year’s forum, ACA gifted corporate executives and their guests rooms; in-state transportation; event tickets to the Waste Management Phoenix Open VIP Skybox, an NFL Owners Party, a Super Bowl VIP Tailgate Party, the Super Bowl Experience, private viewing suite for the Super Bowl, and concerts associated with the Phoenix Open and Super Bowl; theater tickets; regular season football game tickets and parking passes; lunch invitations with NFL leadership; and Super Bowl Host Committee VIP Golf Tournament tickets.
ACA admitted in a December response to the attorney general that they couldn’t attribute direct causation between CEO Forum attendance and a decision to locate a project in Arizona. Mayes declared that the inability to show cognizable economic value received for their expenditures constituted a violation of the Gift Clause.
“ACA’s responses to our office’s inquiries demonstrate that it expends considerable funds on simply achieving attendance at the CEO Forums even though there is no public benefit from an executive’s private ‘changing perception and increasing sentiment’ about Arizona,” wrote Mayes. “ACA counts non-binding commitments to locate a project in Arizona as ‘project wins.’”
Up until the Tuesday determination by Mayes, ACA was planning on spending another million on corporate executives this year.
ACA planned to spend over $1 million on two forums this year for the NCAA Final Four Basketball tournament and the Waste Management Phoenix Open. If the costs were split evenly, each forum would cost around $400,000 more than the individual 2018-2022 forums held under former Gov. Doug Ducey.
Mayes pledged to prevent the ACA from issuing future gifts to private entities.
Corinne Murdock is a reporter for AZ Free News. Follow her latest on Twitter, or email tips to corinne@azfreenews.com.
by Corinne Murdock | Oct 4, 2023 | Economy, News
By Corinne Murdock |
The Arizona Commerce Authority (ACA) may have misspent $2.4 million to court private CEOs, according to a new report from the Arizona Auditor General (AG). The ACA is a state agency managed as a public-private partnership.
The report found that the ACA spent more than $2.4 million to court private CEOs with accommodations, experiences, and refreshments between 2018 and 2023. These gifts spread across five private CEO Forums were intended to entice private CEOs to bring their business to the state; none did. Only 23 of 118 companies courted proposed “potential non-binding investment and job commitments.”
The ACA courted the CEOs in “marketing campaigns” around the Waste Management Phoenix Open (WMPO) golf tournament and the 2023 Super Bowl. At these events, the ACA paid for hotel rooms; transportation; suites at the WMPO; Super Bowl sponsorship that came with access to Super Bowl LVII and related VIP events; gifts like events tickets, hats, sunglasses, tumblers, and tote bags; VIP nightclubs and concerts at the WMPO; and the Super Bowl Music Festival.
The ACA told the AG that their CEO courting didn’t violate the Arizona Constitution’s Gift Clause because the CEOs’ projected, but non-binding, promise of tens of thousands of jobs and billions in investments would far outweigh the $2.4 million.
Below is the cumulative cost breakdown of all six years of CEO Forums:
- Super Bowl sponsorship package: $1.85 million
- WMPO Suite: $288,600
- Transportation and lodging: $193,200
- Educational events (speakers, panels): $65,000
- Birds Nest VIP and other concert or theater tickets: $42,000
- Small gifts (sunglasses, sunscreen, water, hats, tumblers, red wine, desserts): $7,600
The Super Bowl sponsorship package included 140 game tickets, 140 tickets to the Super Bowl VIP Tailgate Party, 140 tickets to the Super Bowl Experience, a party loft at the Super Bowl (with food and drinks), gift packages for event attendees (four tickets and two premium parking passes for one Arizona Cardinals regular season football game), 70 hotel rooms at the Arizona Biltmore (all event attendees), and Arizona Biltmore Resort events (hospitality lounge, planned dinner events, welcome event with Gov. Katie Hobbs, and panel discussions).
The WMPO Suite was for 17th hole suites, which include daily complimentary alcohol and other beverages, and breakfast and lunch buffets; suite tickets for up to 34 people daily; an additional 20 general admission tickets daily; and 15 parking passes for each day of the WMPO.
The ACA plans to host another two private CEO Forums in February and April 2024, in conjunction with the WMPO and the NCAA Men’s Final Four basketball tournament.
READ THE AUDITOR GENERAL REPORT
The AG also found at least two instances in which the ACA had invited company executives after awarding them a grant or approved tax incentive.
The over-$2.4 million was the smallest amount of expenditures that earned concern from the AG. Over $111 million may have been misspent on business incentives and broadband grants as well.
The report found that the ACA failed to provide documentation proving that $11 million in incentives were given to businesses that met required targets on job creation and/or capital investment. ACA staff also disclosed to the AG that they frequently didn’t conduct wage verifications for tax credits.
In all, the ACA lacked documentation showing it verified job creation requirements prior to approving 21 tax credits totaling $7.5 million. Those 21 tax credits were a sample out of 99. The AG also discovered that the ACA couldn’t provide documentation demonstrating that it investigated discrepancies in business applications for tax credits.
The AG declared that the lack of oversight created an increased risk of fraud and waste of taxpayer funding.
The ACA also failed to provide required documentation, guidance, or policies and procedures for $100 million in Arizona Broadband Development Grant Program for similar targets.
The ACA had an end-of-year fund balance of $202 million last year.
The ACA has 91 full-time employees, with nine vacancies. A board of directors governs the ACA. Voting members consist of the governor, the ACA CEO, and 17 private sector business leaders. The ACA CEO is Sandra Watson, who also oversees the Workforce Arizona Council and the Arizona Office of Economic Opportunity.
Corinne Murdock is a reporter for AZ Free News. Follow her latest on Twitter, or email tips to corinne@azfreenews.com.
by Terri Jo Neff | Mar 31, 2023 | News
By Terri Jo Neff |
In a move intended to further increase the state’s global competitiveness, two new Arizona Trade Offices are being opened, both in Asian countries.
The Arizona Commerce Authority currently has trade and investment offices in Tel Aviv, Israel and Frankfurt, Germany, as well as three in Mexico (Chihuahua, Guanajuato, and Mexico City). The new offices will be located in Taipei, Taiwan and Seoul, South Korea, and will serve as a platform to further accelerate economic collaboration.
The recent announcement of the new endeavors was made in conjunction with Gov. Katie Hobbs’ International State of the State address, which highlighted the fact Arizona ranked first in the nation in 2022 in the amount of foreign direct investment (FDI).
According to FDI Markets, Arizona attracted expansion projects in 2022 from 35 international companies last year, representing $31.954 billion in investment. It was the second time in three years that Arizona led the nation for FDI, demonstrating the state’s leading attractiveness for investment from global technology companies.
According to the Arizona Commerce Authority, the state’s FDI total for 2022 was led a $28 billion project announced by Taiwan Semiconductor Manufacturing Company, which brought the total of the company’s years-long commitment to construct and operate two facilities in north Phoenix to $40 billion.
Other significant FDI in Arizona last year included Canada-based XNRGY Climate Systems, Taiwan-based Chang Chun Group and Sunlit Chemical, and Switzerland-based Nestle.
Hobbs’ announcement was timed to feature the decision by South Korea-based LG Energy Solution of a four-fold increase to their planned Arizona investment. The company initially planned to invest $1.4 billion—which was included in the 2022 FDI report—before announcing in March its plan to up that to $5.5 billion.
LG Energy is a leading global battery manufacturer and renewable energy company. Its investment decision will support construction of two battery manufacturing facilities in Queen Creek, which industry observers say is the largest single project to date for a stand-alone battery manufacturing facility in North America.
Construction is set to begin this year, with production for cylindrical batteries for EVs (27GWh) and LFP pouch-type batteries for ESS (16GWh) beginning in 2025.
The Arizona Commerce Authority is the state’s leading economic development organization with a streamlined mission to grow and strengthen Arizona’s economy. Its International Trade Program offers Arizona-based companies export services to amplify their trade opportunities in international markets. Services include assistance and trade counseling, getting started, contact facilitation, company background, export leads, educational programs, and more.
The program further provides global exposure to Arizona’s small- and medium-sized companies through coordinated trade missions in various foreign countries. Such relationships lend long-term growth opportunities in global markets and prove critical for companies looking to import or export goods.
International projects in the Arizona Commerce Authority’s project pipeline have seen a 52 percent increase over the last quarter, reflecting a strategic effort to target the expansion of manufacturing and technology sectors. Such sectors traditionally offer higher than average wages for Arizonans.
Terri Jo Neff is a reporter for AZ Free News. Follow her latest on Twitter, or send her news tips here.
