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When Visions Diverge

When Visions Diverge: What Happens When Property Owners and Cities Want Different Land Use

The crack of the gavel thunders through the room over the buzz of hushed whispers. Alone at the podium, the property owner stands stunned by the city council action denying the vision for a property. The investment in preplanned designs, attorneys, consultants and engineering circles the drain.

Hanging above it all is the “vision.” A parcel of land, lines on a drawing, colors on a map and the ghost of a citywide vote. A document, called a general plan, presses down on the hope, the plan and the decision, “Motion to deny the development proposal passes. The council finds the project is not consistent with the general plan.”

Jordan Rose, founder of Rose Law Group

Jordan Rose, founder of Rose Law Group.

“During the recession, some investors looked at bargains and not zoning,” says Scottsdale land use attorney Jordan Rose, founder of Rose Law Group. “There was less diligence, and some acquired land without regard to what the general plan said about the property.”

Development plans have been stalled or blocked by recent Valley city zoning actions. Several cases―primarily in the East Valley―have brought the issue into greater focus. The recovery-driven interest in turning properties or resurrecting old plans causes some of the conflict.

In many ways, local governments are market-driven, but driven by a different market than commercial real estate. The Arizona legislature forces towns and cities to depend on sales tax for general fund revenues―the basic operating income for key community services. This in turn drives local governments to create retail and employment site opportunities through the general plan. Without revenue-generating undeveloped land, a city council is not going to have the wherewithal to fund future growth and the requisite public safety, parks and libraries.

The sales-tax dependence led to cities to be very protective of revenue-generating land set aside in the general plan. Retail business has significantly changed over the past decade, but local government funding mechanisms continue to use 20th century revenue models for a 21st century economy.

The General Plan
In Arizona, every city and county needs a general or comprehensive plan to provide a long-range blueprint of development patterns within current and future boundaries. Plans are supposed to be updated every decade and ratified by the voters. Several plans are slated for ratification this year―including Tempe, Scottsdale and Mesa.

“A general plan is a large and complex document, it carries a lot of implications that are not apparent when voting for ratification,” says Ralph Pew, member and manager, Pew & Lake, PLC, Mesa.

The comment “the plan can’t be changed because voters approved it” is often raised during a project hearing when there are proposals to amend the land use map. Pew says, “The plan itself contains the standards for approving major and minor amendments. Change is a planned part of the process.”

John Berry, founder of Berry Riddell & Rosensteel LLC, Scottsdale, says that preparation is the key, “When a client comes to us, we start with the staff, listen to neighbors and talk with elected officials to try to foresee any major issues. It’s incumbent on the developer to give the city the facts to support the project. Opinions and project economics alone are not going to gain an approval.”

Rose agrees, “We’ve seen clients with plans that just don’t fit with the general plan. This means a lot of work up front to move the project forward, but sometimes, we have to tell them, ‘it isn’t going to be approved.’”

Before the recession, development was moving so quickly that a zone change or general plan amendment denial just meant the developer moved on. “We don’t have a lot of land use litigation in Arizona,” says Pew. “Pre-recession, the pace of development and number of opportunities, made it possible for the developer to shrug off a denial and move on to the next project.”

It’s different in the planning pipeline now. “When the recession ended, we were tickled to get applications once again,” reminisces Mesa Planning Director John Wesley. “There was an appetite to make things happen, and most projects were approved. That’s different now.”

Developers are seeing the difference during the hearing process.

“Councils are busy and they don’t like controversy,” says Berry. “The key to success is to listen closely to any objections early in the process and eliminate as many issues up front. When I go before a city council, I want to be able to say we have many points of agreement and just a few points of disagreement, if any.”

Pew emphasizes that getting an approval requires more work on the facts up front, “The more information we can give a city with the application showing the need for change, the easier it is for the city council to ultimately say ‘yes.’”

All three attorneys say that they will provide economic analysis, traffic reports and other empirical facts to back up an application.

Wesley says that he’s seeing more of that too, “It used to be developers would come in and say the project doesn’t pencil without the changes being approved. That doesn’t show any benefit to the city, and today, the council is less likely to be persuaded.”

Converging Goals
Cities and developers are looking more closely at project and city objectives to see how the divergent goals can be brought closer together. “In Mesa, we had a pattern of putting commercial development on every major street corner. Recently, an owner showed us that the area was barely supporting existing commercial on two of the corners, and a third corner still had undeveloped commercial zoning. Their argument made sense and the city approved a residential rezone.”

Even with numbers and well-reasoned arguments, sometimes visions are irreconcilable. “There are some properties in cities where general plan amendments are just not going to be approved,” cautions Rose. “We see cities with long range plans for an area, and the council is not going to change their vision on a piece-by-piece basis.”

“In Mesa, we have some neighborhoods where there is flexibility, if an owner makes a case,” points out Wesley. “But there are some areas where we need to protect the city’s plans even if the land remains vacant for a while.”

A Need for Change
Some point to the success of the Price Corridor in Chandler where the city held firm on keeping land use for large corporate and single-tenant users. That is changing this year following a report by The Maguire Group the city commissioned. Changing economics and use patterns opened the door to maintaining the same corporate center feel, but now permitting smaller users and multi-tenant buildings. As soon as the amendment’s approval was imminent, the Douglas Allred Company filed plans for a hotel and mid-rise office on the Park Place campus.

Allred Park Place building five shell.

Allred Park Place building five shell.

“We’re starting to see cities, like Queen Creek, take a look at actual absorption rates and land use needs when considering general plan amendments,” says Pew. “Policy is starting to move away from the pre-recession rigidity that all commercial and employment lands needed to be preserved.”

Before the economy plunged, it was common for land owners to seek highest-and-best use zoning in order to better position the land for sale. The convergence of Internet shopping, the housing crisis and a push for infill development changed land use demand and affected patterns.

“Cities are becoming aware that we’re starting to run out of land area,” explains Wesley. “We’re looking more carefully at changes, because there is generally no going back.”

“As long as land remains undeveloped, it is possible and sometimes reasonable to change zoning again,” says Pew. “With the real estate market shift, owners start looking at what’s going to work. It’s possible cities are going to see requests to shift zoning to match market demand rather than market value.”

Finding Balance
Wesley talks about listening to developer ideas and goals, “Sometimes what’s wanted isn’t a perfect fit, but we’ve worked with owners to try and accomplish their objectives. We had a recent project where we mixed land uses so that both (Mesa) and developer goals were mostly achieved.”

“A lot of the time, the public is wed to the general plan,” reflects Rose. “The general plan is a vision for a community, it can’t just be simply dismissed. There are a lot of moving parts.”

In conversation with each of the three attorneys, one word is in their comments again and again: “understand.”

“Listen and understand what the neighborhood expects from a development,” Berry says.

Rose advises, “Understand what’s expected and be creative to bring ideas to the table.”

“Understanding the stakeholders and the project neighborhood is a big key to success,” counsels Pew.

Understanding city expectations can be the first step on the road to meeting an owner’s property objectives.

sales.tax

Arizona lawmakers adopt sales tax overhaul

The Arizona Legislature adopted a major overhaul of the state’s complicated sales tax collection system in the final hours of the session Thursday night after a deal with cities and towns removed a major roadblock.

Municipalities led by the League of Arizona Cities and Towns were able to hold off the overhaul after raising concerns they would lose revenue. Gov. Jan Brewer made the overhaul a priority of the legislative session and made major compromises before the final deal was struck Thursday.

The Senate passed House Bill 2111 unanimously and the House passed it with just one opposing vote.

The overhaul would not impact what ordinary consumers pay at store checkouts. Instead, it will make it easier for businesses that pay a so-called Transaction Privilege Tax. The deal leaves in place a tax on new construction that funds many city projects but eliminates it for companies that do home and other repairs.

Municipalities could still lose revenue, but the compromise gives them better ways to track revenue and clarifies how audits are done, said the sponsor, Rep. Debbie Lesko, R-Peoria. The deal that was finally cut Thursday happened after months of impasse.

“The League came to the table and gave us some reasonable language about what they wanted,” Lesko said.

The deal came together as the Legislature pushed out a budget and Brewer’s Medicaid expansion plan and made a rush to finish work and adjourn Thursday night.

The overhaul targets the state’s complex system where businesses are taxed on their revenues, at different rates by different entities, including the cities, counties and the state. The tax on contractors and other business transactions known as the TPT, and the state alone is estimated to collect $3.8 billion of the state’s total revenue of $8.6 billion this budget year. Businesses also were subject to multiple audits and had to file returns in every city, county and town where they operated.

That system will be eliminated, with the state overseeing all those functions.

sales.tax

Arizona Business Community Supports HB2111

The undersigned organizations and businesses want to express their strong support for the passage of HB2111 with the floor amendment that will be offered by Senator Steve Yarbrough. This final amendment represents major concessions to address concerns that have been expressed by the city representatives.

This final amendment reflects the cities’ request for a separate online portal for the collection of sales taxes in the 18 non-program cities. In addition, the amendment reflects the cities’ demand to maintain the authority to audit single-location businesses in their city. Lastly, the amendment removes all of the changes to prime contracting tax except for the trade and service contractors.

While the Yarbrough amendment reflects major concessions to the cities that undermine some of the important reforms recommended by the Transaction Privilege (Sales) Tax Simplification Task Force, we believe this final proposal still reflects historic progress that deserves final passage.

The Senator Yarbrough floor amendment will provide for the following:

* Single Point of Administration – the Department of Revenue (DOR) will become the single point of administration and collection of TPT. However, at the request of the cities, there will be a separate online portal for the 18 non-program cities. Despite this concession, the cities remain opposed because they want to continue to require businesses making paper sales tax remissions to pay the state and city separately. Their proposal provides most small businesses no administrative relief from making multiple payments to multiple jurisdictions each month.

* Single and Uniform Audit – DOR will administer a standardized state audit program where all state and city auditors are trained and certified by DOR. Despite major concessions from the business community to allow cities to continue to audit local businesses, the cities continue to push for further changes that will undermine much needed reforms to standardize state and local audits.

* Trade/Service Contracting Reform – Service contractors working directly for an owner to maintain, repair, and replace existing property would pay tax on materials at retail and not be subject to the Prime Contracting Tax. During Task Force deliberations, the cities repeatedly conceded that this area of the prime contracting tax was problematic and should be changed. However, after almost a year of study and discussion, they have offered a change to the taxation of service contractors that provides no administrative relief and couples that change with a request that the state give the cities $80 million from use tax collections.

Arizona’s chaotic and dysfunctional sales tax system has been the subject of considerable controversy at the Capitol for over 30 years. The creation of the Task Force, as well as the appearance for the first time that the cities recognized the need for reform, gave Arizona businesses great hope that this system would finally be reformed. We strongly encourage state policymakers to pass a sales tax reform bill that is grounded in sound tax policy and focuses on reducing the extraordinary compliance costs on Arizona businesses.

Kevin McCarthy, President, Arizona Tax Research Association
Michelle Lind, Chief Executive Officer, Arizona Association of REALTORS
Bas Aja, Executive Vice President, Arizona Cattlemen’s Association
Glenn Hamer, President & CEO, Arizona Chamber of Commerce
Steve Macias, Chairman, Arizona Manufacturer’s Council
Francis McAllister, Chairman, Arizona Mining Association
Courtney LeVinus, Arizona Multihousing Association
Michelle Allen Ahlmer, Executive Director, Arizona Retailers Association
Steve Chucri, President/CEO, Arizona Restaurant Association
Rick Murray, Chief Executive Officer, Arizona Small Business Association
Steve Zylstra, President & CEO, Arizona Technology Council
Greg Turner, Vice President, Senior Tax Council, Council On State Taxation (COST)
Lisa Rigler, President, Small Business Alliance AZ
Todd Sanders, President & CEO, Greater Phoenix Chamber of Commerce
Tom Franz, President, Greater Phoenix Leadership
Connie Wilhelm, President, Home Builders Association of Central Arizona
Tim Lawless, Chapter President, NAIOP
Farrell Quinlan, Arizona State Director, NFIB
Ronald E. Shoopman, President, Southern Arizona Leadership Council
Scot Mussi, President, The Arizona Free Enterprise Club
Matt Beckler, Vice President, Treasurer & Chief Tax Officer, Apollo Group, Inc.
Steve Barela, State & Local Tax Manager, Arizona Public Service
Steve Trussell, Executive Director, Arizona Rock Products Association
Michael DiMaria, Director of Legislative Affairs, CenturyLink, Inc.
Gayle Shanks, Owner, Changing Hands Bookstore
Michelle Bolton, Director of Public Affairs, Cox Communications
Nikki Daly, Owner, Flair! Salons
David Karsten, President, Karsten’s Ace Hardware
Reuben Minkus, Minkus Advertising Specialties
PetSmart, Inc.
Tina Danloe, General Manager, Pima Ace Hardware
Molly Greene, Senior Government Relations Representative, Salt River Project
Les Orchekowsky, President & Co-Owner, Sierra Ace Hardware, Inc.
Ann Seiden, Administrator/Corporate Public Affairs, Southwest Gas Corporation
Joseph Hughes, Director of Government Affairs, U.S. Airways
Walgreens Co.

Glenn Hamer is president and CEO of the Arizona Chamber of Commerce and Industry. The Arizona Chamber of Commerce and Industry is committed to advancing Arizona’s competitive position in the global economy by advocating free-market policies that stimulate economic growth and prosperity for all Arizonans.

Jan Brewer

Brewer's sales tax overhaul passes 1st House hearing

A proposal that would overhaul Arizona’s complex sales tax collection process got a strong endorsement from business leaders before unanimously passing its first Arizona House committee Monday.

The proposal from Gov. Jan Brewer is designed to ease the burden on businesses, and business leaders hailed the bill for its intent of cutting red tape and complexities.

Cities and towns object because of the way the measure shifts taxation of new construction. It’s now based on where the building is done, so growing areas get added revenue, but Brewer wants it changed to where the materials are sold.

The legislation doesn’t affect how consumers pay sales tax.

Maricopa Mayor Christian Price testified at the House Ways and Means committee Monday that his city would lose millions in revenue a year because of the construction tax changes.

“Let’s call a spade a spade here. At the end of the day this is going to boil down to numbers,” Price told Ways and Means Committee members. “There are 91 cities and towns in this state that are very much opposed to this construction tax change.”

An amendment designed to ease the loss to municipalities was adopted, but cities said even with that change, the losses could decimate their cities.

“If you don’t want to see some of these become ghost town, like the city of Maricopa, they you need to listen to what we say,” Price said.

The bill would unify the state’s sale tax collection system, creating one return, one payment and one audit. That would replace multiple versions of each that businesses operating in multiple jurisdictions must deal with.

Jan Brewer

Brewer’s sales tax overhaul passes 1st House hearing

A proposal that would overhaul Arizona’s complex sales tax collection process got a strong endorsement from business leaders before unanimously passing its first Arizona House committee Monday.

The proposal from Gov. Jan Brewer is designed to ease the burden on businesses, and business leaders hailed the bill for its intent of cutting red tape and complexities.

Cities and towns object because of the way the measure shifts taxation of new construction. It’s now based on where the building is done, so growing areas get added revenue, but Brewer wants it changed to where the materials are sold.

The legislation doesn’t affect how consumers pay sales tax.

Maricopa Mayor Christian Price testified at the House Ways and Means committee Monday that his city would lose millions in revenue a year because of the construction tax changes.

“Let’s call a spade a spade here. At the end of the day this is going to boil down to numbers,” Price told Ways and Means Committee members. “There are 91 cities and towns in this state that are very much opposed to this construction tax change.”

An amendment designed to ease the loss to municipalities was adopted, but cities said even with that change, the losses could decimate their cities.

“If you don’t want to see some of these become ghost town, like the city of Maricopa, they you need to listen to what we say,” Price said.

The bill would unify the state’s sale tax collection system, creating one return, one payment and one audit. That would replace multiple versions of each that businesses operating in multiple jurisdictions must deal with.

Jan Brewer

Brewer rolls out sales tax reform plan

Gov. Jan Brewer is expected to announce details of her proposal for a comprehensive simplification of the Arizona’s sales tax collection system at a press conference Monday.

Brewer says the current system has so many twists and turns it is extremely difficult for businesses to pay what they owe. She says business owners serving multiple cities must file multiple tax returns and undergo multiple audits. She’s said she wants a system that has just one form and one filing per business.

Cities and towns have objected to one part of the proposal that would change how sales tax on new construction is collected. They say that will hurt growing cities by sending the taxes elsewhere.

Brewer plans to announce the introduction of legislation designed to implement her plan.

shopping

Retail: It’s a New Reality

As municipalities all across Arizona have seen their general funds strongly impacted over the last several years due in part to significant drops in sales tax revenue, the importance of a vibrant/strong retail sector has once again taken on a prominent role.

With Arizona cities in some instances relying on retail sales taxes for up to one-third of their general fund revenue, there is today a quiet, but forceful emphasis – particularly in rural areas – being placed on economic development professionals to make sure their programs help retain and attract new retail businesses to their communities, with the progressive municipalities leading the way.

In addition to the general fund ramifications of retail sales tax collection, another significant new reality of the retail sector has been recognized.  Todd Sergi, co-chair of the AZ/New Mexico Alliance for the International Council of Shopping Centers (ICSC), said the stigma of retail jobs being associated only with unattractive, part-time or low-paying jobs is changing.

“With bankers, pharmacists, medical professionals and other non-traditional retail businesses more commonly becoming a part of the new, redefined mainstream shopping environment, the retail sector is now creating well-paid jobs not traditionally seen before,” Sergi said.

The recession in Arizona provided examples in many instances of what a well-designed, well planned center does, or does not, look like.  Successful retail centers have common themes.  Municipalities have realized what it takes for retailers to have success in their cities, including ample parking, un-obscured visibility and easy access from the surrounding streets and easy-to-see signage.  These elements are routinely found in the more highly occupied centers that fared better through the economic down cycle.
Sergi said, “Everyone realizes that a hard-to-get-to retail center hidden behind large over grown landscaped settings with bad signage and limited parking is a lose-lose.  We don’t need more empty buildings.”

Fortunately, the design and planning barriers for retailers to enter a market have been noted.  Lessons were learned.  Statewide, both elected leaders and municipality staff have seen first-hand examples where dated or onerous policy cost their communities opportunities for new sales tax revenue.  The demand and competition to attract those businesses, in some instances, sent potential new entrants to neighboring communities viewed as more reasonable and forward thinking.

The retail industry has been adapting, as well.

Garrett Newland, vice president of development for Macerich, said we are seeing these adaptations every day with continuing anchor changes and new retail concepts.
“Retail is reinventing itself right before our eyes,” he said.  “What malls look like today is vastly different than what we saw in the ‘80s and ‘90s and it doesn’t matter if it’s a super-regional mall or a corner strip center.”

With empty stores and some poorly designed centers dotting Arizona’s retail landscape, a number of existing centers will have to be retrofitted, or possibly redeveloped, to make them assets to the community that can be counted on to generate needed sales and/or real estate tax revenue.

The evolution of retail e-commerce is also changing the face of retail.

An ICSC report recently indicated that retail e-commerce has grown seven-fold since 2000 and at its current growth rate will double again by 2016.  Legislation that requires e-commerce retailers to capture sales tax dollars for government coffers to some degree may level the playing field for the bricks and mortar retailers.

But even so, to remain competitive the storefront of tomorrow is changing.  Retailers now understand the need to integrate their physical and on-line presence, how to balance the product search, selection, transaction and delivery processes desired by today’s consumer and the ability to offer a variety of delivery and return options.

Michael P. Niemira, vice president, chief economist and director of research for ICSC, said the partnerships being established between the private and public sectors, the ability of retail to adapt and meet the needs of today’s customers and the willingness of economic developers to embrace retail bode well for the future economic success of each of our communities.
Eric Larson is president-elect of the Arizona Association for Economic Development (AAED) and board chair for the Scottsdale area Chamber of Commerce. AAED and ICSC will co-present a retail symposium Jan. 8 in which these topics will be discussed in detail by those quoted and others, as well as presentations made by representatives of new/expanding Arizona retailers.  For information, call (602) 240-2233 or visit www.aaed.com.

sales.tax

Governor’s task force making right moves on sales tax

One of the Arizona Chamber of Commerce and Industry’s top legislative priorities for 2013 is to simplify our state’s sales tax system.  Our sales tax is so complicated that you might be surprised to learn that Arizona does not technically have a sales tax. Rather, we have a transaction privilege tax (TPT), something that requires certain merchants to pay for the “privilege” of selling taxable items and a use tax, which is aimed at consumers who purchase certain goods to pay.

Thanks to the leadership of Gov. Jan Brewer and the state Legislature, we have made tremendous progress in tax reform over the past two years. Our corporate income tax rates, capital gains tax rates, business equipment and property assessments are all being reduced to put the state in a better competitive position and to win back the jobs we lost in the Great Recession.

But when it comes to the TPT and use tax, the state is out of kilter. After the expiration of the temporary one-cent sales tax in June 2013, our overall sales tax burden (state and local) will be among the 15-highest in the country. However, perhaps even more problematic than the tax rate will be the incredible complexity of the system, which places substantial administrative burdens on companies – particularly small businesses – and also leads both to willful and inadvertent tax avoidance.

Gov. Brewer on May 11 wisely issued an Executive Order establishing the Transaction Privilege Tax Simplification Task Force, premised on the following three points:

> Arizona has one of the most complex sales tax systems in the country;
> Taxpayers have expressed a clear desire to see reforms enacted that will modernize and simplify the TPT; and
> It is in the interest of taxpayers and state and local governments to make the tax code easier to understand, comply with and administer.

Lead by one of the state’s smartest and savviest tax and policy experts, the governor’s director of policy, Michael Hunter, the task force recently released a draft report. The report, which in an easy to digest 22-page document captures the group’s 17 meetings conducted over a five-month period.  The key recommendations:

State law should allow only a single audit, in accordance with existing statutory schedules, including a multi-jurisdictional audit if applicable.
The current tax structure for contracting activity is a mess and should be transitioned to a tax on materials at the point of sale, which if done properly should ease compliance and increase the overall pot of tax dollars available to local communities.
The State Legislature should act to ensure that Arizona is well-positioned to benefit from the taxation of online retail and remote sales.
The state, cities and towns should standardize TPT licensing
When fully implemented, the online portal required by legislation authored by Rep. Rick Gray (HB 2466) should be expanded to issue all TPT licenses and allow for all TPT tax returns to be filed through the portal.

These are all sound, commonsense ideas. While there is much work to be done to implement all of these recommendations, it is exciting that we have taken the first step to simplify a tax system so complicated that few Arizonans even know what it’s called.

Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry. The Arizona Chamber of Commerce and Industry is committed to advancing Arizona’s competitive position in the global economy by advocating free-market policies that stimulate economic growth and prosperity for all Arizonans. http://www.azchamber.com/

sales

Ruling allows sales tax hike to go on ballot

An initiative measure for a sales tax increase can appear on Arizona’s ballot this November despite a paperwork error that threatened to kill the proposal before it reached voters, the Arizona Supreme Court ruled Tuesday.

The brief order issued by a three-justice panel said it was enough that supporters of the initiative “substantially complied” with laws on initiative applications.

Supporters mistakenly filed an incorrect paper copy of their proposal with the state when they launched the initiative petition drive in March. They submitted a correct version on compact disc and attached correct copies to petitions circulated to voters.

The initiative technically hasn’t been certified yet for the ballot, but ongoing checks have already determined that supporters turned in enough petition signatures.

The initiative proposes a penny-on-the-dollar increase to take effect in 2013 upon the expiration of a same-size temporary increase.

The money would be directed to education, transportation projects and programs for children, but the two paragraphs omitted from the paper copy filed with Secretary of State Ken Bennett’s office affected how some of the money would be divided among those purposes.

Public school groups, business alliances, university students and others who support the initiative urged the justices to let the initiative go on the ballot. They said a minor paperwork mistake that was caught in time to prevent confusion shouldn’t thwart voters’ right to use the initiative process to set public policy.

Top Republican legislative leaders, a business-backed taxpayer organization and a conservative advocacy group joined elections officials in saying the initiative should be kept off the ballot because supporters didn’t follow rules that protect the integrity of the initiative process. They argued that the error caused confusion over how the sales tax would work.

Initiative supporters said the paper copy was an outdated version that lacked two paragraphs spelling how some of the sales tax revenue would be spent. They said a worker in the office of a lawyer who helped prepare the initiative printed the wrong copy to be filed.

The error wasn’t noticed until months later, before the circulated petitions were filed but after Bennett’s office posted the incomplete version on its website.

Initiative supporters sued after Bennett in June declared all the petitions invalid because the copies of the initiative attached to petitions didn’t match the paper filing with his office.

A trial judge overturned Bennett’s decision, ruling that the initiative petitions circulated to voters had the intended version of the initiative. Bennett appealed to the Supreme Court.

With the omitted two paragraphs, there would be bigger increases in funding for universities and transportation projects. Without the paragraphs, there’d be larger funding increases for K-12 education and community colleges.

The legislative budget staff said $650 million was at stake over 17 years, out of a total of $25 billion of sales tax revenue during the same period.

tax revenue

17 Percent Of State Tax Revenue Comes From Auto Sources

A new report from a leading industry research group reveals that more than 17 percent of Arizona’s total tax revenue is generated by the auto industry and from the state’s drivers and auto owners.

In a nationwide study released this week, the Center for Automotive Research in Ann Arbor, Michigan found that in 2010 the State of Arizona collected more than $1.74 billion from car owners, dealers, drivers and auto industry workers, totaling a full 17 percent of the total tax revenue for the state. Arizona ranks in the top third of all states in percentage of tax revenues generated by the auto industry. The national average is 13 percent.

“This study confirms that the U.S. auto industry has a huge economic impact in Arizona and across the nation,” said Mitch Bainwol, President and CEO of the Alliance of Automobile Manufacturers. “Between taxes and fees paid by auto owners, income taxes paid by auto industry workers, fuel taxes paid by drivers, and corporate taxes paid by dealerships and other auto related businesses, the automotive sector is contributing a very significant share of revenue to the budgets of every single state.”

“In Arizona, families and businesses paid $723 million in sales taxes on new and used vehicles, service and parts,” said Bobbi Sparrow, President and CEO of the Arizona Automobile Dealers Association. “Add in another $201 million in registration and license fees, and Arizona drivers are kicking in a major share of the state’s tax base every year.” Specifically, in calendar year 2010, the State of Arizona collected:

• $382 million in new vehicle sales taxes
• $240 million in used vehicle sales taxes
• $101 million in sales taxes on auto parts and services
• $797 million in taxes from fuel sales
• $201 million in registration, licensing and title fees
• $19 million in business and employee taxes from dealerships, manufacturers and suppliers

The production and sale of cars is a massive economic driver for the US economy. National revenues from car sales alone totaled over $564 billion in 2010, an increase of 17 percent from the previous year. The manufacture and sales of parts, along with repairs and service, account for another $173 billion in economic activity. So, automobiles drive more than $735 billion into the economy each year.

“In this country, 8 million people are employed directly and indirectly as a result of the manufacture, sale and repair of automobiles,” added Bainwol. “Those 8 million people earn $500 billion in compensation. These are American families living all over this country. In many communities, they form the backbone of local and even state economies. And as jobs are added, these numbers will climb. So auto policy is central to the economic vitality of virtually every state.”

For more information on the Center for Automotive Research’s report, visit their website at cargroup.org.