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A PUBLICATION OF THE TRENDS ARIZONA DEPARTMENT ECONOMIC OF ARIZONA ECONOMIC SECURITY • Summer 2001 Slowing Economy Limits Tax Cuts; 2001 Session ocused Mainly on Back-Burner Issues In terms of business and economic nally passed. Before the Legislature legislation, the 2001 session will go took office in January, Tucson eco- down more for what was not passed, nomic development officials and the than what made it through the pro- Arizona Partnership for a New Econ- cess. A lack of funds and a politically omy, a public-private board created split Legislature for the first time in by Gov. Jane Hull to study ways to a decade accounted for the lack of develop the states technology indus- significant business bills passed this try, were touting a series of proposals 2001 BUSINESS AND LABOR costing $20 million to $30 million. Among these were: venture capital LEGISLATION REVIEW NEWS ANALYSIS for start-up technology companies; funding to study and promote indus- harmful legislation from becoming past year. However, business was try clusters (e.g., optics) that are ex- law. In some instances, it was a gov- able to fend off a number of con- pected to lead to high-paying jobs; ernors veto which set a record sumer-protection laws, which were lower business taxes; and incentives (28) in 2001 that prevented several considered too harsh by business in a for telecommunications infrastructure less-than-friendly bills for business time of economic uncertainty. and technology training centers.1,2 from getting onto the books. Among One indication of poor economic But by the end of the first session of these were proposals to give civil conditions in Arizona was that one of the 45th Legislature, few of the major rights protections to gays and trans- the governors major proposals at the economic development and business sexuals, and to levy hefty fines on beginning of the session had to be proposals made it through the legisla- companies that do not provide haz- pared back dramatically when it fi- tive process. 9or example, five ardous materials management plans tax-cut proposals totaling nearly $500 and inventory statements to local fire million primarily helping corporate departments. and small business were passed by In addition, there were a half-dozen IN THIS ISSUE the House of Representatives, but other bills that business fought never came up for a vote in the Sen- strongly that did not make it through ate (see Table 1). Ultimately, the re- the legislative process. These in- Volume 25 No. 2 ality that the state (and national) cluded proposals to make business economys continual slide kept any of responsible for destroying customer Page those bills from making it to the gov- records, adding health benefit re- Back-Burner Legislative Issues . ernors desk, where they likely would quirements, and increasing unem- have met the veto pen. Rose to ront in 2001 ............. 1 ployment insurance benefits and tying Still, business interests had to con- them to the cost of living. IndustryUpdate ........................ 8 sider the session a success in many The bills that we need to kill we ways because of their ability to keep were able to kill, said Michelle 2001 BUSINESS AND LABOR LEGISLATION REVIEW Covel, Arizona director of the National 9ederation of Independent Businesses, Table 1 said in a Tucson business journal. Major Tax-Cut Legislation That ailed in 2001 Session But it was a big struggle this year to Estimated Cost try to educate people and make them Bill Overview Over Biennium Outcome understand the unintended conse- 3 quences of some of these bills. Across-the-board Passed in House; Covel was referring to the time and HB2125 cuts in individual $98.4 Million ailed in Senate income taxes Committee cost of these requirements, particu- larly for small business. Lawmakers didnt seem to understand that small Cuts corporate income tax; Passed in House businesses are fundamentally different HB 2475 lowers threshold for $123.2 Million ailed in Senate from big business, and they have family tax credit inance Committee deep pockets like the big guys, Covel said.4 Offer option to multi-state Passed in House; HB 2477 corporations to base $39 million ailed in Senate On the other hand, some of busi- income tax on sales or Committee ness wins equated to defeats for la- keep current system bor, which has made some gains in recent years. Probably the biggest plus for labor, however, was a num- Eliminates transaction Passed in House; HB 2576 privilege tax on telecom- $118.8 million ailed in Senate ber of improvements for state work- munications, utilities ers (including universities) and active members of the state retirement sys- tem. The Legislature included in its Increases standard deductions Passed in House; HB 2616 for singles and married $101 million ailed in Senate budget a 10 percent pay raise to state couples workers over the next two years, and passed several bills offering increased health and pay benefits for retirees. Sets the assessment ratio for Lower taxes ailed in Senate SB 1097 secondary property taxes of commercial Committee Business at 10 percent of full cash value property Because of the dearth of tax cuts in 2001, legislation that normally would not be considered major rose to the Source: Arizona Capitol Times, March 2, 2001; Arizona Legislative Internet Site top this session. Among areas that (www.azleg.state.az.us) received more attention involved in- dustries such as construction, finance, idential development has been creep- and take-off zones while allowing in- and insurance. ing up on three sides of Luke Air creased development in other areas, After tackling growth issues the past 9orce Base in Glendale, the largest reported the Arizona Capitol Times5. two sessions Growing Smarter and 9-16 training base in the country. (Also see Economic Development Growing Smarter Plus the Legisla- State and local officials worried that for related material.) ture focused on less explosive, yet too much encroachment would make In 1995, the state established the Ar- important, issues. the base less viable, and therefore an izona Military Airport Preservation One issue that has come to the fore- easier target for closure. Committee for the purpose of encour- front in recent years is encroaching Enactment of SB 1525 expanded on aging the preservation of the growth around military installations. laws passed in last several years to long-term viability of Arizonas mili- With the closure of Williams Air 9orce protect military installations, by re- tary airports and protecting the pri- Base in Mesa in 1993 and federal quiring advance warning (at least 60 vate property rights of property plans to shut down more bases days) to military and public officials owners in the vicinity of military air- around the country, the state has of encroaching development by vari- ports. The law also required all polit- grown increasingly concerned about ous governing bodies. In addition, ical subdivisions in the vicinity of a how growth around bases can affect the law re-charted the locations military airport to adopt land-use their viability and the economic im- around the base that can be devel- plans and adopt and enforce zoning pact on local areas with the loss of oped and increased the restrictions regulations that assure development thousands of jobs. Case in point, res- against development within landing compatible with the high noise and 2 Arizona Economic Trends 2001 BUSINESS AND LABOR LEGISLATION REVIEW ments; increases and modernizes accident potential generated by mili- consumer protections; and autho- tary airport operations. Legislation rizes payment of finder fees.10 adopted in 2000 required the Attor- ney General to enforce planning, zon- One controversial real estate pro- ing and sound requirements within posal that didnt make it into the law territory in the vicinity of military air- books would have put tighter regula- ports and established civil penalties tions on home owners associations. for noncompliance. SB 1368, which was passed by the Senate and defeated in a House com- The Legislature also passed a num- mittee, would have a created a ber of laws relating to the regulation method to appeal a decision by a of the real estate and construction in- home owners association ().11 Several dustries. Several bills provided in- interest groups who felt the bill was stances when liens can be attached to insufficient and favored developers, property, another dealt with the sub- plan to bring up a bill in the 2002 division of land for sale, and another New Law Limits Construction Around Arizona session to create a state agency or de- tightens regulation of unlicenced con- 12 Military Bases partment to license HOAs. One of- tractors. ficial said since the HOA can review One bill (SB 1500) allows real estate and overturn this decision only li- brokers to place liens on commercial received a separate, lower prior- censing management companies and buildings when commissions for leas- ity for construction liens.8 HOAs would allow for proper en- 13 ing space have not been paid. This • HB 2023 allows the sale of an im- forcement of HOA code. type of law, which is in effect in 16 proved lot in a subdivision where Perhaps the biggest success for other states, has been attributed to a five or more sales were previ- business in 2001 was its ability to reduction in lawsuits over unpaid ously made by the seller, subject fend off legislation considered harm- 6 commissions. When the commis- to prescribed conditions, without ful, particularly to small business. sion dollar amount is under $20,000, having to satisfy subdivision pub- We played a substantial amount of if you sue, your court costs are going lic report requirements.

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