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News for Southeastern Arizona, provided by the University of Arizona School of Journalism

Everyone wins — but what about the AZ taxpayer?

PHOENIX — Last week, Gov. Ducey took the lead in personally announcing a $1 billion deal with Nikola Motor Company to build a factory and headquarters in Buckeye, the centerpiece of a master-planned community that has been the pet project of two of the Valley’s biggest developers.

Nikola didn’t decide to pack up shop in Utah and move everything to Arizona out of the kindness of their hearts, as both the state and the city of Buckeye have generous incentives packages to lure the hydrogen-electric semi truck manufacturer out to the West Valley.

JDM Partners, one of the two real estate developers, has been generous too: Jerry Colangelo, David Eaton, and Mel Shultz (The J, D, and M of the Partners) each contributed $5,000 to the governor’s 2018 election fund, all on March 23rd, 2017 as campaign finance reports show. That’s the maximum a person can give to a statewide candidate.

Those developers have been looking for an anchor to their community since it was first envisioned in 2002 — and the state has been on the hunt for high-tech investors like Intel and Amazon.

The result? Ducey has the support of Arizona heavyweights (JDM Partners owns Comerica Theatre, built Chase Field and US Airways Center, and at one point owned the Arizona Diamondbacks and Phoenix Suns), JDM Partners gets a massive blue collar/white collar tech hub for their Douglas Ranch community, and Nikola receives tax breaks and relief from sales tax.

It sounds like everyone wins — but what about the Arizona taxpayer?

The state is offering $5.3 million in grants that incentivize competitive business and job growth — which pales in comparison to the $41.2 million in state tax credits that Nikola would qualify for under the Qualified Facility Tax Credit Program — totaling nearly $47 million in “performance-based” rewards for coming to the state. Manufacturing or R&D firms that are investing in new space or expanding, while creating new jobs are eligible for that tax credit, and Nikola is expected to meet those qualifications. The Arizona Commerce Authority was one of the government associations that helped negotiate the Nikola agreements.

“We are not buying deals with that money, that kicks in when a company is in a final decision phase,” Susan Marie, vice president of Communications at ACA, said. “We use this to tip the scales in favor of Arizona.”

Not to be outdone, the City of Buckeye is willing to offer a performance-based rebate of 49 percent of the construction and operational sales tax, as well as reimbursing all permits and fees. The Buckeye sales tax is 3 percent, with items over $2,000 subject to a lower 1.1 percent rate. The city is expecting the construction costs to run anywhere from $1 million to $1.5 million, with the resulting rebate as $490,000 to $735,000. The reimbursed permits and fees are construction-related, and while official numbers haven’t been announced, the reimbursement would be an estimated $500,000 to $750,000.

All of this is contingent on Nikola delivering, and it isn’t set in stone until the full dollar amounts of potential tax revenue and fee costs are determined. According to Anne De Chance, the communications director for the Buckeye city manager, there hasn’t been a set contract yet either.

“We don’t know yet at this point,” De Chance said. The Buckeye City Council will meet later February to iron out the finer points into an official contract.

According to Marie, there isn’t a contract at the state level yet, only an offer made and accepted as negotiations are ongoing.  This deal presents the state with 2,000 jobs in the Nikola complex itself, with a potential 20,000 additional jobs in logistics and supply chain positions that support the work done at the factory and headquarters. As this would be the first large, corporate headquarters in Buckeye, Nikola means big changes for the city — moving from a sleepy, rural community to a vibrant, innovative logistics hub.

“Nikola Motor Company’s selection of Arizona demonstrates that we are leading the charge when it comes to attracting innovative, industry-disrupting companies,” Ducey said. “This incredible new technology will revolutionize transportation, and we’re very proud it will be engineered right here in Arizona.”

This sort of high-tech, big-name investment is exactly what Ducey and the state government dream about: it represents the “start-up” business culture that the governor has been trying to build. How much that costs, and who picks up the tab for this vision, remains to be seen.

“It’s a question about state revenue,” Marie said. There’s a 2-1 ratio, for every dollar spent two is made.”

Erik Kolsrud is the Don Bolles Fellow covering the Legislature for Arizona Sonora News, a service provided by the school of journalism at the University of Arizona. Reach him at ekolsrud@email.arizona.edu.

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