Air Date: Week of November 17, 2000

A tax subsidy program in Arizona has the state’s budget bleeding. The plan helped defray the cost of buying vehicles that run on alternative fuels. But now state officials are trying to figure out how to pay for the runaway cost of the program. To top it off, the plan will probably do little to clean up Arizona’s air. Diane Toomey speaks with KJZZ reporter Mark Moran.

Transcript

TOOMEY: Arizona is in the middle of a fiscal and political crisis, thanks to a disastrous subsidy program. The plan was designed to reimburse people who bought an alternative fuel vehicle or converted a conventional one. But the Arizona governor now describes the program as a cancer eating away at the state budget. Its estimated cost has soared from three million to half a billion dollars, eight percent of the entire state budget. The author of the subsidy bill was the speaker of the State House, but the Republican lawmaker was resoundingly voted out of office. The Arizona state legislature is meeting in special session to figure out what to do next. We're joined now by Mark Moran, news director at member station KJZZ in Phoenix, Arizona. Mark, tell me how the program worked.

MORAN: Well, the cost of having the vehicle converted to run on natural gas, the licensing fee, and also a clean fuel tax credit provided by the state in many cases added up to as much as seventy percent off the price of a vehicle, as long as the person was willing to have the vehicle converted to run on natural gas and gasoline. State budget analysts predicted that they would spend between three and ten million dollars on this. Well, right now the price tag, as you and I talk, is about $483 million.

TOOMEY: Why did the program end up being so popular?

MORAN: Because while the law said these vehicles shall be equipped to run on natural gas, it does not say they must burn natural gas. And that's the loophole. They're bi-fuel vehicles, which means that they are equipped with two fuel tanks: a natural gas fuel tank and a regular gasoline tank. So people can go out and get these expensive vehicles and run regular gasoline in them. There was also no shut-off valve, which means as many people that could get to the car dealership before they sunsetted this program they were in.

TOOMEY: Not only did the program end up costing a lot more money, but it may do nothing to help clean up Arizona's air.

MORAN: Absolutely. That's the irony is that the idea was to entice people to buy a vehicle that could burn natural gas because it would clean up the environment. But in fact, there are only a handful of natural gas gas stations in the city. So people are going to go down to their corner store and put regular gasoline in them. They're probably not going to drive an hour across Phoenix traffic and put natural gas in when they're not required to by law.

TOOMEY: How could something like this get past both houses of the state legislature and the governor, who signed this bill?

MORAN: Well, I asked the governor when this whole thing came to light, and she said, "I wish I knew." You know, the bill was passed in one of those final nights of the legislative session, about two in the morning. The staff missed it, she missed it, and everyone underestimated the popularity because they missed this huge loophole. Now, because of the oversight, the governor says people are angry.

TOOMEY: You have some tape from an interview you did with the governor. Let's hear that now.

GOVERNOR: I am amazed, though, having been out and just kind of talking to people over the weekend, how many people are really upset, and rightfully so, about the fact that, first of all, the general fund is bleeding. And secondly, that there are people that are, you know, taking advantage of this. A lot of people I think would not have done it. But it is a free market, and it shows you what happens when government tries to tamper with the market.

TOOMEY: Well, the governor has put the brakes on the program, but there are thousands of people who are expecting a check in the mail. What are the environmental groups saying should be done about this?

MORAN: Well, they're skeptical, in large part, because of the way that the bill went through the legislature. It was also authored and aggressively marketed by the Speaker of the State House, Jeff Grosscost, who lobbied on various occasions for a natural gas company. He held informational meetings in his neighborhood and in his church about the benefits of this program, even after the state budget officials knew that the costs were spiraling out of control. And environmentalists are upset about that. He's since resigned from the House and was resoundingly defeated in the State Senate bid. The Sierra Club's Sandra Barr is obviously all for clean air, but she thinks the state's addressing the problem backwards.

BARR: It would be nice if we could find a way to encourage the most polluting vehicles to get off the road and replace them with alternative fuel vehicles. Instead, the cleaner-burning vehicles, the newer ones, are being replaced with these alternative fuel vehicles. And so, you're not getting the same kind of emission benefits as you would if you were taking the most polluting vehicles off the road.

TOOMEY: The Arizona state legislature is meeting now in special session to decide how to pay out these reimbursements. What are the options that are on the table at this point?

MORAN: Well, there's one very distasteful one for consumers who bought these vehicles in good faith, and that is to say -- the governor's proposing this plan -- if the vehicles have not yet been delivered to the people who purchased them, they won't get the tax credits. Well, people who bought these vehicles in good faith from the car dealer now go back to the car dealer and say we're not going to get our half price, and the car dealers are saying well, I'm sorry, we've got this contract and you have to honor it. People are stuck with $50,000 vehicles in some cases and can't get the tax credits back from the state if the vehicles aren't already being converted.

TOOMEY: Well, any way you look at this, it seems like it really is a fiasco.

MORAN: Absolutely. It's got just about everything you can imagine, was marketed heavily and aggressively by the House Speaker, who had lobbied for a gas company. A governor who is not running for re-election and admitted to me that she's glad she wasn't because she knows she wouldn't be able to win. The state Attorney General has a criminal investigation ongoing, and she will not only look into the House Speaker, but the ties to the rest of the people who are involved in this as well.

TOOMEY: Mark Moran is the News Director at public radio station KJZZ in Phoenix, Arizona. Thanks for joining us today, Mark.

MORAN: You're welcome.