Stop SB1450--the special privilege bill for Decades Theme Park in Eloy

Dear Arizona Taxpayer:

Right now, members of the Arizona Senate are debating whether or not to award a private company the privilege of issuing $750 million in tax-free bonds, so that it can build a rock music theme park in Eloy.

If the project turns out to be a flop, and if tourists fail to come to Eloy in sufficient numbers, the state could have to pay back creditors, or it could jeopardize its bond rating, making it more expensive in the future to borrow money for traditional projects, such as road construction.

But the economic downsides of the Decades Theme Park deal are not nearly as important as the question of principle at stake: whether or not the government should not be handing out special privileges to chosen companies. The answer to that question is clearly, “NO.” The government should not be in the business of picking winners and losers in business.

PLEASE CONTACT YOUR STATE SENATOR, AND ENCOURAGE HIM OR HER TO OPPOSE THIS BILL.

WE ARE ESPECIALLY CONCERNED ABOUT ANY SENATOR WHO VOTED YES (“Y”) ON THE EARLIER VERSION OF THE BILL:

http://www.azleg.gov/FormatDocument.asp?inDoc=/legtext/48leg/2r/bills/sb1450.sthird.1.asp

If you’re not sure who your state senator is, reply to this email with your zip code, and we will give you the contact info.

In response to a query from the Senate, AFP Arizona hereby announces that the bill, SB1450, will be included in our 2008 Legislative Scorecard. Given the potential yearly fiscal impact, and the importance of the principle at stake, the bill will be a 50-point bill. In last year’s scorecard, that would have been just under 5 percent of the total, but there are fewer bills this year, so SB1450 could weigh as much as 10 percent of the overall score.

For more information about why SB1450 is a bad bill, see the pieces from the Goldwater Institute and the AZ Free Enterprise Club (below).

Tom Jenney
Arizona Director
Americans for Prosperity
(Arizona Federation of Taxpayers)
www.aztaxpayers.org
tjenney@afphq.org
(602) 478-0146

Springtime for Decades: Eloy theme park bill bad for Arizona

By Byron Schlomach, Ph.D., director of the Goldwater Institute Center for Economic Prosperity.

In the Mel Brooks play, The Producers, a planned swindle would only succeed if a joke of a Broadway play was a monumental flop. The play, Springtime for Hitler, ended up being a success against all reason. Right now the Arizona legislature is planning a similar heist: the Decades Music Theme Park.

The Arizona legislature has proposed a law to create a “special attraction district” in Eloy that would only include the Decades park and give it quasi-governmental status. Why is this proposed law a scam? In essence, the law is designed to subsidize private companies that cannot raise the money or otherwise get financing without special government treatment. In this case, the special privilege is the ability to issue government bonds. The bill now being considered would allow the owners of Decades to issue $750 million in government bonds.

People who buy government bonds accept less interest than they would otherwise for two reasons. First, they don’t have to pay federal income tax on the interest earned. Second, government bonds are backed by the ability of a government entity to tax its citizens, so they are generally safe investments.

In the case of the proposed theme park, the bonds will be financed by sales taxes paid only by park visitors. That means these bonds are really every bit as speculative as corporate bonds, because they are entirely dependent on the ability of a company to attract customers.

There are very likely to be good-faith buyers of these special attraction district bonds who will have every reason to think the bonds are as safe as school district bonds. Then, if the park doesn’t work out and goes out of business, widows, retirees, and institutional investors could find their government-grade bonds worth pennies on the dollar at best. If this unfortunate scenario were to happen, disappointed investors would likely sue those responsible, including the State of Arizona.

Even if there’s no lawsuit, Arizona’s bond ratings will suffer if the park goes belly-up. Future bond buyers, with no idea if they’re really buying speculative corporate bonds or genuine government bonds, might avoid buying Arizona bonds all together.

Not only could Arizonans lose financially if policymakers ultimately approve this highly speculative project, we could lose in other ways. The private sector sets a pretty high bar for potential enterprises to pass in order to get funding. That doesn’t mean there is always success when enterprises are privately funded, but it does mean the winners often win big. Who knows what kind of big winner this government-backed project might prevent from opening.

If a theme park comes to Arizona, it needs to stand on its own financial feet. The test any such proposal passes should come from the private sector school of hard work, not the political school of smooth talking.

Decades Music Theme Park Bill Strikes the Wrong Chord

Exempting income and property taxes is corporate and investor welfare

Phoenix, AZ – The Arizona Free Enterprise Club, a pro-economic growth advocacy group, today announced its opposition to SB1450, the Regional Attraction District, otherwise known as the Decades Music Theme Park.

The legislation exempts for-profit companies within the district from paying income and property taxes.

During testimony on the bill in Senate Commerce, proponents claimed that without this legislation, the area in Eloy where the park is proposed would not be an internationally recognized music theme park. Proponents of the bill also stated that some of the private investment was contingent on the bill.

“What gets built in Eloy should not be determined by legislating corporate subsidies being pushed by those who stand to benefit financially,” said Steve Voeller, president of the Club. “When corporate welfare is needed so that the private investment pays off, you could say the role of government has been exceeded.”

The legislation exempts businesses who locate with the district from paying property or income taxes.

The park’s supporters claim that because they are required to raise $100 million in private investment before the bonds can be issued, the state’s investment is a sound one.

“If building a music theme park in Eloy makes economic sense, so much so that the first $100 million can be raised privately, then the project should be financed like other large projects and the owners should pay taxes like everybody else.”