APS Joins Forces with Tom Steyer to roll out Arizona Green New Deal

In 2018 Arizona Public Service spent over $30 million dollars fighting liberal billionaire (and Democrat Presidential Candidate) Tom Steyer and his effort to impose California-style green energy mandates on Arizona ratepayers.

They weren’t the only ones fighting against this radical measure. Organizations and individuals from around the state banded together to fight Prop 127 and the permanent economic harm it would inflict on homeowners and business owners.

After learning about how Steyer’s renewable energy plan would lead to skyrocketing utility bills, voters overwhelmingly rejected Proposition 127 by a 2 to 1 margin (32-68 percent). The message was clear: RATEPAYERS DO NOT WANT ENERGY MANDATES.

Fewer than 18 months later it appears that both Steyer and APS have decided to ignore the will of the voters. Late last month APS announced they are rolling out, with full support of the environmental left and Tom Steyer, the “Arizona Green New Deal”. Under their proposal, APS will shift to 100 percent carbon free generation by 2050, regardless of cost, reliability or whether their customers support the concept.

Just to explain how radical this plan is, the Arizona Green New Deal is more extreme than the 25 percent renewable energy mandate Steyer pitched to voters in 2018. Only this time voters won’t get an opportunity to reject the deal since APS can implement it unilaterally and their monopoly rate base has nowhere else to go.

APS will attempt to explain their flip flop by saying that this is only “aspirational” and that it helps protect and promote nuclear power in Arizona. This is utter nonsense. Make no mistake: unless this plan is stopped it will be adopted by the Arizona Corporation Commission and will become a mandate.

And if the Palo Verde Generating Station is really under threat from the likes of Tom Steyer or other anti-nuclear environmentalists, then the better approach is to pass and promote laws to preserve the energy source. The fix should NEVER BE to saddle their captive ratepayers with all the risk of their Green New Deal, especially given the lousy track record of government selecting which companies/industries in the renewable energy industry to support.

While ratepayers will be saddled with no options and escalating utility bills, APS will be immune from the negative impacts. As a regulated corporate utility, they are constitutionally guaranteed a rate of return, which will be provided by the Arizona Corporation Commission in generous profitable increments over the next 30 years.

If this is the path that existing monopoly utility providers want to pursue, then ratepayers deserve the right to opt out. For years there has been discussions on enacting utility competition in Arizona and giving customers the option to choose their own energy provider. Now is the time to press forward on this issue. If APS wants to impose higher costs through their Green New Deal, then they should be required to compete with other utilities offering alternative plans. 

Additionally, ratepayers need to have legal protections to ensure that cheap, reliable energy takes precedent over unpopular partisan politics. Since the current structure is not putting ratepayers first, systemic reforms are necessary.

The Club urges both the Corporation Commission and the Legislature to honor the will of the voters and take action against the Arizona Green New Deal. Don’t let bullies like Tom Steyer dictate energy policy in our state.

Lack of Oversight and Spiraling Costs Hinder Low Income Housing Tax Credit Program

Last week the Arizona Free Enterprise Club released our report detailing the poor performance of the Low Income Housing Tax Credit Program (full report can be viewed HERE). The information in the study should provide more than enough evidence for lawmakers to reject HB 2732, legislation that would give away millions in subsidies to investors and developers to fund a housing program rampant with fraud.

The reports author, Everett Stamm, has followed up by writing an op-ed explaining why Arizona would be better served to look at other solutions to address housing affordability rather than funding a risky program with a track record of failure.

Lack of Oversight and Spiraling Costs Hinder Low Income Housing Tax Credit Program

Americans are increasingly unable to cope with the ever-increasing costs of housing. Rising costs in Arizona, and across our nation, should be of interest to policymakers. One program that’s being used is the Low-Income Housing Tax Credit program. This program has been one of the largest suppliers of affordable housing throughout the past 30 years, but has had consistent struggles with increasing operational costs and questions over accountability and transparency. I’ve published a report with the Arizona Free Enterprise Club analyzing these concerns and recommending solutions for policymakers to consider.

What is the Low-Income Housing Tax Credit Program?

The Low-Income Housing Tax Credit (LIHTC) program operates by offering federal tax credits to developers who construct new, rehabilitated, or refinanced rental housing that meets affordability requirements set by the U.S. Department of Housing and Urban Development. This program uses federal tax credits but is administered by the relevant State Housing Finance Authority. In Arizona, this would be the Arizona Department of Housing.

Each state is granted the larger of $3.1 million or $2.70 per capita to distribute in a competitive allocation process. The competitive allocation process awards projects tax credits to new construction at approximately 70% of the cost of the project. There is also a non-competitive process for rehabilitation projects already being financed through federal bonds, awarding tax credits at approximately 30% of the project cost. Only the 70% tax credits come out of the amount allocated to the state. 

Rising Construction Costs

Looking through national level data, we found the LIHTC program had around a 10% year-over-year cost increase in the amount of tax credits required to build one unit of affordable housing (adjusted for inflation). Additionally, our report investigates compares LIHTC-financed housing to equivalent privately financed housing in Arizona and Washington state. We found housing construction financed with the LIHTC program correlates with significant increases in cost per square foot in Washington and increases in both cost per square foot and cost per unit in Arizona.

Lack of Oversight and Accountability

The LIHTC program provides a considerable amount of discretion to State Housing Finance Authorities during the competitive allocation process. The United States Government Accountability Office (GAO) published a report in 2018 summarizing these concerns. Their report criticized the lack of standardization, and sometimes complete absence, of cost management measures set by state HFAs and the high risk of fraud due to lack of oversight. Notably, the report found only 2 out of 57 LIHTC allocating agencies had limits on the development cost per unit and only 6 out of 57 LIHTC allocating agencies limited the amount of tax credits that could be issued per unit in a project. Additionally, just last year a group of lenders entered into a settlement with the US Department of Justice after an investigation revealed market manipulation by investors and developers utilizing the LIHTC program.


Our report discusses the concerns over cost and accountability of the LIHTC program in much greater depth, including suggestions on alternative ideas such as tenant-based programs to address the issue of housing affordability.  The full report can be viewed HERE as well as other reports by the Arizona Free Enterprise Club at www.azfree.org.

Everett Stamm resides in Washington DC and is author of the report ‘Analysis of the Low-Income Housing Tax Credit Program in Washington and Arizona’  

Swampy D.C Program Rampant With Fraud, Being Pushed in Arizona.

Swampy D.C Program Rampant With Fraud, Being Pushed in Arizona.

Every legislative session, lawmakers are duped by rosy tax credit programs, sold as either robust jobs programs or silver bullets to our social woes. 

This year HB2732, sponsored by Representative Ben Weninger, is being sold as both.  The Low-Income Housing Tax Credit (LIHTC) program is a federal program by which qualified investors are incentivized to build housing projects for low-income persons with generous income tax subsidies.

How it works.

It is a sweetheart deal for banks, insurance companies and investors.  The Arizona program allows for $8 Million a year of tax credits that can be matched with the subsidies offered through the federal program.  The bills mirror the federal LIHTC percentages and can be carried over for 5 years.

To illustrate the business model, a $10 Million project qualifies for 9 percent tax credits.  That is $900,000 a year and $9 Million over the course of the 10 year carry forward period.  Banks sell these credits to other investors who make up a pool to finance the project.  Some projects are even able to bridge financing gaps with other government programs. But not only are almost the entire project costs subsidized by the taxpayer, another $2.2 Million is generated through tax write offs from real estate losses, depreciation and interest expenses.

This mechanism is supported by many layers of middlemen who add to the cost of building these projects.  As a result, the program is lucrative for investors, and very costly for the taxpayers.

How it actually doesn’t work.

For several years now, this program has been sharply scrutinized by various parties including the Office of Government Accountability (OGA), think tanks, and the media. 

The overarching theme: this is a costly and inefficient program, susceptible to fraud and dubious in its impacts to shelter low-income Americans.

Much of the gamesmanship of the program revolves around the submittal of construction costs which the OGA determined varied drastically from state to state and project to project.

 The average LIHTC project cost $218,000, yet only $9,400 of it was the cost of the land; a ratio observably out of whack. This is par for the course for a program which in the past has been scandalized by construction kick-back schemes.  The program has been gamed in other ways.  Just last Fall, Wells Fargo made an over $2 Billion settlement with the Department of Justice for nation-wide collusion to devalue the tax credits.  Hundreds of millions of dollars have been siphoned from the program in these ways resulting in far fewer units being built for the poor at a great cost to taxpayers. 

Neither at the state nor federal level, did necessary oversight exist to ferret out inflated budget projections and fraud.  In fact, only seven of the 56 agencies around the country awarding these credits has been audited in the program’s 30-year history.

And yet the feds continue to soak increasing dollars into the program each year, though the actual number of units being constructed dwindles.  According to an investigation conducted by NPR, the $9 Billion LIHTC program is producing fewer units than it did 20 years ago yet taxpayers are paying 66 percent more in tax credits.  Aside from the fraud, another factor likely being the many syndicators, consultants, and financiers that work in their margins into the complicated process.

What else this reveals.

The OGA’s report on the vast cost variations in building state to state, reveal another critically important truth.  Jurisdictions with onerous and restrictive land use regulations drive the high costs to build there.  These incentive programs in fact reward states that cause their own affordable housing crises and fleece taxpayers all at the same time.  A report issued by the National Association of Homebuilders and the National Multifamily Housing Council estimated that 32 percent of multifamily costs were attributable to regulation

In fact, studies of housing prices have shown costs have directly increased with land use regulations.  As a result, federal housing affordability spending is almost two times higher in the most regulated states than the least regulated states.

There are better ways.

It is long-time policymakers address affordable housing for American families by addressing the root of the problem and tailoring assistance programs that serve those in poverty, not only those seeking a profit

Under the new federal administration, director of Housing and Urban Development (HUD) Ben Carson, has looked to do just that.  Instead of continuing to reward bad behavior by local governments, his agency has discussed attaching HUD grants to regulatory reforms proven to lower housing costs.  HUD’s position that they won’t continue to aid in the affordable housing problem by subsidizing it – is also a signal to states that they should look to curb their own contributions to the problem instead of simply seeking more federal handouts.  In Arizona, one of those factors is the residential rental tax – which disproportionately impacts low-income individuals.

Reforming land regs is a long-term endeavor and won’t solve the immediate need for low-income people in unaffordable housing markets. 

But there are better ways to structure programs than the convoluted LIHTC program.  One such proposal with bipartisan support are “Housing Choice Vouchers (HCV).”  Instead of incentivizing profiteers to supply housing – HCVs empower individuals and families to access housing in places they desire to live. 

This approach allows low-income families to move to higher income places which often gives them access to better jobs and school districts and affords children of low-income families’ greater opportunities to succeed.  Because the LIHTC programs provide greater incentives for building in designated areas of greater poverty, it has the direct effect of actually concentrating poverty and segregating poor people.

Arizona lawmakers should help poor people and protect taxpayers.

The expansion of this 34-year-old failed federal program in Arizona would be a big mistake. The bill being pedaled this year is not being backed by advocates for the poor; but by those who stand to gain the most – insurance companies, investors and banks.  If lawmakers truly care about the poor – and the taxpayer – they will resoundingly reject HB2732.

New Study Shows Low Income Housing Tax Credit Program Fails at Delivering Affordable Housing in Arizona

New Study Shows Low Income Housing Tax Credit Program Fails at Delivering Affordable Housing in Arizona

Today the Arizona Free Enterprise Club released a new study evaluating the cost of Low-Income Housing Tax Credits (LIHTC) in Arizona and Washington and how LIHTC have performed compared to other government backed housing affordability programs. The review determined that in both states, LIHTC have led to a significant increase in the cost of development and construction when compared to similar market rate housing.

In his analysis, economist Everett Stamm determined that a “lack of oversight and transparency, requirements to pay higher wages and inadequate cost control measures all attribute to the higher development costs” associated with LIHTC.  Stamm concludes that even if proper reforms were implemented with LIHTC, other tenant-based programs, such as the Housing Choice Voucher Program, are better suited to provide housing for low income residents than LIHTC.

Evidence that LIHTC drive up construction costs and fail to keep housing affordable add to the list of concerns that exist with the program. “There is ample evidence, both from the Government Accountability Office and the US Department of Justice, that the Low-Income Housing tax Credit Program has been rampant with fraud and other criminal activity and lacks basic oversight to determine any tangible benefits,” said Scot Mussi, President of the Arizona Free Enterprise Club.

“If the legislature is serious about addressing housing affordability, they should look at options that are tenant based and that drive down the cost of construction. Low income housing tax credits accomplish exactly the opposite,” Mussi continued.

In Arizona, there is currently a proposal to spend $8 Million to expand the LIHTC program, which is being aggressively pushed by developers and investors that will financially benefit from the tax credits.

The complete study by the Club on LIHTC can be viewed by clicking HERE.