By Andrew Ford
Three state lawmakers representing both major political parties pledged to work on reforms — including proposed changes to state law — following an investigation of the state’s bonding authority by The Arizona Republic.
“Obviously the article raised some yellow flags, and it’s something which we’re going to take a look at,” said senior lawmaker Rep. John Kavanagh, R-Fountain Hills.
The Republic revealed the Arizona Industrial Development Authority’s pattern of approving bonds that stand to make the state look foolish, including risky and out-of-state projects. Though taxpayers won’t foot the bill if the bonds go bad, the practice could jeopardize the board’s ability to draw money to needed projects if problems continue to mount.
The board has approved more than $8 billion in bonds with more than half of that money flowing out of state to finance everything from a Hilton Garden Inn in Harlingen, Texas, to a parking garage in Ypsilanti, Michigan.
“I’m concerned at the mission creep at the (Arizona Industrial Development Authority),” Kavanagh said. “I think all of us thought they were concentrating on Arizona projects.”
Kavanagh said he thinks there’s consensus among legislators that the AZIDA should be limited to projects in the state.
“We could very easily amend the law and restrict the scope, the area of investments, to Arizona only,” Kavanagh said, noting that he’ll address the issue in the upcoming legislative session, while also ensuring the state truly isn’t liable if a bond should default, a term meaning the entity that got the loan stopped making interest payments.
Kavanagh was joined across the aisle by two Democratic colleagues calling for reform.
Rep. Morgan Abraham, D-Tucson, said he wants to see a change in the law to limit the board to Arizona projects, similar to Kavanagh’s stance.
“This needs to be looked at immediately,” he said in a message on Twitter, citing The Republic’s investigation. “The risk we are taking on out-of-state projects doesn’t seem appropriate to me.”
Rep. Mitzi Epstein, D-Ahwatukee, said while out-of-state projects aren’t necessarily a problem if they benefit Arizona, one finding from The Republic’s investigation might prompt her to propose a new law. The Republic revealed the same people who make up the AZIDA are also members of the Arizona Finance Authority, which oversees the AZIDA.
The notion that the same people have oversight of themselves is “ludicrous,” Epstein said.
“That’s just a sham,” Epstein said.
She said she has staff exploring how that law could be crafted, and she’d like to see it ready in some form in January. An event like a legislative hearing, where lawmakers could explore the issue, may also be necessary, she said.
Overall, Epstein praised The Republic’s investigation.
“It’s really nice to read your work, that was pretty impressive,” Epstein said. “And incredibly sad, but not surprising to find out about.”
Many of the bonds are signed personally by Gov. Doug Ducey. His spokesperson, C.J. Karamargin, didn’t answer questions about The Republic’s findings. Karamargin said on Twitter the AZIDA hasn’t put taxpayers at risk and asserted the state’s reputation is strong thanks to Ducey’s fiscal responsibility. He provided a statement to The Republic describing Ducey’s signature on many of the bonds as a “purely administrative act.”
The Republic previously revealed red flags in the background of a man whose silica mining business got a bond from AZIDA, which is now in default.
Gov. Ducey personally signed off on that deal.