Arizona lawmakers OK tax break for NGS coal

The tax break will hopefully make NGS look more attractive to potentail buyers.

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LECHEE, Ariz. – The Arizona Senate joined the House on Thursday in approving legislation exempting coal used at the Navajo Generating Station from the state’s transaction privilege tax in an attempt to make the plant more appealing for prospective buyers.


The measure passed the Senate on an 18-12 vote and now heads to Gov. Doug Ducey for consideration.


“This bill … is going to help, significantly, an estimated nearly 800 jobs for the people that are affected by the potential closing of this plant,” said Sen. Steve Smith (R-Maricopa), who sponsored the bill, Senate Bill 1501, which mirrors House Bill 2003. “Eight hundred jobs, which I don’t need to tell you is the vast livelihood of the Hopi and Navajo people. So, this bill is going to do just that.”


HB 2003 passed the House on March 5 on a 33-22-5 vote. LoRenzo Bates, speaker of the 23rd Navajo Nation Council, said both measures were drafted to abolish the transaction privilege tax, or the TPT, so that coal would not be taxed.  


The Navajo Nation pays up to $15 million a year into the TPT, which Bates says he has been trying to get at least $9 million back since he was speaker pro tem of the 22nd Council.


“It’s a real struggle trying to take some of that money,” Bates said recently in an exclusive meeting with NGS and Kayenta Mine workers at LeChee Chapter. “Any coal that comes in from out of state is not taxed, but they tax their own coal that comes out of Peabody (Western Coal Co.).”


Citing high electricity costs, the five owners – Arizona Public Service, Bureau of Reclamation, NV Energy, Salt River Project, and Tucson Electric Power – voted last February to close the plant at the end of 2019. The federal government though wanted to explore ways to keep the plant open.


However, the move to close the plant would result in a billion per year negative impact for the next 10 years, according to a 2012 Economic Impact Study by the W.P. Carey School of Business at Arizona State University. This touches everything from teacher pay to the cost of living, said Arizona Rep. Mark Finchem, who sponsored HB 2003.


“The state of Arizona is looking at roughly, in 2018 dollars, a billion dollars a year in negative impact,” Finchem said. “That has to do with everything from unemployment to unemployment insurance, lack of tax revenue – all of those things that are tied specifically to NGS.”


Smith agreed saying the shutdown would cause an economic devastation to northern Arizona, especially to the Hopi and Navajo nations.


“The utilities who own it made a business decision that it no longer made economic sense to burn coal because it was too expensive,” said Sen. Steve Farley (D-Tucson), who was one of 12 senators who voted against SB 1501 on Thursday. “They made a decision to shut down the plant. We need to be able to preserve those jobs, but the best way to preserve those jobs is not to find a way of handing out Arizona taxpayer money to a private coal company which has no buyers on the line.”


Continuing, Farley said, “To then take taxpayer money and give it to a coal company to try to sweeten the deal so that they can get this thing going and keep their money going; to keep their failed business model propped up because we as a state decided to hand out money to a failing industry. That’s just flat out wrong. And it’s just not going to provide sustainable jobs in the future.”


Smith says there are potential buyers. There is significant activity and significant interest in NGS and these legislations are going to help do that.
“This actually satisfies and rectifies an injustice of the past,” said Sen. Sonny Borrelli (R-Lake Havasu City), who voted yes on the measure. “If the NGS does close, (it’s) totally going to affect (Page Hospital). Ratifying or rectifying the past, this is exactly what this legislation does because this repeals an unjust tax.”


Diné Sen. Jamescita Peshlakai (D-Cameron) says one of the arguments for these measures was that the TPT is an illegal unlawful tax, some of which were collected on tribal lands.


“That tax was collected for five decades,” she explained. “Millions … of dollars came to the Arizona general fund. (Those) millions were redistributed to other places other than where the taxes were collected. The communities around (NGS), a lot of them don’t have electricity and running water. One of the discussions moving forward after this session is how does that money go back to tribal lands? How do we get back to those people?”


Sen. Lisa Otondo (D-Yuma) added, “Our answers, our culture’s answers are not always the answers for other nations and other peoples. We must be respectful of nations and their cultures.”


Otondo voted no.


“It’s unfortunate that we’re here with this bill as the vehicle that … the Navajo Nation believed should happen because I think it’s going to be another broken promise,” Farley said. “And that’s not something that anybody needs.”


Smith says this is not another broken promise as individuals need to read the entirety of the bill, which reads that the Navajo Council must approve the transfer of the plant ownership and signed by Navajo Nation President Russell Begaye.


“(The Navajo Nation) is the one that is going to drive this decision,” Smith said. “That’s a deal that they want to do. If you give all the authority to them, where it belongs, and let them map out their own future and save the jobs for their people – I think that’s tremendous.”