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Cut in Car Subsidies Sought

Updated:
PHOENIX (AP) — Gov. Jane Hull is urging the state to backtrack on a deal offering subsidies to motorists who drive alternative-fuel vehicles, now that costs of the program are spiraling out of control.

``The bottom line on this whole process is we cannot let this state hemorrhage money. We cannot let this go on,'' Hull said Thursday as she called the Legislature into special session beginning Monday.

Hull outlined a plan to revamp the program, which had offered tax credits to residents who bought vehicles using so-called clean fuels like natural gas, propane or electricity, or who converted conventional vehicles to use such fuels.

She could not immediately say how much her proposals — designed to close loopholes in the program, which proved more popular than anyone imagined — would save. The latest estimates show the program will cost taxpayers $483 million.

Her proposed legislation includes tax credits only for vehicles in-state as of Thursday, and reimbursements for people who cancel vehicle orders and lose deposits and similar out-of-pocket expenses.

The program had been on the books but drew little attention until April, when lawmakers added incentives designed to encourage motorists to take part.

Under the sweetened deal, residents were to get lump-sum tax refunds equal to about half the price of a new vehicle. Many orders were placed for expensive sport utility vehicles and large pickups.

In September, state leaders learned the cost of the program, originally estimated as low as $3 million, was skyrocketing. The Legislature suspended it on Oct. 20, meaning vehicles bought or converted after that date were not eligible for subsidies.

Under Hull's plan, tax credits would be paid out with interest over 10 years — not as a lump sum — and credits based on a vehicle's purchase price would not include televisions or other add-ons ``that do not improve air quality.''

Additionally, taxpayers claiming credits must prove that the vehicles primarily use an alternative fuel — not regular gasoline — and that the vehicle is driven chiefly in Arizona.

Hull said her plan would slash the program's costs, but that reliable numbers will not be available until next week.

A total of $40 million would be set aside for reimbursements for canceled car and truck orders.

State Attorney General Janet Napolitano said Hull's retroactive changes would be legal because they would be made in the same tax year as the changes that made the program more generous.

``Those people will not be able to claim anything against the state,'' Napolitano said of the possibility of lawsuits by people denied the subsidies they expected.

Chuck Coughlin, a lobbyist for alternative-fuel vehicle dealerships and conversion shops, said his clients were reviewing the plan and had no immediate comment.

Caelen Armijo, training manager at a Toyota dealership in Phoenix, said he knows of salesmen at other shops who have not been paid for alternative-fuel vehicles they sold.

``The sales people got the shaft on the deal, but I doubt that anyone's going to be crying a river for them,'' Armijo said.

Hull's plan drew immediate support from some lawmakers.

``Finally we are seeing some decisive action,'' said Senate Finance Chairman Scott Bundgaard, R-Glendale.

Hull said the special session may take longer than a week, although Bundgaard predicted a vote by lawmakers before then.

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State of Arizona: http://www.state.az.us
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