Proposition 116, which failed, would have widened the tax exemption for business equipment. The voters above were in Vail.


PHOENIX - The sharp defeat of an Arizona ballot measure to exempt more business equipment from property taxes has backers working on how and when to try again.

But one thing is clear: Next time, it's going to need real money.

On the surface, the issue is basic.

Businesses, like homeowners, pay annual property taxes on land and buildings. But businesses also pay an annual levy based on the value of all their equipment, from huge presses to filing cabinets and chairs.

Voters previously approved a constitutional amendment to provide a $50,000 exemption, a figure that, with inflation, has risen to about $68,000.

Proposition 116, which was defeated on Nov. 6, would have altered that formula, tying it to average salaries. Projections are that would have taken the exemption immediately to about $2.4 million.

The proposal was so popular that it was placed on the ballot with bipartisan support. But it was that popularity, coupled with the lack of any organized opposition, that was its undoing, said its organizer, Farrell Quinlan, Arizona director of the National Federation of Independent Business.

"People would say, 'If it's the feel-good proposition of the cycle, why should I give money to you?' " Quinlan said.

Oh, and there was one more thing: Businesses were focused - and spending their money - on their successful efforts to defeat Proposition 204, the proposal to create a permanent one-cent surcharge on the state sales tax for education and other priorities.

"There were other things we were competing with," Quinlan said.

Glenn Hamer, president of the Arizona Chamber of Commerce and Industry, put it more succinctly, saying: "204 sucked all the oxygen out of the room as far as revenues went."

The result is that Quinlan had just $60,000 to spend. And that got him to just 44 percent of the vote.

"We probably needed to spend 10 times that just to get a shot at 50 percent," he said.

The problem, he said, is that while lawmakers understand the issue, voters do not.

The levy is officially on what's known as "business personal property." That did not poll well.

"Using the words 'personal property' brought a 2-to-1 against, with a large number of undecided," Quinlan said.

He managed to get to 50-50 in a survey by phrasing the campaign on the issue of "equipment and machinery." But that did no good, as there were still many people unsure. And the general consensus is that when people are undecided by the time they vote, they side against a measure.

Quinlan produced several commercials that also were used in polling.

"When we were able to make our pitch to the voters, they were 2-to-1 in favor," Quinlan said.

But, other than in polling, he never got to make that pitch, as there was no money for the kind of broad-based campaign necessary.

The change remains a priority for members of the business and economic development communities.

That's because jobs in the manufacturing sector, in general, pay better than service jobs such as clerks and call-center help. But the tax on equipment, levied year after year, becomes a disincentive for manufacturers to locate or expand here.

Both Quinlan and Hamer are sure this is not the end of the issue.

Hamer pointed out that it was state Sen. Andy Biggs, R-Gilbert, who sponsored the measure to put the issue on the ballot. And Biggs will be Senate president for the next two years.

Quinlan said he's adopting a wait-and-see attitude.

The next chance to put this before voters is 2014. That means there is no need for legislative action this coming year.

He said a lot of the decision of how and when to proceed will depend on analyzing the overall political and economic situation in Arizona.

"There could be another charge up the hill," Hamer said. And this time, he said, business interests won't ignore the pleas for money.

"Without something like 204 on the ballot, I would expect there to be the resources," Hamer said.