House Speaker Jeff Groscost threatened in early August to take the alternative-fuel-vehicle program away from the state energy office unless its director -- Amanda Ormond -- more forcefully promoted the program even as its cost was skyrocketing.
Groscost made the threat in an August 8 voice-mail message to Ormond.
Groscost left the message moments after Ormond told about a dozen legislative and gubernatorial staffers that the energy office had received more than 2,400 applications for tax credits in the first 12 days of the program and that the cost had climbed to at least $24 million -- far beyond the estimated $3 million to $10 million cost of the program.
At a briefing for staffers in a Senate hearing room, Ormond said her office was receiving more than 200 phone calls a day concerning the program and that she had hired seven temporary workers to help with the deluge of rebate applications.
"This program has hit us like a ton of bricks," she said.
After the meeting, Ormond returned to her office, where she heard Groscost's voice mail. Groscost told her he had been watching her presentation via closed-circuit television.
"We have worked hard for about six years to get where we are now and I got to tell you I'm a little bit frustrated that we seem to be backpedaling now that we are there," Groscost said in the voice message to Ormond.
Groscost then suggested he might remove the program from Ormond's oversight unless she more forcefully promoted it.
"We might just want to take that out of the energy office and place it somewhere else for administration. At this point, I'm willing to do that. I have to tell you, I'm really looking for somebody to advocate this, go out and push it," Groscost said.
Groscost did not return calls Tuesday to the Speaker's office or respond to a message left with his press secretary.
Francie Noyes, a spokeswoman for Governor Jane Hull, noted that Ormond's energy office is part of the Commerce Department, which is under the control of the governor, not the Speaker.
"He's [Groscost] responsible for what he said. But there is a separation of powers here," Noyes said.
Records indicate Ormond took his message seriously, and did not make any further public statements about the size and cost of the program. Groscost's warning appears to have slowed communications between the energy office and the governor's office.
Ormond did not meet with the governor's staff and Department of Revenue officials to discuss the overall cost of the program until September 13 -- five weeks after Groscost left his voice message. By then, the cost of the program was up to more than $115 million, state records show.
In the weeks following Groscost's voice mail to Ormond, energy office records -- including the daily calendar for Ormond and her assistant, Jennifer Hindman -- indicate the office focused on implementing and promoting the program, rather than keeping track of its cost.
The law, which was written by Groscost and passed with little scrutiny in the last days of the legislative session, did not require that the energy office keep track of possible impact on the general fund.
Instead, the energy office was only required to fund alternative-fuel rebates from a $4 million Clean Air Fund that it administered. Once the Clean Air Fund was exhausted, the energy office was required only to issue affidavits to alternative-fuel-vehicle buyers that entitle them to apply for fully refundable tax credits from the Department of Revenue.
In the August 8 briefing, which was videotaped, Ormond told staffers that the grant money in the Clean Air Fund was depleted in the first few days of the program and that all the rest of the money would be coming from the general fund.
"The Clean Air Fund, if you will, has already been stripped of the funds that it has," she said.
Once the Clean Air Fund was gone, there was no dollar limit on how much money could be taken from the general fund via the refundable tax credits. Instead, the only thing limiting the amount of money that could be raked from the state's budget was a lid on the number of alternative-fuel vehicles eligible for rebates. Once again, the provision was overly generous. The law allowed owners of about 37,000 newly converted alternative-fuel vehicles per year to apply for rebates.
It was not until October 18 that Hull requested that the Legislature impose a one-year moratorium on the tax incentive program. The moratorium was passed on October 20. The state appears liable for nearly $500 million in rebates on vehicles purchased before the moratorium was enacted.
In April, Groscost told fellow legislators not to expect much interest in the incentives, which refund between 30 percent and 50 percent of the cost of a vehicle plus the cost of conversion to alternative fuels. In some cases, the law allows a $30,000 cash rebate on the purchase of a $32,000 Ford F-450 pickup truck.
"There unfortunately will not be the kind of, you know, stampede to utilize this," Groscost told members of a House-Senate conference committee debating the bill on April 13. He made those comments to stem concerns that the bill could cost far more than the estimates provided by budget analysts.
But while Groscost appears to have been telling state legislators not to anticipate a "stampede," statements he made in July indicate he fully expected a strong response and, in fact, was pleased.
In a July 18 appearance in Washington, D.C., before a subcommittee of the U.S. Senate Finance Committee, Groscost boasted that the fuel incentive program was generating huge demand. Groscost said Arizona's program proved that people will purchase alternative-fuel vehicles if provided generous tax incentives.
"In fact, those incentives . . . have truly moved the market," Groscost testified before the subcommittee, chaired by Senator Orrin Hatch, R-Utah.
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Groscost told the subcommittee that a single dealership had more than 800 Chevy Suburbans on back order and that a Honda dealership had more than 1,000 vehicles on order. Rebates are averaging about $22,000 per vehicle -- or about $40 million for the 1,800 vehicles Groscost identified in his U.S. Senate testimony.
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