Apollo Group Inc. Threatens to Move Workers

Arizona’s fourth-largest private employer, Apollo Group Inc., has threatened to relocate employees out of the state because Gov. Jan Brewer vetoed a bill that would have given University of Phoenix’s parent and other companies millions in tax breaks.

An analysis by the state’s Department of Revenue estimated that the law would have cost Arizona $33.2 million in revenue, one of the reasons that Brewer cited in her veto letter Wednesday.

In a statement released late Wednesday, Apollo Group leaders said they were "very disappointed" by Brewer’s decision.

"The status quo amounts to a double-taxation penalty on companies that retain jobs and facilities in Arizona, such as Apollo Group, and encourages the flight of jobs and capital investment from the state," the statement said.

"As a result, Apollo and other impacted companies may be forced to investigate options for locating employees in states whose policies are more fair and equitable."

Apollo Group, which operates the University of Phoenix, is headquartered in Phoenix and has 12,000 workers in Arizona.

It’s unclear how easily Apollo could move its employees.

Apollo’s statement comes weeks after the company sold its corporate-headquarters buildings to a real-estate-investment trust for $170 million as part of a leaseback deal.

The 20-year lease with Cole Real Estate Investments requires Apollo to stay in the complex.

Although Apollo has a lease agreement, that doesn’t mean its corporate headquarters must remain in Phoenix, said Manny Rivera, Apollo’s public-affairs executive director.

Even though Apollo doesn’t have immediate plans to move workers, the company and similar service firms will consider this tax issue if they plan to invest or expand in Arizona, he added.

Brewer said Thursday that she was surprised to hear of the university’s response to her veto because the Governor’s Office has had ongoing discussions with the company in recent days.

She said she and her staff reached out to Apollo as she was deciding what action to take on the bill.

"I am disappointed, of course," Brewer said of reports the company might pull its workers out of Arizona. "

But we are going to continue working with them and see if we can’t have a little open discussion in regards to what they’re intending to do – if that is what they are intending to do."

In her veto letter, Brewer argued that Arizona, which recently closed a $1 billion budget gap for fiscal 2012, could not afford the lost revenue.

Arizona already plans to phase in business-tax cuts, starting in 2014, that would reduce corporate-income taxes below 5 percent and gradually introduce tax reforms similar to what Apollo wants, Brewer wrote.

The bill would have fast-tracked a tax break that would "allow one industry to jump the line in front of other industries," she added.

The measure, Senate Bill 1552, would have applied to Arizona-based education companies that have a large online presence such as the University of Phoenix and Grand Canyon University.

It might also have applied to businesses that operate call centers, process credit-card transactions or process insurance claims for out-of-state customers, according to the state Revenue Department report.

SB 1552 passed the state Senate in March. The state House passed the bill 58-0 this month.

THE ARIZONA REPUBLIC

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