Governor considers using VW payout to replace school buses

Auto company paid Arizona $59M to settle lawsuit

PHOENIX — Gov. Doug Ducey is sitting on $59 million in unexpected cash.

Now he needs to figure out how to spend it within the confines of the strings attached.

And given the current thinking among his top staffers, the beneficiaries could be school districts seeking to replace their fleet of aging buses.

The windfall, if you will comes, from the decision by Volkswagen last year to settle a nationwide lawsuit over the sale of so-called “clean diesel” vehicles being marketed under the VW, Audi and Porsche labels that were anything but. It turns out they had a “defeat device,” programmed to go into a low-emission mode during testing but then spew out pollutants at much higher — and illegal — levels when actually on the road.

VW eventually pleaded guilty to three felonies, including defrauding the U.S. Environmental Protection Agency, and agreed to $4.3 billion in penalties and another $4.9 billion to address pollution from the supposedly low-emission diesel vehicles.

Arizona’s share of that is about $59 million.

But this isn’t unrestricted cash. It has to be spent on project to reduce emissions of oxides of nitrogen, the very pollutants that the VW vehicles were spitting out above permissible levels.

Some groups already have come forward with suggestions.

For example, Airlines for America, a group that lobbies for the airline industry, wants the dollars used to convert ground equipment at airports to all-electric vehicles.

Southwest Gas proposes converting vehicles to use natural gas.

And both the Alliance of Automobile Manufacturers and General Motors suggest having the state erect a network of electric vehicle charging stations, a move that would promote the sale of more electric vehicles, most of which can’t go on long trips because of limitations on battery charges.

“I would say it’s one of the ideas that’s been presented,” said gubernatorial press aide Daniel Scarpinato.

“It’s one that we’re open to,” he said, what with Ducey signing an accord with officials from seven other Western states to create an “intermountain electric vehicle corridor” along major interstate highways.

But that idea -- and the others -- are likely to be replaced with something a bit more low-tech.

“The governor’s perspective, as it is really on most things involving the budget, is he wants to see as much of the dollars get to our K-12 system as possible,” Scarpinato said.

“One need we know exists is that we have aging school buses and that there are school buses that need to and are going to be replaced,” he said.

“So we do see a potential nexus here where we could really help K-12 and our public schools deal with those issues and provide some additional dollars through this settlement.”

Not just any school bus will do.

It will have to be cleaner than the one it replaces, specifically in those nitrogen oxide emissions.

Scarpinato said one option would be the latest generation buses with “clean burning” diesel engines -- really clean burning, not like those VW admitted to selling.

But he said that other options, including natural gas and electric might be appropriate, depending on what each district needs. And there are other factors to consider, including the cost of operating a new vehicle over its lifetime.

“We’re not quite there yet on those level of details,” Scarpinato said. “But our goal would be get the most bang for our buck, get the most buses in a way that meets the parameters of the settlement.

There is another option: If the bus body is in good shape, it may be most financially efficient simply to drop in a new engine.

Some other details also need to be worked out, including who benefits.

Chuck Essigs, lobbyist for the Arizona Association of School Business Officials, said the typical bus costs $120,000, with the exact figure depending on the size and configuration. If all the dollars are put into new buses, that would purchase close to 500.

That’s just a small dent in the fleet of about 7,000 buses that travel about 80 million miles a year.

There’s one important condition that comes with that $59 million: If the state buys new vehicles, whether school buses or anything else, the old ones have to be destroyed.

Selling or giving them away, even to groups in need -- and even to other countries -- is not an option, as it defeats the purpose of spending money to replace high-polluting vehicles with cleaner ones.

In fact, the conditions are so specific that, according to aides to the governor, a school bus that is being replaced actually has to be cut in half. So anyone looking for a shell to put in the back yard as a playhouse is out of luck.

Scarpinato said what Ducey finally decides will become part of the budget he proposes to lawmakers in January. But he said it’s not exactly clear whether Ducey needs legislative approval to allocate the dollars or is empowered to divide them up on his own.

As to those charging stations, Scarpinao said his boss remains interested in having them set up at regular intervals along state highways. But he said there may be another option, one that doesn’t cost the state any money at all.

He pointed out that Arizona is seeking a waiver from federal prohibitions against having commercial operations at rest areas along roads built with federal dollars. Scarpinato said if that is granted, the state could require that the private firms that want to establish gas stations, restaurants and coffee shops along the interstates also have charging stations available.

The money coming into Arizona is separate from -- and does not affect -- a lawsuit filed last year by Attorney General Mark Brnovich against VW.

He is charging the company duping about 11,000 Arizonans into buying or leasing the so-called clean diesel vehicles between 2009 and 2016, paying anywhere from $1,000 to $7,000 more than for comparable vehicles. And Brnovich contends even just advertising them as clean diesel violated the state’s Consumer Fraud Act.

The company is not disputing that the vehicles were not ad promoted but contends any claims were just promotional “puffery” and not fraudulent.

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