Arizona Court of Appeals overturns CityNorth subsidy

The City of Phoenix's $97.4 million sales tax subsidy to the CityNorth retail center project in north Phoenix has been declared unconstitutional, a violation of the Arizona Constitution's gift clause. All three members of the appeals court agreed, writing in their opinion that "We think these payments are exactly what the Gift Clause was intended to prohibit."

The city's subsidy would have granted $97.4 million in sales tax revenues (or less, not to exceed 50% of the sales taxes collected by CityNorth businesses) over 11 years to the project developer, the Klutznick Company, in return for 3,180 parking spaces, including 200 parking lot spaces set aside for public use for "park and ride," for the next 45 years. The ruling found that the only public benefit for which the city could legitimately be paying were the 200 "park and ride" spaces, and that the city may still pay market rate for those 200 spaces (probably about $6 million over 45 years), but not for the other 3,180 spaces. The appeals court's ruling may be found here (PDF).

Congratulations to Goldwater litigation director Clint Bolick and the owners of the six small businesses that were plaintiffs in the case: Meyer Turken of Turken Industrial Properties, Ken Cheuvront of Cheuvront Wine and Cheese Cafe and Cheuvront Construction (and Democratic State Senator), Zul Gilliani who owns an ice cream shop at Paradise Valley Mall, James Iannuzo of Sign-a-Rama, Kathy Rowe of Music Together, and Justin Shafer of Hava Java.

The Goldwater Institute team initially lost the case, Turken v. Gordon, at the trial court level in Maricopa County Superior Court. The City of Phoenix tried unsuccessfully to get an award of $600,000 in attorney's fees from the Goldwater Institute in an attempt to chill future public interest lawsuits; now they'll no doubt appeal to the Arizona Supreme Court.

(Previously.)