Mixed Decision on Government Subidies, Mostly Good News


The Arizona Supreme Court today unanimously reversed an appellate court ruling on the CityNorth case, saying it erred when it deemed the city of Phoenix's $97 million subsidy of the shopping center unconstitutional.

I discussed this in great depth in a series of posts, including this one.  The purpose of the subsidy was to try to get Nordstrom's to move their planned store about 1 mile from a development planned in Scottsdale over the line to a development planned in Phoenix  (the public cover story was to provide parking for a park and ride).

Fortunately, the ruling seems to be more procedural than anything else, and seems to slam the door in the face of similar private subsidies in the future:

Indeed, in today's unanimous decision, penned by Chief Justice Andrew D. Hurwitz, the five Supreme Court judges say that indirect public benefits -- like, apparently, beating out Scottsdale for the sale tax from Bloomingdales -- aren't enough to justify a giveaway to a private party.

Previous courts who've held that, they say, have misread precedent.

"In short, although neither [of two Supreme Court precedents] held that indirect benefits enjoyed by a public agency as a result of buying something from a private entity constitute consideration, we understand how that notion might have been mistakenly inferred from language in our opinions," they say. Now that they've clarified, the justices seem to be saying, the appellate court must examine whether the direct benefit the city of Phoenix gets -- aka. those parking spaces -- is enough to justify the giveaway.

For the record, the Supreme Court suggests that the parking garage is not, likely, benefit enough to justify such a tax giveaway.

"We find it difficult to believe that the 3,180 parking places have a value anywhere near the payment potentially required under the Agreement," its opinion finds. "The Agreement therefore quite likely violates the Gift Clause."

Kudos to the Goldwater Institute for continuing to push this issue.


  1. mahtso:

    So the City "quite likely violate[d]" the State Constitution, but that violation goes without remedy? To me that is remarkable.

  2. Nikhil:

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