Court to Determine Whether City of Scottsdale Violated Gift Clause Law Through Pool Monopoly

(Photo by Nathan O’Neal)

By Corinne Murdock

Division One of the Arizona Court of Appeals will soon determine whether the city of Scottsdale violated the state’s gift clause law by awarding one swim team public pool discounted access at the expense of another – for over 10 years. Court of appeals judges Jennifer Perkins, Cynthia Bailey, and Maria Elena Cruz heard the case, Neptune v. Scottsdale, on Wednesday.

As reported previously, swim coach Joe Zemaitis had attempted for 13 years to gain access to Scottsdale’s public pools for his team, Swim Neptune. The city continually rebuffed Zemaitis’s attempts, instead granting access at discounted rates to another team, the Scottsdale Aquatic Club.

In a press release, Zemaitis explained that their efforts over the years were met with bureaucratic inconsistencies.

“Since 2007, we’ve been aggressively pursuing space in the Scottsdale pools,” said Zemaitis. “They seem to reinterpret the rules and rewrite the rules every time we are eligible under the criteria, they change them again to try to freeze us and our residents out, and it’s simply not
fair.”

Initially, Zemaitis apprised the Goldwater Institute of the situation. Their legal team roped in the American Freedom Network (AFN) – the institute’s network of pro-bono attorneys. AFN counsel sent the city of Scottsdale a letter to allow swim teams to bid on the pool space. This prompted the city to open up the pool space for a request for proposal (RFP): a formal solicitation bid.

However, the city of Scottsdale cancelled the RFP after it was apparent that the Scottsdale Aquatic Club would lose the bid. That was the final straw for Zemaitis. This past February, the Goldwater Institute filed suit against the city.

In a statement, the Goldwater Institute asserted that the city of Scottsdale had created a monopoly – giving gifts of discounted rates and pool access to the Scottsdale Aquatic Club in violation of the state’s gift clause – then violated their own procurement code in their handling of
the RFP.

“This monopoly violates Arizona’s Gift Clause, which prohibits government from giving gifts to private entities. That’s exactly what the city of Scottsdale is doing here,” asserted the Goldwater Institute. “The deal was also done in violation of the city’s own procurement code. Scottsdale’s unlawful actions against Swim Neptune Foundation are preventing the swim club’s Scottsdale families from using facilities that they’re already paying for with their taxes.”

During Wednesday’s hearing, the city’s attorney, Eric Anderson, challenged that no city actions constituted a gift clause violation. Anderson argued that cancellation of the RFP contract and the lane fees weren’t gift clause violations.

“What is the claim here? What is Neptune asking this court to do? Are they asking for an injunction, a mandamus?” questioned Anderson.
Anderson argued further that the issues of procurement and gift clause abuses are separate.

Even so, Anderson claimed that the city hadn’t violated any procurement processes. He said that the acting procurement director merely noticed that the process had an error – that the committee should’ve scored the procurement bids entirely and not partially.

The panel of judges appeared confused by Anderson’s arguments. They wondered at the apparent conflicting language between the city’s method for scoring and the RFP (request for proposal).

Judge Perkins stopped Anderson multiple times to note that the court wasn’t so much concerned about the why behind the RFP cancellation, but the fact that it occurred at all.

“Isn’t Neptune saying this cancellation of the RFP worked to give a special advantage to a private interest, and that is why the city cancelled the RFP because if it hadn’t cancelled the RFP then the winning bidder would’ve been the non-preferred entity […] You know, this looks hinky,” said Perkins. “You had a relationship with one entity, you thought that entity was going to win the bid, when it turned out that – at least in the back and forth that we see according to the record – that the math was wrong, and when the math was correct and somebody else was going to get the bid, then we cut off the process. That the big picture is the articulated violation. The question of how we calculate consideration and everything tells us whether or not they’re correct about the violation. That’s not what is the violation.”

As a rebuttal, Riches clarified that the gift clause violation at hand is the city’s subsidization of one private entity. He called for declaratory relief, and a mandamus on the city.

He emphasized the fact that Swim Neptune was the mathematical winner of the city’s procurement evaluation – not Scottsdale Aquatic Club. This would’ve been cause to award Swim Neptune the bid, yet Scottsdale didn’t. Instead, they threw out the RFP.

Riches warned that this case would prove to be the basis for other cases around the state concerning government’s preferential treatment and relationships with private entities.

“If the city of Scottsdale can do this with public resources – [then] they can do this throughout the state,” asserted Riches.

After the hearing, Riches told AZ Free News in a statement that they were pleased with the court’s handling of the case.

“The Gift Clause prohibits the use of public resources by private parties unless certain protections are met. Here, the City of Scottsdale set up a public procurement process for a valued public asset – public swimming lanes – but then arbitrarily tossed the results when it did not like the outcome. That is unlawful and costs Scottsdale citizens $284,000 every year,” explained Riches. “We were glad to see the court of appeals grapple intelligently with these serious questions, and we are hopeful the court will stop the city’s taxpayer abuse in this case, and discourage future abuse going forward.”

The judges indicated that they would publish their ruling soon.

Corinne Murdock is a reporter for AZ Free News. Follow her latest on Twitter, or email tips to corinne@azfreenews.com.