In a major victory for millions of Arizonans, the Arizona Free Enterprise Club has prevailed at the Arizona Supreme Court in its attempt to protect a forecasted $1.9 billion tax cut through changes signed into law last year to change Arizona from a four rate income tax structure to a single rate.
On Thursday, the justices ruled in favor of a lawsuit filed the AFEC and several of its members who sought to ensure two provisions of Senate Bill 1828 related to the new 2.5 percent flat rate income structure goes into effect in January 2025. SB1828 was the omnibus appropriations bill signed into law by Gov. Doug Ducey in June 2021.
The AFEC lawsuit was in response to an effort by the Arizona Education Association sponsored Invest In Arizona to have voters overturn those two provisions in November.
But key to the AFEC’s legal arguments is the Arizona Constitution, which prohibits voter referendums of legislative actions undertaken for “the support and maintenance of the departments of state government and state institutions.” Oral arguments were held at the Arizona Supreme Court on Tuesday, during which attorneys Kory Langhofer and Thomas Basile presented AFEC’s position.
On Thursday morning, Mussi took part in an interview with KFYI’s James T. Harris about the efforts to protect the forthcoming tax cuts due to changing to a 2.5 percent flat rate. Mussi told Harris that Tuesday’s arguments at the Arizona Supreme Court “went well” and that he was optimistic “the justices generally understood what our argument was.”
Mussi did not realize how prescient his observation was, as just a few hours later the justices released their decision siding with AFEC and rejecting the referendum attempt.
The decision under the signature of Chief Justice Robert Brutinel enjoined the Invest In Arizona referendum effort from appearing on the 2022 General Election Ballot. In addition, the decision denied Invest In Arizona’s request for attorneys’ fees.
OFFICIAL STATEMENT ON RULING:@AZCourts issued a big win for taxpayers today. The court ruled against referendum filed by Invest in Arizona that sought to stop the implementation of critical tax reform legislation passed by #AZleg and signed into law by Gov @DougDucey. (Thread)
After the Court’s decision was announced, Mussi called it “a big win for taxpayers” across the state.
“The legislature passed historic tax cuts last year that benefit all Arizona taxpayers,” he added. “It’s time for Invest in Arizona and out-of-state special interest groups to accept this reality and stop making a farce of the referendum process.”
A detailed opinion explaining the legal conclusions made by the justices to form Thursday’s decision will be released in the next few weeks.
Last October, the Arizona Department of Housing published a Notice of Funding Availability which resulted in more than 20 developers expressing interest in sharing $24.5 million which came available to help fund affordable housing projects.
Nine applications came in by the end of January for a total of nearly 1,200 units; all but two of the applications were for projects in Maricopa or Pima counties. One was for a project serving Yuma County, while the other is the long-awaited second phase of an affordable housing complex in Sierra Vista being developed by Walling Affordable Communities, LP.
Glenn and Mary Walling specialize in the development of affordable housing apartment projects across Arizona and have been involved in bring more than 1,500 residential units to the market utilizing tax credits. One of the projects was Casa Del Sol in Sierra Vista, where Mary Walling grew up.
Casa Del Sol – Phase One of the project brough 88 badly needed low income adult housing to the area, which is home to the U.S. Army’s Fort Huachuca. Planning for Phase Two began in 2019 with the use of Federal Low Income Housing Tax Credits as part of the funding mechanism.
But COVID-19 in 2020 and then uncontrolled price increases and labor challenges throughout 2021 put pressure on the company’s plans. Walling turned to the Arizona Department of Housing, which began offering a competitive State Low Income Housing Tax Credit program in further support of bringing as many affordable housing units to market as possible.
ADOH also made available the $24.5 million pool to help provide several projects with some gap financing to address the unrelenting surge in costs. In late February, the Wallings were told by ADOH that underwriting for the Casa Del Sol project could still take another 60 days.
But on March 31, ADOH told AZ Free News that underwriting was completed and the developer has received their award.
“We at the Arizona Department of Housing are proud to help fund this exciting project to bring much-needed affordable housing to Cochise County,” Sheree Bouchee – ADOH Rental Programs Administrator. “We are thrilled to collaborate in creating housing solutions for rural Arizona communities.”
It was welcome news for city officials in Sierra Vista, where there are currently only 503 affordable housing units despite the fact more than one-third of Cochise County’s 125,000 residents live in the area. The presence of Fort Huachuca and the city’s proximity a U.S. Border Patrol station near Bisbee has led local rents outpacing the ability of many non-government employees to afford local housing.
According to Sierra Vista spokesman Adam Curtis, the city staff worked with the Wallings to waive some fees and approve modifications to code requirements to help facilitate and incentivize the project. Those actions were consistent with strategies identified in the City’s voter-approved Vistas 2030 General Plan.
And with the site plan approved and a building permit already issued, city officials are looking forward the announcement of a ground-breaking ceremony.
“The second phase of Casa Del Sol will be a welcomed and much needed addition to our West End,” Community Development Director Matt McLachlan said. “The Wallings have a tremendous track record of building high quality affordable housing in our community and have been a great partner in advancing the City’s affordable housing goals.”
Tucson-based Tofel Dent Construction will serve as general contractor for Phase Two, which encompasses more than five dozen new units and a swimming pool to complement the existing recreation center. The hope now is for construction to begin in late summer with occupancy set for the end of 2023.
In the meantime, the Wallings are already moving forward with plans for Phase Three which could be ready for occupancy by the end of 2024.
News of ADOH’s assistance for the Casa Del Sol project is just one of the recent efforts across the state to address Arizona’s lack of affordable housing.
Last week the Maricopa County Board of Supervisors approved applying $17 million of American Rescue Plan Act (ARPA) funds toward adding more than 600 new units to the Valley’s affordable housing stock. Arizona Housing, Inc. will received $8 million of those funds to convert an existing hotel in central Phoenix into 50 permanent, supportive housing units.
In addition to the living spaces, the property will include on-site case management services to provide residents with employment assistance and social services options. Maricopa County says construction could begin yet this year with estimated completion in Summer 2023.
The remaining $9 million will support the construction of affordable rental projects in the West Valley and in central Phoenix. The Centerline on Glendale will go up at the southeast corner of 67th and Glendale Avenues. The 368-unit project by The Gorman Group will take place in two phases, starting with 186 units.
“It’s going to take awhile to get our inventory where it needs to be, but the addition of nearly 400 new rentals in the heart of Glendale is an example of how we can address our affordable housing shortage one investment and one partnership at a time,” said Maricopa County Supervisor Clint Hickman.
In downtown Phoenix, Ulysses Development is slated to construct a 192-unit affordable rental complex called Salt River Flats. It will be built near Broadway and 14th Street, with an expected opening in Spring 2024. All of the unit figures are estimates.
For now, the residents and developers of a 20-story retirement community recently built in the heart of ASU’s flourishing entertainment district have silenced live music at a popular club, but the owners of Shady Park Tempe promise to appeal.
Mirabella at ASU is located across the street from Shady Park, a popular eatery – dance club where live music has been offered since 2015. But on April 13, a Maricopa County judge imposed several restrictions on the business, making it impossible for Shady Park to hold live music events, according to a company statement.
For its part, Shady Park sees an appeal of Judge Brad Astrowsky’s ruling as the only option to save the business after all these years.
“We remain hopeful that the court system will correct this injustice and that our appeal will allow us to once again host live music and provide a bit of joy and happiness to thousands of people every week,” the statement reads.
And owner Scott Price warns Shady Park will be forced to close down for good if Astrowsky’s ruling is upheld on appeal.
“This is because the revenue from shows is vital to our ability to pay for the other business operations,” Price said of the ruling, adding that “the power and influence of ASU was too much for us to overcome.”
Shady Park and other clubs in along East University Avenue have been in operation long before the Mirabella at ASU project broke ground. And there is no one who does not know that clubs and noise go hand in hand, particularly in a college community.
But ASU President Michael Crowe saw an opportunity to attract developers interested in taking advantage of ASU’s property tax exemption. Mirabella opened in December 2020 while several restaurants, clubs, theatres, and other “nightlife” businesses remained shuttered due to the economic effects of Gov. Doug Ducey’s various public health executive orders.
Once Shady Park reopened in May 2021, the folks at Mirabella complained about the noise. Price shutdown the live music while a canopy was constructed to help with the noise, but more complaints flooded in once live music started up again in September.
The lawsuit filed in October sought a preliminary injunction against Shady Park to prevent live music events which exceed Tempe’s “community standards” for noise. Then just before Astrowsky conducted a trial in February, Mirabella at ASU offered Shady Park “a large sum of money to close down and agree to let them take over our lease,” according to Shady Park.
The trial left many legal observers comparing the Mirabella residents to those who complain about noise after moving into a neighborhood that is in an airport’s well-established flight path. But the judge sided with the newcomers, ruling that residents made a substantial showing of harm caused by the Shady Park live concerts.
Astrowsky also faulted the efforts Shady Park took to address the noise complaints, saying there was “no credible evidence” that the canopy mitigated the noise.
“Shady Park never consulted an acoustical engineer or acoustic consultant,” the judge ruled. “Further, Shady Park did not perform any testing to determine how effective the canopy was at containing sound.”
Astrowsky was also not impressed with Shady Park’s arguments of the financial damage to the business if forced to turn down its music or construct an enclosure “to acoustically seal” the venue. The evidence presented about the impact was merely that of “speculative harm,” he ruled.
To rub salt into the wound, a post-ruling statement by Mirabella at ASU noted the “relief” Astrowsky brought to its residents and the surrounding community.
“We hope the court’s ruling results in peaceful coexistence moving forward and a celebration of a community that is inclusive and respectful of all,” the statement reads in part.
Shady Park says it has ceased all live music operations, “as the restrictions mandated make it impossible for us to hold live music events.” It could take a few weeks before an expedited appeal can be heard, leaving the company without vital revenue.
In the meantime, the ASU Foundation is benefiting richly from Mirabella at ASU, despite the impact to the local community and culture. It is a situation that is garnering scrutiny for other decisions by ASU, the Arizona Board of Regents, and President Crowe for using public tax-exempt property to benefit private businesses.
The Arizona Supreme Court recently ruled that a lawsuit filed by Arizona Attorney General Mark Brnovich against the Regents and ASU can move forward to trial. In that case, the attorney general contends the 16-story Omni Hotel Tempe built on tax-exempt public property violates the Arizona Constitution’s Gift Clause prohibition on providing public monies for the benefit of non-public enterprises.
A jury trial about the ASU – Omni deal could be held as early as Spring 2023.
How to interpret changes enacted in 2011 to Arizona’s development impact fee law will be heard by the Arizona Supreme Court, it was announced last week.
At issue is Arizona Revised Statute 9-463.05 which was amended in 2011 to redefine the circumstances under which a municipality can lawfully assess development impact fees. The Legislature noted its intent that courts would “narrowly” construe a town or city’s privilege to assess development fees.
Specifically, the 2011 version of ARS 9-463.05 prohibits impact development fees on new residents to pay for “a burden all taxpayers of a municipality should bear equally.”
In 2018, the Southern Arizona Home Builders Association (SAHBA) sued the Town of Marana after town officials spent more than $16 million in 2013 to acquire a water reclamation facility formally operated by Pima County. At the time, the facility only had capacity to serve current residents.
Marana then spent more than $17.5 million as part of a multi-phase Capital Improvement Project (CIP) to expand, upgrade, and modernize the facility, including compliance with environmental regulations. 20-year bonds were issued to cover the costs, with bond payments coming from impact fees charged on new homes and other development projects.
SAHBA’s lawsuit contends the expansion of the water reclamation facility and other upgrades undertaken as part of the project benefitted all existing residents as well as new residents. As a result, much of the impact fees violated ARS 9-463.05, the lawsuit argued.
The town, however, contended there was already sufficient water resources and wastewater treatment capacity to serve existing residents. It only acquired the Water Reclamation Facility and expanded the facility in order “to meet the needs” of future development, town attorney’s argued.
Marana also argued the project was developed “over years of careful consideration” by engineers, consultants, the public, and the Town Council. SAHBA was among the stakeholders involved in a planning process which started years earlier but took no action until 2018, according to town attorneys.
A Pima County judge and later the Arizona Court of Appeals sided with Marana’s position. Attorneys for the town later argued that review by the Arizona Supreme Court is “unwarranted” because the two lower court ruling were rightly decided.
“The trial court and the court of appeals evaluated whether the Town’s impact fee ordinances met the statutory requirements under A.R.S. § 9-463.05,” Marana’s response stated. “Both courts held the statutory requirements were met.”
But on April 5, the Arizona Supreme Court announced it will take up the case later this year, representing the first time the amended law will be subjected to review by the justices. The questions to be addressed during oral arguments are:
Did Marana violate A.R.S § 9-463.05 by making future development bear 100 percent of the cost of acquiring the Facility?
Did Marana violate the same statute by making future development bear nearly all of the cost of upgrading, modernizing, and improving the Facility?
Did Marana further violate the statute by failing to take into account what could or could not be included in development fees under that statute, and by failing to make any proportionate allocation of costs between existing and future development?
The Home Builders Association of Central Arizona, which is a trade association representing nearly 500 member companies engaged in residential construction and development, filed an amicus curiae (friend of the court) brief in support of SAHBA’s case.
The governing board of the Buckeye Elementary School District is coming under fire after the Arizona Auditor General discovered the superintendent of the 5,100-student district received about 100 percent more in compensation than the superintendents of Arizona’s three largest districts made on average.
Kristi Wilson became superintendent of the Buckeye District’s seven elementary schools in 2013. From July 2016 to December 2021, she received total compensation of more than $3.2 million under the terms of three employment agreements, according to a report released April 12 by Arizona Auditor General Lindsey Perry.
Of that, roughly $1.7 million is categorized as “additional compensation,” including nearly $570,000 which Perry’s auditors believe was not owed to Wilson.
The report also contends the District “omitted critical information” and records associated with two of the three employment agreements. The auditors expressed concern that there was a lack of transparency which “did not enable the public to monitor the District and superintendent’s performance.”
Any overpayment could constitute a violation of the Gift Clause in the Arizona Constitution, while violations of Arizona’s public records law can be prosecuted in some instances. As a result, the Auditor General’s findings have been referred to the Arizona Attorney General’s Office for investigation.
Data provided by the Auditor General shows 16 percent of the Buckeye District’s students come from families at or below the poverty rate. And nearly 70 percent of all students qualify for free or reduced lunches.
Furthermore, four of the seven schools had a D or F grade in Fiscal Year 2019. This has resulted in the Arizona Department of Education working with District officials to create an integrated action plan to improve student achievement.
Equally concerning, according to the audit report, is that District students performed below their peer group and students statewide on State assessments in the four fiscal years ending in Fiscal Year 2019. Yet at the same time, the salary and benefits package for Wilson worked out to 54 percent more in per pupil spending for executive administration than the statewide average.
In addition, the average teacher salary in the District was $44,536, about 15 percent below the average in Arizona.
Jane Hunt, the president of the District’s governing board, responded earlier this month to Perry. Hunt did not agree with several of the audit’s findings, but Perry’s staff contends the District’s response contains “certain inaccurate or misleading statements” about the situation.
In one instance, the District contended it had agreed to pay Wilson “a retirement credit” sufficient to cover all tax liability associated it with. Such an arrangement was expressly authorized by the Arizona State Retirement System through the use of post-tax pay, Hunt responded.
But that is not what happened, according to the audit report.
“The District’s assertion that the superintendent’s retirement credits were purchased using post-tax pay is wrong,” the report notes. “ Rather, per the superintendent’s election, the District deducted and sent to the ASRS the superintendent’s retirement credit payments through pre-tax deductions.”
This is an important distinction, Perry’s staff noted, because the District’s failure to correctly apply pre-tax status when calculating Wilson’s additional compensation led to a significant overpayment “to and on behalf of the superintendent.” And that could lead to legal problems for Wilson and the District Board.
The audit report notes that four of the District’s five current governing board members held such positions in April 2016 when the first of the employment agreements was approved to provide the superintendent with additional compensation.
