Every time the Republican-controlled legislature considers cutting taxes, the biggest obstacle is the taxpayer-funded lobbyists representing cities, towns, and counties. They come down to the legislature year after year accusing lawmakers of “defunding” local government. And, of course, it is always police, fire, and public safety on the chopping block and never DEI programs, art projects, or other unessential and unnecessary spending projects.
The problem with this narrative is that it is completely false. Cities and towns are flush with cash and have actually received enormous windfalls, not cuts, from the legislature. The result has been hundreds of millions in new revenue for the cities in just the last 6 years. Most of it from two sources—online sales and enhanced state shared revenue.
Online Sales Tax Windfall
In 2019, the legislature passed legislation responding to the Wayfair decision, allowing the state and local governments to tax online sales from sellers outside of this state. At the time, it was sold as a “meager” $85-million-a-year tax increase. But now, five years since the legislation was enshrined into law, taxpayers are doling out over one billion dollars in total collections each year to state and local government…
The City of Phoenix has drawn the attention of the Goldwater Institute, earning a stern response from the conservative think tank to “Stop violating taxpayers’ rights.” The rebuke comes over a proposed tax increase on businesses that provide services that are precluded by the Arizona Constitution. A final city council vote on this proposal is set for March 18, 2025.
If the hike on Transaction Privilege (“TPT”) and Use Tax rates is approved, the rates go into effect July 1, 2025.
According to Goldwater, “The city of Phoenix has proposed a tax increase on businesses that provide services, claiming it needs the money because of a revenue shortfall. But the burden of the new tax increase will ultimately fall hardest on Phoenix businesses and consumers, raising the prices of services like construction contracting and lodging.” As Goldwater observes, the Arizona Constitution (Art. IX § 25) outright forbids “any county, city, town, municipal corporation, or other political subdivision of the state, or any district created by law” from creating any new or increasing any existing transaction-based taxes on the “privilege to engage in, or the gross receipts of sales or gross income derived from, any service performed in this state.”
Notably though, the prohibition on Section 25 “does not repeal or nullify any tax, fee, stamp requirement, or other assessment in effect on December 31, 2017,” and therefore allowed the pre-2017 taxes already in place. However, as Goldwater Attorney Stacy Skankey explains, the new rates would constitute a new tax under the law.
Skankey wrote succinctly, “New or increased taxation on services violates the Arizona Constitution.”
“The Arizona Constitution has a broad understanding of the term ‘service,’ and it includes a range of covered enterprises on anything that does not produce ‘goods.'”
“Service generally includes activities involving human effort like labor, skill, or advice. The term also covers businesses in the hospitality industry such as hotels, restaurants, and bars. Many of the business classifications subject to the proposed TPT tax increase are services as that term is used in the Constitution.
“The proposal by the Phoenix City Council is a tax increase on services, and therefore, is unconstitutional. Consequently, we urge the City to disapprove of the proposed TPT tax increase and any future proposed tax that may violate the Arizona Constitution.”
As reported by AZ Free News in January, the Goldwater Institute has already launched a lawsuit against the Town of Gilbert after municipal leaders unleashed a similar service tax on Town businesses including homebuilding and short-term rental properties.
Over 7,300 illegal aliens have been deported in President Donald Trump’s first week in office, per the Department of Homeland Security (DHS).
DHS published this latest dataset on Monday. Following Trump’s inauguration, DHS and Immigrations and Customs Enforcement (ICE) began posting daily updates with immigration enforcement totals.
DHS reported that among these 7,300 apprehensions were “hundreds of convicted criminals” for crimes such as sexual assault and rape, robbery, burglary, aggravated assault and battery, drugs and weapons offenses, domestic violence, suspected terrorism, firearms trafficking, kidnapping, vehicular manslaughter, driving while impaired, and possession of an illegal substance.
This latest update follows the Senate’s confirmation of South Dakota Gov. Kristi Noem last Saturday as Trump’s DHS secretary.
“Ensuring Americans’ safety and securing the border is President Trump’s and Secretary Noem’s top priority,” stated DHS.
DHS also reported that their novel implementation of deportation flights returned many of these detained illegal aliens to Mexico, Jordan, Brazil, and El Salvador.
In the first week of the Trump Administration, we have fulfilled President Trump's promise to the American people to arrest and deport violent criminals illegally in the country. In one week, law enforcement officials have removed and returned 7,300 illegal aliens. pic.twitter.com/JKZYMD0f00
In remarks made Monday during the House GOP’s annual Congressional Institute conference, Trump declared his administration’s use of military planes for deportations marked a historic approach to U.S. immigration enforcement.
“For the first time in history, we are locating and loading illegal aliens into military aircraft and flying them back to the places from which they came — and made clear to every country they will be taking back their people,” said Trump.
Per data provided by ICE in their daily enforcement updates, as of Monday there were over 3,500 arrests and 2,650 detainers lodged since Trump took office.
Under Trump, immigration and law enforcement officials have also begun “enhanced targeted operations” on major hotspots for illegal aliens. On Sunday, ICE announced a partnership on such an operation with the FBI, ATF, DEA, CBP, and Marshals Service to enforce immigration law in Chicago, Illinois.
“For the record: targeted enforcement operations are planned arrests of known criminal aliens who threaten national security or public safety,” stated ICE.
Chicago considers itself a “sanctuary city.” Chicago and other cities which adopted this status are now under investigation by the House Committee on Oversight and Government Reform, per a letter sent to local leaders on Monday. Other sanctuary cities named in that letter were New York City, New York; Denver, Colorado; and Boston, Massachusetts.
— U.S. Immigration and Customs Enforcement (@ICEgov) January 26, 2025
Although Phoenix declined years ago to declare itself a sanctuary city officially, Phoenix Mayor Kate Gallego maintains a position similar to those maintained by sanctuary city leaders. Last November, in the weeks following Trump’s election, Gallego declared that no city resources would be used for mass deportation efforts.
“I can say without equivocation that as long as I’m mayor, Phoenix will not use its police department—or any city resources whatsoever—to assist in mass deportation efforts by the Trump Administration,” said Gallego in a statement to Arizona’s Family.
Phoenix Police Department policy set years ago requires sergeant approval prior to contacting ICE.
Reportedly, Phoenix city leaders plan to meet privately for legal advice on the Trump administration’s immigration policies. The Department of Justice issued a three-page memo last week directing U.S. attorneys to investigate any state and local officials who refuse to cooperate with immigration enforcement.
“Federal law prohibits state and local actors from resisting, obstructing, and otherwise failing to comply with lawful immigration-related commands or requests,” read the memo from acting Deputy Attorney General Emil Bove.
The Trump administration put in a workaround to these refusals by major cities on immigration enforcement. Several days after Trump’s inauguration, then-acting Homeland Security Secretary Benjamine Huffman issued an internal memo granting immigration enforcement authority to law enforcement agents throughout various agencies, as reported exclusively by The Wall Street Journal.
Days later, the Phoenix office of the DEA announced its partnership with the DOJ and DHS in carrying out illegal alien apprehensions. Like its federal peers, the Phoenix DEA has taken to posting about their work with greater frequency since their Sunday announcement of a federal partnership.
Like Phoenix city leadership, Tucson’s city leaders vowed in a press release to not participate in any federal immigration enforcement efforts.
In his first week in office, Trump’s administration also ended the CBP One app enabling illegal entry into the border, and repealed ex-Secretary Alejandro Mayorkas’ memo limiting ICE agents.
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The city of Phoenix reported an overall decline in crime for 2024 but noted a marked rise in violence against police.
Notably, the city reported a “significant decrease” in homicides: around 28 percent. Overall crime declined by four percent. Yet, the incidents of violence perpetrated against police officers continues to increase (only officer-involved shootings declined). The Phoenix Police Department reported 14 incidents in which officers were on the receiving end of gunfire. One of those incidents resulted in the death of an officer.
“These incidents represent a complete disregard for law enforcement, the important role officers play in our community and the sanctity of life,” stated the department. “We have trained our officers well and will continue to take the next steps in advanced training to minimize the risk to our community members and officers as they put their lives on the line every day and night to keep our community safe.”
Phoenix police attributed part of the reduction in homicides to its 2024 Crime Reduction Plan released last June. That plan dedicated the department to prioritizing crackdowns on violent offenders, active areas of crime, prohibited gun possessors, and those with warrants. Police reported the number of juveniles arrested for homicide dropped from 23 in 2023 to seven last year; the number of juvenile homicide victims dropped from 23 in 2023 to 15 last year.
The city’s police attributed the overall reduction in crime to its coordinated investigations of syndicated crime and repeat offenders. These included Operation Makeup Breakup to investigate organized retail theft, Operation Full Court Press to investigate certain violent offenders, an FBI partnership investigating a hotel operating as a brothel, and Operation Night Owl to investigate a drug and money laundering network.
“The Phoenix Police Department will continue to strive to be a self-assessing and self-correcting agency while looking for additional ways to increase accountability and transparency,” said the department.
Phoenix police reported that staffing continued to be a challenge last year. The department took in just under 2,300 applications for sworn police officers, and about 160 started the Phoenix Police Academy (in 2023, there were about 150 recruits).
The top sources for applicants, in order, were the department website, a friend or family member, Indeed, employee referral, and then social media. However, the top sources for hired recruits came, in order, from a friend or family, an employee referral, social media, the website, and then billboards.
The department remains understaffed. The city has budgeted for about 3,000 officers; total sworn officers as of last November amounted to just over 2,500.
During last Tuesday’s meeting for the Public Safety and Justice subcommittee, Phoenix police also reported that their hiring total reduced from 167 officers in 2023 (150 men, 17 women) to 144 officers in 2024 (124 men, 20 women).
In order to improve its numbers, the police department said that it has continued traditional advertisement forms in TV, radio, print, and digital media as well as creating recruitment opportunities with Arizona Christian University, the Arizona Diamondbacks, Arizona State University, and Grand Canyon University.
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The city of Phoenix will be in court on Wednesday over a lawsuit against its arrangement waiving $8 million in property taxes for a private real estate developer downtown.
The Arizona Court of Appeals will hear the case, Paulin v. City of Phoenix. The Goldwater Institute filed the lawsuit in May 2022.
Goldwater Institute Vice President for Litigation Jon Riches claimed the property tax exemption violated both the Arizona Constitution and court precedent prohibiting the use of taxpayer dollars to benefit private interests.
“Arizona courts have been clear time and again: taxpayer dollars are to be put to public use, not to benefit private, special interests,” said Riches.
Phoenix waived the property taxes on a downtown high-rise development project by assuming the legal title from real estate developer Hubbard Street Group and leasing the property back to them. The city did so in order to capitalize on Arizona’s Government Property Lease Excise Tax (GPLET) abatement provisions. In so doing, the city of Phoenix ensured the Hubbard Street Group protection would be saved from having to pay millions in property taxes for the term of the lease — eight years. After that better part of the decade is up, the city will return the title back to the developer.
The Goldwater Institute maintains that this workaround adopted by the city amounts to, essentially, tax evasion: an abuse of GPLET and a loss of a revenue stream at a burden to other taxpayers.
As reported previously, the city of Phoenix assumed ownership after it declared the developer’s project, “Skye on 6th,” to be part of a slum or blighted area. As part of their arrangement with the city’s assumption of their legal title to the development, Hubbard Street Group agreed to pay over $500,000 in rent to the city, $30,000 to two school districts, and dedicate 10 percent of its residential units to workforce housing.
Skye on 6th is marketed as “the height of luxury.” The most affordable rooms (studios listed at 400 square feet) start at $1,500 a month. The most expensive rooms are on their penthouse floor, where rent starts at $4,500 a month and goes up to over $6,700 a month.
The project cost nearly $88 million to develop.
One of the represented taxpayers in the case, Bramley Paulin, successfully sued the city last year, Paulin v. Gallego, when he challenged the city’s restriction on temporary signage for the Super Bowl LVII. The Maricopa County Superior Court ruled the city’s resolution on signage was an unconstitutional restraint on free speech and delegation of government power.
Paulin and the other taxpayer in the case, Mat Englehorn, reside and own businesses in the Phoenix area.
The oral arguments are scheduled to occur on Wednesday at 9:30 am.
In 2020, the Maricopa County Superior Court ruled against a similar GPLET arrangement between the city of Phoenix and another high-rise developer.
In his ruling, Superior Court Judge Christopher Coury questioned whether GPLET could be relevant any longer given the tendency for abuse.
“This judicial officer questions whether the death knell for the GPLET’s usefulness has rung,” wrote Coury.
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