by Corinne Murdock | Jun 30, 2023 | News
By Corinne Murdock |
The city of Phoenix is being sued over its capitalization of a loophole to shield high-rise luxury apartments from up to an estimated $7 million in property taxes.
The city of Phoenix effectively agreed to relieve private real estate developer Hubbard Street Group of around $7 million in property taxes by taking ownership of their property, “Skye on 6th,” and declaring it part of a slum or blighted area while the developer continues to operate and manage the property. In return, the developer agreed to pay a total of $525,000 in rent to the city, pay $32,000 to two school districts, and dedicate 10 percent of its residential units to workforce housing for the eight years of the lease. The city arranged this deal through the state’s statutory provisions outlining the Government Property Lease Excise Tax (GPLET).
In the case Paulin v. City of Phoenix, two taxpayers represented by the Goldwater Institute sued the city over allegedly violating the Arizona Constitution’s Gift Clause and Evasion Clause.
Since local governments are exempt from property taxes, GPLET enables governments to accrue revenue on its property by leasing to businesses. The Goldwater Institute, on behalf of the two Phoenix taxpayers, argues that the city took advantage of GPLET by assuming ownership of the property of interest to a private business in order to provide a special tax break to that business. Although the government sustains a reduced revenue stream and taxpayers pay more under such an arrangement, the Goldwater Institute alleges that local politicians may claim business growth while paying off the business with a tax write-off.
“[U]nder this arrangement, private property is conveyed in form to the government while in substance being owned and operated by a private party for the sole purpose of evading property taxes to which other taxpayers are subject,” stated the complaint. “The result of this arrangement is a gift of public resources to a private business, and a conveyance of property to evade taxes in violation of Arizona’s Constitution.”
Those poised to lose out on their share of the $7 million in tax payments would include the city, Maricopa County, Maricopa County Community College District, Central Arizona Project, Maricopa Special Healthcare District, Fire District Assistance Tax, and special taxing districts for library and flood control. Phoenix Elementary School District and Phoenix Union High School District are the two school districts receiving the tens of thousands to reportedly offset their share of the lost tax revenue.
The Goldwater Institute also disputed the city’s characterization of the contested property as located in a slum or blighted area: a condition required for an eight-year tax abatement as provided in the GPLET agreement between Phoenix and the developer.
A hearing on the case took place last week in the Maricopa County Superior Court. The city argued that taxpayers upset by their arrangement with the developer were truly upset with the existence of GPLET. The city contended that the taxpayers should petition lawmakers to reform GPLET law to prevent their actions.
Counsel for the city also contended that any claims that their actions violated the Gift Clause would render GPLET impossible to use.
The city also claimed that Hubbard Street Group was chosen through the request-for-proposal (RFP) process, and disputed the claim that Hubbard Street Group approached the city first.
The Goldwater Institute argued that there were no actual reservations of ownership, control, or management of the property. They also argued that the city never intended to hold onto the property itself, but always intended to convey the property back to the lessee. Counsel for the developer contended that claim, referencing a contract provision that the property will be owned by the city.
In a statement, Goldwater Vice President for Litigation Jon Riches said that Phoenix’s use of GPLET is unconstitutional.
“The Arizona Constitution prohibits the transfer of property to evade taxes that are otherwise owed and that other taxpayers must pay,” said Riches. “Here, the city of Phoenix allowed private property to be transferred to the city even though it will never be used as city property so that one special interest could avoid paying taxes on it. We are hopeful the court will agree this artificial transfer violates the Constitution.”
In 2020, the Maricopa County Superior Court struck down a similar GPLET arrangement between the city of Phoenix and another high-rise residential developer. Four months later, the city entered into the currently-contested GPLET agreement with Hubbard Street Group.
A ruling on the case may occur sometime within the next several months.
Corinne Murdock is a reporter for AZ Free News. Follow her latest on Twitter, or email tips to corinne@azfreenews.com.
by Daniel Stefanski | May 14, 2023 | News
By Daniel Stefanski |
In the middle of a hectic week at the Arizona Legislature, Democrat Governor Katie Hobbs signed a wildly popular bill to increase veterinary care for pets.
On Tuesday, Governor Hobbs signed SB 1053, sponsored by Senator T.J. Shope, which “allows a veterinarian to use an audio-video communication medium to establish a veterinarian-client patient relationship and prescribe drugs subject to certain terms and conditions.”
Last week, after the bill cleared the Legislature, Shope wrote, “By now, you’ve heard me talk a lot about SB 1053, a bill I’ve sponsored that would allow veterinarians to utilize telemedicine to care for our pets. After this bill passed out of the House by a nearly unanimous vote, 57-1, it passed out of the Senate on Final Read this week with supermajority support and has been transmitted to the Governor’s desk. I, along with the Arizona Humane Society and many other pet owners, hope Governor Hobbs will do what’s best for our animals and sign this bill into law.”
Senator Shope and Co. got their wish with Hobbs’ signature. The Goldwater Institute had also been a huge proponent of the bill and cheered on the new law. Goldwater’s Director of Government Affairs, Jenna Bentley, tweeted, “A great day for pets in Arizona as SB 1053 is signed into law! This bill expands access to veterinary telemedicine services. Something that cannot happen soon enough for many animal owners, especially in rural areas of our state.”
The Goldwater Institute also posted an article from Mark Cushing, who is the Founder & CEO of the Animal Policy Group. Cushing praised the bill and explained why this proposal was sorely needed in the Grand Canyon State, writing, “A chronic shortage of veterinarians has created veterinary deserts throughout the United States. Pet owners of all ages don’t hesitate to seek veterinary advice and care, but such care is often available only through digital tools. Veterinary trade associations resist these changes, ignoring the key principle that telemedicine requires an informed choice by the veterinarian and pet owner to proceed without an in-person examination of the pet.”
Cushing also used the passage of Shope’s bill to encourage other states to follow in Arizona’s footsteps: “During the COVID pandemic, 19 states allowed pet owners to utilize telemedicine to initiate veterinary care with no reports of harm to pets. The Canadian province of Ontario, where 15 million people live, has enjoyed veterinary telemedicine for five years and also reported no complaints of injuries to pets. The Arizona Legislature looked at the lessons from these jurisdictions, considered the experience of human medicine, and made the right choice. The door is now open for more states to follow Arizona’s lead.”
Daniel Stefanski is a reporter for AZ Free News. You can send him news tips using this link.
by Corinne Murdock | May 2, 2023 | News
By Corinne Murdock |
Last Friday, the Maricopa County Superior Court denied the city of Phoenix’s motion to extend the deadline imposed to clean up The Zone.
Maricopa County Superior Court Judge Scott Blaney apparently rejected the city’s insistence that they’d begun taking sufficient action.
“The Court interprets this argument as meaning the injunction is unnecessary because the City is already taking steps to abate the horrible conditions in the Zone,” wrote Blaney. “But the Court issued the Preliminary Injunction based, in part, upon the City’s past failure to address the issues in The Zone, as well as the City’s apparent lack of intent to do so until faced with possible judicial intervention.
In their motion to stay the court’s preliminary injunction, the city said it didn’t dispute the current conditions of the homeless encampments, but opposed the actions they were required to take, namely the court’s suggestion of campgrounds. The city took issue with the required deadline of July 10.
“[D]eciding how to spend taxpayers’ money, deliver services, and create new infrastructure for public housing is a legislative, not judicial function,” stated the city. “[T]he order intrudes into local law enforcement and prosecutorial discretion in what appears to be an order to take mandatory enforcement action — ignoring any analysis of the facts on the ground and ordering sweeping relief in its stead.”
The city further claimed that Blaney violated the constitutional separation of powers. It also seemed to question the judge’s description of homeless individuals’ conduct as a “nuisance.” Blaney’s ruling outlined the many ways that The Zone qualified as a public nuisance. The city said it couldn’t guarantee cleaning up The Zone.
“While the City seeks to maintain a clean and crime-free environment for its residents, those are outcomes that the City simply cannot guarantee, even with the expenditure of significant resources,” stated the city.
The city also claimed that Blaney’s order didn’t reflect public interest or the true desires of the Phoenix community. That contradicts the numerous business owners and residents of The Zone and elsewhere in the city that have complained about the homeless crisis.
“The City’s policies are the product of community meetings with policymakers, the gathering of information from all relevant stakeholders, and the advice of experts at the City and throughout the community,” wrote the city. “To circumvent this process and supplant the City’s plans with the Court’s own judgment is against public interest.”
The homeless crisis spiraled following the election of Mayor Kate Gallego, a Democrat, in 2019.
The Maricopa County Superior Court ruled in late March that the city of Phoenix was at fault for the current state of The Zone, and imposed a cleanup deadline this summer. The ruling came days after city officials promised to meet to discuss solutions for The Zone, in the wake of back-to-back murders.
Details of a settlement in a separate, federal case haven’t been publicized yet.
Democratic leadership has generally downplayed the urgency of the public nuisances and dangers presented by The Zone.
Corinne Murdock is a reporter for AZ Free News. Follow her latest on Twitter, or email tips to corinne@azfreenews.com.
by Daniel Stefanski | May 2, 2023 | News
By Daniel Stefanski |
Days after a powerful Arizona government watchdog group scored a major victory in the City of Phoenix, it is turning its attention to a neighboring city over the same issue.
On Monday, John Thorpe, a Staff Attorney with the Goldwater Institute, sent a letter to Tempe Mayor Corey Woods and councilmembers, expressing serious concerns about the proposed ordinance “Relating to the Payment of Prevailing Wages on City Construction Contracts” to be considered at the Council’s upcoming meeting on May 4.
Thorpe noted his understanding that “the proposed ordinance imposes, among other measures, prevailing wage and apprenticeship requirements on all contractors who participate in public works projects for the City for contracts exceeding $250,000.”
Much like the letter the Goldwater Institute previously transmitted to the City of Phoenix, Thorpe warned, “if the City adopts this ordinance and regulates matters that are expressly pre-empted by state law, it will expose the City to a high risk of litigation, as well as costs and attorneys’ fees for parties who successfully challenge the unlawful ordinance.” He also highlighted the troubling nature of the Council’s consideration of this proposal “with less than one week’s notice and little chance for input from those most affected.”
The Goldwater Institute was again representing the Arizona Builders Alliance and the Associated Minority Contractors of Arizona.
The letter to Tempe’s municipal leaders follows the repeal of the prevailing wage ordinance from the City of Phoenix last month after a change of two councilmembers. The vote flipped from 5-4 (approval of prevailing wage) to 6-3 (opposition of prevailing wage). Phoenix Mayor Kate Gallego voted to repeal the ordinance, writing, “Workers deserve a living wage – and we can deliver that through a robust, public process that doesn’t put the city in legal and financial jeopardy. That’s why I voted with a majority of Council to direct city staff to find legally viable ways to increase wages on city projects.”
On behalf of the Goldwater Institute, Thorpe cheered on the reversal from the City of Phoenix, stating, “Yesterday’s repeal….is a reminder that Goldwater will never stop fighting to hold government accountable and to defend Americans’ economic freedom from burdensome, counterproductive regulations.”
The Arizona Attorney General’s Office is still considering a 1487 complaint from Democrat Senator Catherine Miranda, who submitted the request on April 17 to “clarify the apparent conflict between two statutes and consequently determine whether Phoenix has the authority to enact prevailing wage at the municipal level.” Though Tempe isn’t the focus of the inquiry to the state’s chief law enforcement officer, her final disposition could give valuable direction and information if more cities and towns attempt to pass versions of the prevailing wage ordinance.
Daniel Stefanski is a reporter for AZ Free News. You can send him news tips using this link.
by Corinne Murdock | Apr 26, 2023 | Education, News
By Corinne Murdock |
The state budget sits at $2.5 billion, an unanticipated increase, despite a leap in school choice enrollments.
Nearly 40,000 students have joined Arizona’s universal school choice program; 7,000 have joined this year alone. Prior to the Education Savings Account (ESA) Program extension to all students, there were just over 12,100 students enrolled. At present, there are over 51,800.
Yet, this addition of tens of thousands of students didn’t hurt the state budget; the surplus has only increased as ESA Program enrollment increased. The surplus hit $2.5 billion this month, where last June it was $1.1 billion.
The ESA Program has also reflected a cost-saving measure for the state. Each student in the ESA Program receives scholarship funds of about $7,000 — about half of what the average public school spends on each student. Based on current program participants, that means that these students originally cost the state $725 million on average while in public schools, whereas they cost just over $362 million within the ESA Program.
Following these latest figures, ADE opened up enrollment for the ESA Program for the 2023-24 school year.
Gov. Katie Hobbs has rejected the cost-saving argument of the ESA Program. Shortly after taking office, Hobbs proposed rolling back the ESA Program, making the argument that universal school choice would bleed the state of $1.5 billion over the next decade. Yet, the Arizona public school system takes about $15 billion annually, or $150 billion over the next decade.
The Goldwater Institute, a public policy think tank who pointed out this disparity in an analysis defending universal school choice, argued that Hobbs’ arguments of frugality weren’t intellectually honest.
“To argue that taxpayers can afford the latter, but somehow not the former, defies basic common sense,” stated the organization.
The state legislature also increased public school funding by $600 million for this year. Anti-school choice activists continue to claim that the schools don’t receive adequate funding.
The Common Sense Institute found that the state saved $500 million annually after about 31,000 students exited the public school system from 2019 and following the COVID-19 pandemic. They also projected an $8 million end-of-year surplus based on enrollment trends.
According to the Joint Legislative Budget Committee (JLBC) report issued last week, base revenue growth is projected at nearly nine percent – a nearly two percent increase from January’s forecast, or $750 million.
JLBC noted that this year’s fiscal growth rate reflected a 64 percent increase in corporate income tax collections, much higher than the 10 percent increase in the federal collections. Additionally, individual income tax refunds increased by 54 percent.
Corinne Murdock is a reporter for AZ Free News. Follow her latest on Twitter, or email tips to corinne@azfreenews.com.
