Ariz. High Court Allows Phoenix Tax Deal to Stand

(CN) - Phoenix did not knowingly violate the Constitution's gift clause when it agreed to give developers $97.4 million in tax incentives in exchange for free parking spaces, the Arizona Supreme Court ruled.

Phoenix signed an 11-year contract with CityNorth to provide more than 3,000 parking spaces for the CityNorth commercial center, which is planned to include 1 million square feet of high-end retail space in the northeast edge of Phoenix.

Meyer Turken and five other Phoenix taxpayers challenged the constitutionality of the contract, saying the gift clause bars the city from giving public money to private parties without receiving a fair return.

But the trial court ruled for the city, pointing out that the parking spaces served a public purpose, and the amount of money was not so clearly disproportionate to the worth of the spaces that it provided "a subsidy to the private entity."

The court of appeals reversed, ruling that the government's expenditure promoted private interests, and that the payments for most of the 3,000 parking spaces -- not reserved for commuters -- violated the gift clause.

The case proceeded to the Arizona Supreme Court, where the justices unanimously backed the contract. Justice Andrew Hurwitz wrote that while the contract "quite likely" violates the state Constitution, it can remain in place "because language in our previous opinions could well have led the city to conclude that the agreement was constitutional."

However, the high court remanded for a deeper look at the other constitutional issues raised by taxpayers.

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