PrintA new phase in the CityNorth legal battle is under way. Two parties, Phoenix and CityNorth, have appealed to the Arizona Supreme Court, asking the court to reject the Arizona Court of Appeals ruling against them.
At issue is a 2007 agreement between the city and the development under which the developer, after constructing and opening 1.2 million square feet of retail space and parking garages with 3,180 free spaces, would receive 50 percent of sales taxes collected by the city from the development during the previous year. The agreement would go for 11 years, 3 months or until the total reached $97.4 million, whichever comes first.
More broadly, the case is about the circumstances under which cities may enter economic development agreements with private organizations -- whether it is sales-tax breaks to major retailers or property-tax breaks to proposed resorts or offices.
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ARGUMENTS FOR THE AGREEMENT
Attorney Timothy Berg, who represents Phoenix, makes the following arguments on behalf of allowing the agreement to stand:
»The Court of Appeals ignored precedent by reconsidering a longstanding test for whether such agreements are lawful.
»The new test threatens to invalidate virtually all government agreements involving a private party, short of buying office supplies.
»The court ignored several potential benefits of the agreement, from additional employment to reduced air pollution, which should have been considered under the old test.
Attorney Lisa Hauser, for CityNorth, added that the state's competitiveness for economic development would be hampered.
ARGUMENTS AGAINST THE AGREEMENT
Clint Bolick, a lawyer for the Goldwater Institute, has kept his arguments relatively simple: The state Constitution's Gift Clause and the cases that defined the clause never intended to permit agreements like this one, which he argues benefit the private party beyond reason.
SURPRISES IN THE FILINGS
The appeals documents contain a few surprises. Among them:
»CityNorth attorney Lisa Hauser says the development will be home to the city's first Neiman Marcus. Najla Kayyem, vice president of marketing and public relations for Related, one of the developers, says no deal has been made with the luxury retailer.
»Both filings make reference to the poor state of the economy. "Government desperately needs economic development tools to stimulate revenues," Hauser says. "More than ever, business and government badly need predictability to restore economic health."
»Both filings say the present value of the money used to pay the developer will reach nowhere near $97.4 million, because inflation will cause future dollars to be worth less then current dollars. Both cases say the city, in terms of today's money, will pay around $60 million, more or less. Put another way, the dollars used to pay the developer will be worth a little over 60 cents.
WHAT HAPPENS NEXT
The Goldwater Institute has until March 23 to respond. Then the other side is permitted a response. After that, the court will schedule the case for review. On that day, the court will decide whether or not to hear the case. If it rejects the case, the Appeals Court ruling banning the agreement stands. If it accepts the case, a briefing schedule will be drafted and a date will be set for oral argument. The court then would rule, but is not required to follow a particular schedule.
