I'm back from a short vacation and will be posting a few articles of interest I came across over the last week. The first is about the future of CityNorth published in the Arizona Republic last week. It has a short question and answer rundown of CityNorth's options following the Arizona Appeals Court ruling (Turken v. Gordon) I wrote about recently. CityNorth and the city of Phoenix have until February 23rd to appeal the decision.
One of the reasons to appeal is to try to gain some additional clarity for municipal governments from the Arizona Supreme Court on what types of tax incentive deals are permissible. The ruling left it a little cloudy as to what all cities can do to help spur development without running afoul of the Arizona Constitution's gift clause. As I noted in my previous post, this ruling is likely to open the path for additional challenges to tax incentive deals in Arizona.
On cue, the Arizona Republic had an article today about the Gaylord Hotel deal in Mesa being questioned by the same group that won the case against CityNorth - the Goldwater Institute. The development agreement between Mesa and the developer (DMB Associates) in this case allows a 3% bed tax to be charged at the hotel when built. The tax is to be used by Gaylord to fund tourism promotion efforts for the area - which arguably provides an economic benefit to the hotel in the form of increased occupancy. The tax benefit is capped at $44 million, with Mesa receiving proceeds above that amount.
A tax incentive structured this way would appear to provide economic benefit to both public and private interests and so may withstand a court challenge based on the CityNorth standards. But further clarification from the Arizona Supreme Court wouldn't hurt in giving developers and municipalities some better benchmarks to be able to determine whether their current or future deals are consitutional.
I will continue to follow this issue as I expect that Phoenix will most likely appeal the CityNorth case and in the meantime, the Goldwater Institute will start putting together a list of other tax incentive deals they can challenge if the case stands.
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