When city leaders in Columbia, Mo., struck a deal with American Airlines to launch a new daily route to North Carolina, they agreed to put up $750,000 in taxpayer money to guarantee the corporate giant’s monthly profits. But that’s an unconstitutional giveaway of public dollars, which is why the Goldwater Institute filed a lawsuit today on behalf of Columbia taxpayers to protect them from the city’s illegal deal.
Goldwater filed the lawsuit in Boone County Circuit Court on Wednesday, more than a month after warning Columbia leaders that their deal with American violates the Missouri Constitution’s Gift Clause. The deal puts taxpayer money behind a guarantee that a new American Airlines route between Columbia and Charlotte, N.C., will meet its monthly revenue goals.
Goldwater is working on behalf of regular taxpayers to ensure their money is not used to shoulder the business risk of a multi-billion-dollar company.
Instead of American bearing the ordinary risk of establishing a new route, Columbia created a safety net that includes $750,000 in public money from the Transportation Sales Tax fund. But Missouri’s Gift Clause bans cities and other state subdivisions from lending their credit or granting public money “to or in aid of any corporation.” Even before Columbia pays American a dime, the city’s promise to pay gives the airline valuable government backing and shifts private business risk onto the public.
Importantly, Goldwater’s lawsuit distinguishes between private businesses that voluntarily choose to support the route and Columbia’s decision to put public credit and taxpayer money at stake. Private businesses and other organizations have contributed an additional $750,000 to help guarantee American’s revenue goals, according to news reports. Goldwater does not object to that private arrangement so long as public money and public credit are not part of the deal.
Giving away tax dollars—or even promising to do so—to subsidize a private corporation’s bottom line is an abuse of power. This type of government overreach distorts the free market and forces taxpayers to become involuntary backers of American’s expansion strategy without any opportunity to benefit from the airline’s upside.
Goldwater’s lawsuit asks the court to remind Columbia’s leaders that the public purse is not a private piggy bank.
The Missouri Supreme Court recently reaffirmed the strength of the state’s Gift Clause, holding that public money cannot be handed to a private entity merely because government officials claim the money will serve a public purpose. That principle matters here. Columbia leaders may want more flights, and private businesses may believe the route will benefit them. But that does not give the city authority to make taxpayers guarantee American Airlines’ revenue targets.
This case joins another recent lawsuit by the Goldwater Institute in its work to vindicate state gift clauses and stop government handouts to private corporations. Last month, the Goldwater Institute initiated a lawsuit against the City of Phoenix, Ariz., challenging an agreement that would give land previously valued at $4.8 million to a private developer for just over $1.5 million.
Fortunately, both Missouri and Arizona have constitutional provisions that expressly ban such special deals at taxpayers’ expense. The lawsuit in Columbia represents Goldwater’s commitment to its conviction that the public wins when governments are forced to follow their state constitutions and stop playing favorites with tax dollars.
Taxpayers should not be forced to pick up the tab for a private airline’s disappointing ticket sales. After all, the public’s money belongs to the public, not to a private corporation’s bottom line.
Read the Goldwater Institute’s lawsuit here. Read more about the case here.
Tony Napolitano is a Senior Attorney at the Goldwater Institute.
