Goldwater to Phoenix: Stop Giving Away Taxpayer Dollars

August 15, 2018

What would you say about government taking your money and giving it away to a private developer? Unfortunately, that’s exactly what’s happening in Phoenix, and the Goldwater Institute is fighting to put a stop to it.

In this latest government giveaway, the city of Phoenix entered into an agreement with Trellis, a private developer, allowing it to buy ten city-owned lots for $50,000—even though these lots had been independently appraised at $668,000. That’s approximately a 92 percent discount. The city claims that it wants to make the homes that are ultimately built on these lots available to “affordable housing” buyers, but Phoenix defines those buyers as people who make $83,000 a year, hardly indigent.

Working with the Goldwater Institute’s pro bono American Freedom Network, Phoenix attorney Dennis Wilenchik sent a letter to the city of Phoenix seeking an immediate end to this agreement. “We’re asking the Phoenix City Council to terminate this deal and to not enter into such agreements in the future,” Wilenchik said.

As Wilenchik explains in his letter, Phoenix’s agreement violates the Arizona Constitution’s Gift Clause, Ariz.Const. art. IX, § 7, which forbids government from giving or lending public money to private enterprises unless the expenditures are for public purposes and taxpayers receive adequate value in return. The Gift Clause provides that:

“Neither the state, nor any county, city, town, municipality, or other subdivision of the state shall ever give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation.”

The purpose of the Gift Clause is to prevent the government from using taxpayer dollars to  give advantages to special interests. That seems clear enough, but it’s not the first time that the city of Phoenix has violated the state constitution by making an illegal gift using taxpayer funds.

The city recently agreed to give more than $8 million to a private developer to subsidize a 19-story multimillion-dollar apartment building, funded by Phoenix taxpayer dollars. In exchange for trivial lease payments, the City is letting Denver-based Amstar/McKinley pay zero property taxes for 8 years—not a single penny for almost a decade. Then, the City has promised another 17 years of reduced taxes to this developer—which guarantees higher taxes for everyone else. The Goldwater Institute is taking Phoenix to court to fight this unconstitutional use of taxpayer dollars.

Likewise, the Goldwater Institute is suing the City of Peoria, Arizona, to prevent it from giving away more than $2.5 million to private businesses. In July 2015, Peoria entered into an agreement to give up nearly $2 million in taxpayer money to Huntington University, a private business. To get the money, Huntington doesn’t have to do a thing for Peoria’s taxpayers. It simply has to get accredited, offer classes, and enroll students—things it would do anyway if it wants to open its doors and run a successful university. Peoria is also giving $738,000 in taxpayer money to Huntington’s landlord, a private real-estate investment firm, to renovate property the landlord owns.

As for the letter sent to Phoenix today, Goldwater Institute director of national litigation Jon Riches says he hopes the city will take swift action.

“We hope that the letter sent today to the city of Phoenix will result in the end of deals that rob from taxpayers to benefit private, special interests,” Riches said. “Standing up on behalf of individual rights is at the core of the American Freedom Network’s mission, and we will continue to work with attorneys from around the country to fight the government overreach that puts these rights in jeopardy.”

Read more about the Goldwater Institute’s letter to the city of Phoenix here.