Judge Refuses to Throw Out Goldwater Challenge to Phoenix “Blight” Declaration

by Jon Riches
September 17, 2018

If you were to stand on the corner of Second St. and Garfield in one of Phoenix’s hippest neighborhoods, and then take a 360-degree view of your surroundings, perhaps the last words that would come to mind would be “slum” or “blighted.” Instead, you would see trendy new restaurants and bars, new apartment buildings, and streets traversed by students and professionals.

Yet in 2016, when Phoenix decided to give a private real estate developer a multi-million-dollar subsidy to build a “micro” apartment building on this very corner, the city found that “municipal growth and the provision of housing accommodations is substantially retarded or arrested in a predominance of properties,” and that the area is a slum where “the public health, safety or welfare is threatened.”

The city first made this finding in 1979—and it hasn’t updated it for nearly 40 years! As a result, the city can award generous tax breaks, known as Government Property Lease Excise Tax or “GPLET” agreements, to developers to build in areas that are far from slums or blighted.

The Goldwater Institute is representing Angel’s Trumpet Ale House and other taxpayers in a challenge to this scheme. As part of that case, Goldwater attorneys have argued that relying on a 40-year-old slum and blight designation to provide taxpayer resources to developers in an area that is neither slum nor blight is arbitrary and capricious.

But the city has tried strenuously to get this claim dismissed.

Most recently, the city argued that a newly passed statute—the intent of which was to prevent cities from relying on outdated slum and blight designations just like the one at issue here—invalidates this claim.

When the legislature passed the newest slum and blight law, however, it did so to address the problem of local governments relying on outdated slum and blight designations going forward. It did not intend to address past injures based on such reliance, like the one taxpayers challenged here. If anything, the new law merely demonstrates that the legislature shares the same concern surrounding municipal abuse of the same GPLET abuses that are the subject of this litigation.

On Friday, the trial court rejected the city’s arguments and agreed with our taxpayer clients that the “slum and blighted” claim can proceed.

Now, the taxpayer plaintiffs will have an opportunity to challenge whether it was reasonable for the city to rely on a 1979 designation in 2016. The corner of Second St. and Garfield has changed a great deal in the last 40 years; indeed, it has changed enormously in the last five years. That area is not a slum and it is not blighted. The court’s order will allow taxpayers a chance to make that case.

Jon Riches is director of national litigation at the Goldwater Institute.