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Oral arguments next in CityNorth challenge

November 8, 2014

NORTHEAST VALLEY – Oral arguments are scheduled for next month in a lawsuit challenging Phoenix’s $100 million deal with the developers of CityNorth, the huge new mixed-use development east of Desert Ridge Marketplace.

Briefs have been filed by both sides arguing for summary judgments in their favor – a decision that is not likely to happen, they say.

Both sides say the case is likely to be appealed by whichever side is on the losing end.

“This has Supreme Court written all over it,” said Clint Bolick, an attorney who filed the lawsuit.

The suit was filed in August 2007, five months after city officials reached the agreement, which will provide CityNorth’s developers with a 50 percent rebate of sales taxes over an 11-year period, totaling $97.4 million. In exchange, the developers are building parking garages that will accommodate more than 3,000 vehicles, giving the development more room to erect income-producing buildings.

Plaintiffs in the suit are six Phoenix business owners.

Their attorney, Bolick, is a staff attorney with the conservative Goldwater Institute.

Defendants include the City Council and city manager, who have hired outside attorneys to defend the case.

Extensive legal documents lay out the case.

Called Turken vs. Gordon, the lawsuit challenging Phoenix’s incentives for the exclusive CityNorth development could be called Goldwater Institute vs. Phoenix.

The lawsuit lays out a variety of ways that Bolick said the incentive violates the Arizona Constitution.

He points out that the subsidy “is exactly the type of corporate welfare that the Arizona Constitution was designed to prevent.”

“The subsidy is dressed up as a parking-lot agreement, which is a transparent sham. This is an attempt to keep tax revenues in Phoenix’s hands and out of Scottsdale’s.”

He says the agreement violates the Constitution’s gift clause, special law clause, and equal privileges and immunity clause. “All of them were designed to prevent special-interest legislation,” Bolick said.

Deputy City Manager David Krietor did not disagree with Bolick’s assessment of the tax-revenue needs.

But the motion attorneys for the city made claims that Bolick’s arguments are all wet.

The practice of promoting economic development is “well-established,” the city’s motion for summary judgment reads.

“The ordinance and parking agreement fully comply with the Arizona Constitution,” the motion argues. “Plaintiffs’ claims fail as a matter of law because the actions of the city are supported by a rational basis that furthers a legitimate government interest.”

Krietor says the bottom line is that the city “has aggressively competed for its share of growth in order to support city services,” Krietor said.

Sales-tax revenues provide the city with the bulk of its income.

“We have taken an aggressive stance because we don’t want to become a dying city.”

Judge Robert Miles will hear the case.



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