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Suit vs. Tempe could sink aquarium at Arizona Mills Mall

November 7, 2014


A June opening for the 26,000-square-foot aquarium at Arizona Mills Mall could be in jeopardy after a conservative think tank filed a lawsuit claiming that the incentive Tempe offered the developer is illegal.
The Goldwater Institute filed the lawsuit on Monday, asking that Maricopa County Superior Court overturn the agreement providing incentives to the developer. The lawsuit was filed on behalf of Nick Coons, owner of Tempe-based Red Seven Computers; Interior Concepts, a Tempe business; and Tempe taxpayers Jack Gibson and Chuck Kirkhuff.
Tempe’s city attorney declined to comment on the lawsuit because he had yet to see the claim.
But Mayor Hugh Hallman stated that the agreement was valid because the city had negotiated a discount on admission for Tempe students to attend the aquarium in return for the incentive it offered Sea Life U.S. Inc., a subsidiary of the United Kingdom-based Merlin Entertainments Group.
“We’re not giving something away for nothing,” Hallman said.
The Goldwater Institute maintains that any subsidy that a city offers to a developer to build a project would violate the gift clause of the Arizona Constitution. The gift clause generally prohibits governments from granting money or credit to private entities. The institute also claims the Tempe incentive violates recently passed legislation that prohibits retail sales-tax subsidies in Maricopa and Pima counties.
Carrie Ann Sitren, a Goldwater attorney, said the institute based its suit on an earlier decision by the Arizona Court of Appeals, which ruled that a $97.4 million subsidy that Phoenix offered to the developers of the CityNorth mall was illegal. CityNorth is a development that includes retail and commercial space just north of Loop 101 near 56th Street. Goldwater filed that suit against Phoenix.
“The gift-clause legislation was supposed to stop cities from doing this,” Sitren said.
Phoenix also claimed in its failed argument to the state Court of Appeals that, in return for the nearly $100 million incentive offered to the developer, the city would receive a parking garage built by the developer as part of the mall project. Under that development agreement, approved in March 2007, Phoenix agreed to pay the developer half of the sales taxes collected for 11 years, three months, or until the total reached $97.4 million.
A decision by the Arizona Supreme Court on an appeal of that ruling is pending.
Tempe’s incentive for the estimated $15 million project, which is being built in a space at the mall formerly occupied by a Hi-Health store, pales in comparison to the CityNorth deal. Tempe’s incentive is not to exceed $218,000.
That incentive includes:
• Reimbursing the developer for taxes it paid on the space it leases at the mall.
• Rebating construction sales taxes.
• Providing development-fee waivers, which include waiving planning, engineering and building-safety processing fees.
The aquarium will have 12 different habitat zones with more than 30 display tanks for more than 5,000 creatures including sharks, rays, sea turtles and starfish.
Last week, Sea Life executives announced a groundbreaking ceremony on Tuesday. The facility is next to Sports Authority on the northeastern corner of the mall near Interstate 10 and Baseline Road.
Tempe’s Sea Life is expected to employ about 50 people and estimated to draw 400,000 people to Tempe annually, increasing visitation to the city by approximately 10 percent, according to Tempe officials.



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