Tuesday, November 20, 2007

Goldwater Institute: Hotel Hysteria

Phoenix Mayor wants to build more downtown hotels

by Clint Bolick

Guess who owns the tallest hotel in Arizona: Westin? Hyatt? Ritz-Carlton?

By 2009, the answer will be the City of Phoenix, which will open a 31-story, 1,000-room hotel offering "Sweet Sleeper" beds and other amenities. And if Mayor Phil Gordon has his way, Phoenix's hotel gambit may double in size soon thereafter.

The initial hotel is designed to serve visitors to the city's expanding downtown convention center. Apparently, the private hotel industry, which is hardly averse to building in the Valley of the Sun, didn't detect quite the enthusiasm for downtown conventions that the politicians did. So the city formed an entity called the Downtown Phoenix Hotel Corporation, issued $350 million in revenue bonds, and made an agreement with Sheraton to operate a new hotel.

But it may not be enough. At his recent State of Downtown speech, Mayor Gordon proclaimed, "We need more hotel rooms now." He directed local business leaders to convene representatives of the hotel industry to explain why they should build more rooms downtown. "And be sure to tell them that if the private sector doesn't meet the demand," he warned, "we will."

Cities sometimes provide decent public services; but they're typically awful at out-forecasting the private market in terms of business opportunities. That's why the framers of Arizona's Constitution took multiple steps to prevent government from getting involved in the business arena themselves.

In addition to prohibiting corporate subsidies, the Constitution's gift clause forbids cities from "becom[ing] a subscriber to, or a shareholder in, any company or corporation, or becom[ing] a joint owner with any person, company, or corporations."

Sounds exactly like what the city did in creating the Downtown Phoenix Hotel Corporation and getting into the hotel business. Except there wasn't anyone around to challenge the deal the first time around. But now there is.

Clint Bolick is director of the Goldwater Institute Scharf-Norton Center for Constitutional Litigation.

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