Wednesday, October 15, 2008

Goldwater Institute: CityNorth problems illustrate the framers' wisdom

by Clint Bolick

The opulent CityNorth development's recent problems-construction delays and having to market luxury condominiums as rentals-illustrate the wisdom of the Arizona Constitution's framers in forbidding corporate subsidies.

The case made for the $97.4 million taxpayer subsidy to the developer was that the shopping mall could not be built without it. But the record in the Goldwater Institute lawsuit Turken v. Gordon, now pending before the Arizona Court of Appeals, shows that according to its own numbers the developer would fetch a nifty profit even without a subsidy.

Regardless, the City of Phoenix claims that there is no risk to the taxpayers because the subsidy is paid only as the project generates tax revenues.

Not so. Even if the City was right and a subsidy was required, what that means is that the market itself couldn't sustain the project. So on a site considered one of the most commercially desirable in the state, CityNorth is being built instead of a project that the market could support. If CityNorth turns out to be a giant white elephant, the net result will be substantially reduced tax revenues compared to an alternate project consistent with sounder development.

Those kinds of miscalculations happen all the time with developments sustained by taxpayer funding. Elected officials can rarely out-guess the market-nor are they elected to do so. And by their constitutional oath, they are forbidden from doing so.

The Court of Appeals will hear arguments in the case on November 25. Here's hoping that constitutional principles will prevail, to the benefit of taxpayers, small businesses who suffer from subsidized competition, and ultimately even politicians who can't seem to stop themselves from gambling with taxpayer money.

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

Learn more:

Goldwater Institute: Turken v. Gordon (CityNorth subsidy case)

Arizona Republic: CityNorth's 1st residents? Renters

CityNorth: A new city rising

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