Thursday, January 15, 2009

Goldwater Institute: Gaylord deal begs the question, do cities ever learn?

by Clint Bolick

In the face of a plummeting economy, huge budget deficits, and massive layoffs, the City of Mesa has decided to give more than $80 million in subsidies to two developers to build a luxury hotel, resort, and convention center at the Mesa Proving Grounds.

give moneyThe scheme is nothing if not complicated. A developer, Gaylord Entertainment, owns the land, which it will sell to the city for $10, then lease it back for $5,000 per year, but then can buy it again for $5,000. But the core of the agreement is a rebate of the City's 3 percent bed tax to the developers and a nonprofit group for purposes of advertising and promotion-totaling as much as $83.3 million.

The project's backers are scrambling to distinguish the deal from the CityNorth subsidy that was struck down last month by the Arizona Court of Appeals as a violation of the Gift Clause of the state constitution. One difference is that the Gaylord deal involves a bed tax, not a sales tax. Umm, try again. Okay, the developers will use the revenues for the same purposes that the City would, namely tourism. But I can't think of a business that wouldn't consider a tax rebate to advertise itself to be a wonderful gift.

Ultimately, the money ends up in the developer's pocket to further its commercial interests, which was the linchpin of the CityNorth decision. Nor can referral of the issue to a popular vote cleanse the deal of its constitutional sins.

Mesa is no stranger to failed economic development schemes. The Waveyard amusement park, which Mesa convinced voters to approve, is languishing. Ten years ago, Mesa used its power of eminent domain to bulldoze an entire neighborhood to make way for a resort--apparently proposed by the same Gaylord Entertainment--that was never built because the developer couldn't find financing.

When a commercial project is not viable without a subsidy, the market is speaking. Will Mesa listen?

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


Anonymous said...

In reading the blogs I came across an intersting question on Mesa Issues that I would love to hear an answer on from Bolick. What happens then when all charter school vouchers are deemed null and void? While I understand their position, the Institute I hope takes some caution when navigting this issue.
I've got some friends who are big supporters of the Goldwater Institute who would be likely asking for all of their donations back.

Anonymous said...

I agree the opinion in this article is extremely myopic. When a development has significant positive direct and indirect impacts on a city it may justify public participation. The Waveyard project, minor league baseball stadiums, resorts, etc.. may be examples of this. The right project can change the entire economic outlook for a region. (look at what Disney has done to Orlando over the years or Westgate for Glendale). Neither one of these projects would have been a reality without public financial participation, but both cities are much, much better as a result of them.