Tuesday, November 24, 2009

Goldwater Institute Sues Tempe Over Handouts for Indoor Aquarium

Subsidy violates same constitutional provisions as controversial CityNorth mall
Phoenix--Today the Goldwater Institute asked a court to strike down an agreement between the City of Tempe and the developer of Sea Life Aquarium, a children's theme park at Arizona Mills Mall. The agreement provides tax subsidies and concessions to the private business in violation of the Arizona Constitution and state law.

The Arizona Constitution bans giving subsidies to benefit a private business under the "Gift Clause." The Equal Protection and Special Laws Clauses of the Arizona Constitution also prohibit these types of subsidy deals. In addition, the Arizona Legislature recently passed a statute prohibiting all retail sales tax subsidies in Maricopa and Pinal Counties, and another restricting sales tax subsidies throughout the state. The Sea Life subsidy runs afoul of both the Arizona Constitution and the state laws.

Subsidies offered to Sea Life, a division of UK-based Merlin Entertainments Group, the second largest operator of attractions in the world behind Disney, include rebates on all construction sales taxes to the developer; rebates on all retail taxes to the developer up to $78,000; rebates on planning, engineering, and building safety processing fees up to $70,000; and special assistance from the city on permitting, planning and other regulatory hurdles required of other, non-favored developers and business owners.

Goldwater Institute attorney Carrie Ann Sitren is representing Nick Coons, owner of Tempe-based Red Seven Computers; Interior Concepts, a Tempe business; and Tempe taxpayers Jack Gibson and Chuck Kirkhuff.

"Our client, Mr. Coons, was not offered any assistance from the city to get his business off the ground," Ms. Sitren said. "The Arizona Constitution is crystal clear on giving taxpayer money to businesses and industries--it isn't legal."

This agreement represents a seismic shift in position by Tempe Mayor Hugh Hallman who spoke out against a similar $97.4 million subsidy from the City of Phoenix to build the CityNorth mall. Mr. Hallman even contributed to an article on the subject that appeared in the Arizona Republic September 29, 2009.

"When government gives taxpayer money to a favored business, it must tax the rest of the public with that missing share," Mr. Hallman wrote. "Small businesses, or those less connected to government leaders, or those who cannot hire lawyers and lobbyists to fight for their own subsidies, are left holding the bag."

The Goldwater Institute filed suit against the CityNorth subsidy in 2007 and is awaiting a decision from the Arizona Supreme Court on its legality. The Arizona Court of Appeals unanimously declared the deal illegal in December 2008 and until the Arizona Supreme Court reverses that decision, it is the law and clearly makes the Sea Life subsidy illegal.

"The fact that the City of Tempe is offering these illegal subsidies while a similar case is being considered is proof that the courts need to put a stop to this practice once and for all," continued Ms. Sitren. "They can do that by saying the Arizona Constitution's Gift Clause provision means what it says, that no subsidy shall be given to benefit a private business."

Construction is already underway on the Sea Life Aquarium. It is slated to open in June 2010.

This lawsuit, Coons v. Hallman, was filed in Maricopa County Superior Court by the Goldwater Institute Scharf-Norton Center for Constitutional Litigation.

For more information on this and other Goldwater Institute lawsuits visit www.goldwaterinstitute.org/litigation. The Goldwater Institute is an independent government watchdog supported by people who are committed to expanding free enterprise and liberty.

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