In 1998, the City of Tempe and America West Airlines entered into an agreement to redevelop part of downtown Tempe. The city agreed to convey property to America West for free and then pay America West approximately $15 million over twenty years. In return, America West pledged to develop the property and convey ownership of the improvements back to the city. Tempe agreed to then lease the property back to America West.
But America West isn't living up to its contractual obligations. And, instead of assessing penalties against the airline, Tempe has amended the contract and foregone $350,000 in assessments. What did Tempe get in exchange? Nothing.
By not assessing any penalties, Tempe may have violated Article 9, Section 2 of the state constitution. Known as the "gift clause," the provision was designed to prevent the dissipation of public funds in speculative business ventures. According to the Arizona State Constitution ratification debates, the section was necessary because government officials in the Arizona territory had a history of losing public funds in such speculative ventures.
Tempe should remember that those who don't learn from history are condemned to repeat it.