PHOENIX – The Goldwater Institute’s legal challenge to the city of Tempe's attempt to give handouts to a private aquarium ended last week when a judge confirmed the lawsuit protected Tempe taxpayers and the Arizona state constitution.
Maricopa County Superior Court Judge Eileen S. Willett ruled last Wednesday that Tempe changed its development agreement to avoid an illegal subsidy to the Sea Life aquarium only because the Goldwater Institute filed a lawsuit challenging the original deal. The lawsuit brought about “a fair contract between the government and private business which did not violate the gift clause of the Arizona Constitution and other statutory provisions,” Judge Willett said.
“This lawsuit forced the city of Tempe to go back and fix a bad deal for taxpayers after failing to follow the law the first time around,” said Carrie Ann Sitren, an attorney with the Goldwater Institute. “We hope other Arizona cities have learned they are being watched closely, and cannot ignore the clear requirements of the Arizona Constitution.”
The Tempe City Council agreed in August 2009 to tax rebates and other incentives for a planned aquarium at Arizona Mills mall. In return, the City received only a vague written statement from the owners of Sea Life that they “desired” to offer discounted tickets to Tempe students. That unspecified arrangement meant Tempe would not be guaranteed a fair exchange for the taxpayer handout, as required by the Arizona Constitution’s gift clause.
The Goldwater Institute challenged that agreement on behalf of several Tempe residents and small business owners who did not receive similar incentives from the City.
After the lawsuit was filed in November 2009, Tempe hired a consultant to determine whether the development would proceed without the City’s financial support and whether the City would receive more benefits than the amount of the tax breaks, something it was supposed to do before it adopted the contract. The City also approved a different agreement requiring the developer to provide discount student tickets.
While this case was making its way through the court system, the Goldwater Institute won a landmark decision in January 2010 from the Arizona Supreme Court in a separate lawsuit that affirmed the role of the constitution’s gift clause in stopping state and local governments from giving away tax dollars without receiving guaranteed benefits of equal value. Had Tempe not revised its agreement with Sea Life, it would have been a clear violation of the gift clause.
Because Tempe modified its agreement to comply with the law, the Goldwater Institute will not take this lawsuit to trial. "We wish that Tempe had followed the law in the first place, which we urged it to do, but at least its subsequent action means taxpayers will not have to bear the burden of a trial," said Ms. Sitren.
Although the revised deal now complies with the constitutional and statutory requirements, the Goldwater Institute condemned the practice of handing out taxpayer money to private companies, even where this is a quid pro quo. "It's clear the aquarium would have been built in Tempe even without the City's financial assistant," said Ms. Sitren. "And in a tough economy, spending public funds in this way is clearly not a top priority." The Institute is developing legislative reforms to further curb taxpayer incentives to private businesses.
Read more about these and other cases filed by the Goldwater Institute’s Scharf-Norton Center for Constitutional Litigation to protect individual rights and keep government within its constitutional limits at www.goldwaterinstitute.org/litigation. The Goldwater Institute is an independent government watchdog supported by people who are committed to expanding free enterprise and liberty.