Turken v. Gordon (CityNorth subsidy case)

Posted on August 08, 2007 | Type: Case
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Case background:

In July 2007 the City of Phoenix signed a contract with the Klutznick Company to provide a $97.4 million subsidy for their CityNorth project through sales taxes, despite a constitutional prohibition on corporate welfare within Arizona. The CityNorth project is a $1.8 billion high-end retail development on prime real-estate in an affluent part of north Phoenix.  On August 8, 2007 the Goldwater Institute filed suit against Phoenix Mayor Phil Gordon over the City North subsidy.

The Goldwater Institute's Scharf-Norton Center for Constitutional Litigation, directed by Clint Bolick, argued that the CityNorth subsidy violates three clauses within the Arizona constitution.

The Goldwater Institute represented six small business owners in Phoenix; Meyer Turken, owner of Turken Industrial Properties, a small real estate development and management company; Kenneth D. Cheuvront, owner of Cheuvront Wine and Cheese Cafe and Cheuvront Construction; Zul Gilliani, who owns an ice cream shop at Paradise Valley Mall; James Iannuzo, who owns Sign-a-Rama; Kathy Rowe who owns Music Together; and Justin Shafer, owner of Hava Java. The case made it to the Arizona Supreme Court, which ruled that the law was unclear and clarified the law. Though the CityNorth subsidy deal can stand, the Court unanimously ruled that, going forward, government subsidies to encourage development violate the Gift Clause of the Arizona Constitution unless the developer offers tangible benefits of equal value in return. The Court did not rule on two legal issues related to the CityNorth case--the equal privileges and immunities, and special law provisions. The Goldwater Institute is currently deciding whether or not to pursue those issues in the Court of Appeals.

View press release below:

 

Read more about corporate welfare and the Arizona constitution:

The Stakes:

  • The elimination of corporate welfare in Arizona.
  • An equitable business environment in Arizona that does not favor the politically connected over small business owners.
  • Greater economic efficiency for a prosperous economy.
  • A realignment of city priorities from the creation of high-end retail stores to police and fire protection.

Case Timeline:

  • August 8, 2007: case filed with Maricopa Superior County Court.
  • February 11, 2008: 10:30 a.m., oral argument on motions for summary judgment in the Turken v. Gordon subsidies case before the Honorable Judge Robert E. Miles at Maricopa County Superior Court, Old Courthouse, 125 W. Washington, Courtroom 303, Phoenix, AZ 85003.  Open to the public.
  • April 2, 2008: Judge Robert E. Miles rules that $97.2 million sales tax deal with CityNorth creates a public good and does not violate the constitution as a corporate subsidy.  Goldwater Institute promises to appeal.
  • April 4, 2008: Goldwater Institute appeals court ruling.
  • June 9, 2008: Judge Robert E. Miles hears oral arguments on attorney's fees. Old Courthouse, 125 W. Washington St., Courtroom 303
  • November 25, 2008: Court of Appeals heard oral argument on appeal.
  • December 23, 2008: Court of Appeals rules the deal with CityNorth does in fact violate the gift clause.
  • September 30, 2009: Hearing in the Arizona Supreme Court at 9:30 A.M., 1501 W. Washington Street.
  • January 25, 2010: Arizona Supreme Court rules that government subsidies to encourage development violate the Gift Clause of the Arizona Constitution and applies the decision prospectively.

 

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