Clint Bolick

Gaylord deal begs the question, do cities ever learn?

Posted on January 14, 2009 | Author: Clint Bolick
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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.

The 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.

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.

Editors Note: In the original version of this email, the Goldwater Institute mistakenly suggested Gaylord Entertainment was involved in a failed hotel development project in Mesa in 1997. That company was not Gaylord Entertainment. The Goldwater Institute regrets the error.

Learn more:

Goldwater Institute: "Regifting the Gift Clause: How the Arizona Constitution Can End Corporate Subsidies"

Goldwater Institute: Turken v. Gordon

Arizona Republic: CityNorth court ruling could affect Gaylord, lawyer says

East Valley Tribune: Campaign for Gaylord bed-tax vote intensifies

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