Arizona's constitution prohibits corporate subsidies by outlawing any donation or grant, by subsidy or otherwise, to any individual, association or corporation. Despite this, last year the City of Phoenix awarded a $97.4 million incentive to Klutznick Company, the developers of the CityNorth mall in north Phoenix.
To stay within the bounds of the constitution and past Arizona Supreme Court decisions, the City has to prove it is buying a public good at an equal market value to the monetary incentive.
In exchange for the $97.4 million dollars, the City of Phoenix will have a 45-year exclusive lease on 200 carpool parking spaces in a parking garage at the CityNorth mall. So the public good, argues the City's lawyer Timothy Berg, is that the 200 carpool spaces will reduce traffic congestion and air pollution.
How about market value? Deal Breaker: A Critique of the CityNorth Subsidy, a report by the Goldwater Institutes Dr. Byron Schlomach, concludes that the City of Phoenix will pay approximately $10,822 per parking space, per year, to lease the 200 spaces at CityNorth. By comparison, the average market rate for a years lease of a parking space in Phoenix is $684.
Arizona State University recently estimated that a new parking garage on their campus would cost $14,000 per space to construct. For that price, Phoenix could build and own 6,950 parking spaces for the same amount it paid to rent 200 at CityNorth.
This deal isnt about the public good. Its a subsidy that very clearly violates Arizona's constitution.
Patrick Gibbons is a marketing and communications associate at the Goldwater Institute.
Read about Turken v. Gordon (CityNorth Subsidy case)
Goldwater Institute: Deal Breaker: A Critique of the CityNorth Subsidy
Goldwater Institute: Regifting the Gift Clause: How the Arizona Constitution Can End Corporate Subsidies
Arizona Republic: Judge hears arguments in CityNorth case