I went shopping last week.
I've been trying to spend less money — if this country's really about to enter its next Great Depression, I don't want to be the idiot who wasted her last paycheck on champagne and a new cocktail dress. But my resolve evaporated when I read about the new shopping center open for business in northeast Phoenix. What the heck, I thought. I've got to buy my year-old nephew a Christmas present anyway.
Sarah Fenske
At CityNorth, the parking lot is empty — and the stores aren't much better.
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So I found a gift. (Spoiler alert for Nathan: You're getting a pair of corduroy overalls from Gymboree.) And, okay, I got something for my little dog, too. (What puppy doesn't long for a pair of strap-on antlers to amuse Mommy's friends?)
I managed to justify the expenditures with some positive thinking: Hey, I'm helping the economy! Hey, the city of Phoenix needs every penny of sales tax it can get!
The trouble is, the city of Phoenix didn't get all the usual pennies. Not for these purchases.
That's because I was shopping at CityNorth.
CityNorth is the gorgeous new retail/office/residential development just a little bit to the north and the east of Desert Ridge, at the 101 just east of the 51. Despite the fact that it's a 30-minute drive from anything remotely urban, it's intended to be a new sort of city center. Instead of an indoor mall, you get an avenue of walkable streets; people are meant to live upstairs and stroll around this little faux-SoHo to get their lattes rather than hitting a drive-through Starbucks.
But that's not where the problem comes. I suppose people are going to move out there eventually. Why not give them their own regional shopping and offices rather than expect them to schlep downtown? Especially when downtown, for the most part, blows?
The problem is that city officials were so desperate to make CityNorth happen, they actually committed $97 million in sales tax revenue to the developer just for building it. The developer gets one-half of every sales tax cent collected by CityNorth retailers. So when I spent $66 on kids' clothes and puppy paraphernalia, the city collected $5 in tax — but it kept only $2.50.
The other $2.50 goes to Thomas J. Klutznick & Company of Chicago.
The city justifies this as a way of creating revenue. We're not losing a penny, it insists. Even with the developer's cut, that $2.50 is still $2.50 more than we'd otherwise have.
But when it comes to my CityNorth experience, it simply isn't true.
If I hadn't gone to the Gymboree at CityNorth, I would have just gone to the one at Paradise Valley Mall. (Name aside, that's within Phoenix city limits.) And if I hadn't gone to the little doggy boutique at CityNorth for those others, I surely would have eventually bought my pup something similar at Three Dog Bakery at Biltmore Fashion Park, where I usually shop. The city would have been $2.50 richer.
The only loser would have been the developer.
The timing was a bit ironic, to say the least. But last week, just days after the CityNorth's grand opening, a three-judge panel heard arguments about whether or not Klutznick & Co. ought to get its $97 million.
The Goldwater Institute, the libertarian think tank based here, had filed a lawsuit soon after the Phoenix City Council approved the tax giveaway, arguing that it was a "gift" to the developer — and that the Arizona Constitution strictly forbids government entities from giving "gifts" to private parties. (See "Revolting Development," September 6, 2007.) After a Maricopa Superior Court judge ruled in favor of the city, Goldwater's litigators promptly took their fight to the appellate level.
In the appellate courtroom, the arguments for both sides were strong, if highly technical. But even as the appellate court attempts to address the legal issues at play here, something much easier to understand is going on in Phoenix.
Sales tax collections are plummeting, for both the city and the state. Last month, the city collected nearly 11 percent less than it did in the same period during 2007, according to its records. (State sales tax revenue was down an equally alarming 9 percent in the same period.)
And to say Phoenix is heavily dependent on sales tax is like suggesting that tweakers enjoy meth. Sales tax collected from city retailers makes up roughly 40 percent of the city's general fund — and sales taxes remitted from the state's shared pool make up another 13 percent.
That means more than 50 percent of the city's main budget comes from consumer purchases. It also means, these days, that the city is in trouble. Mayor Phil Gordon announced last week that Phoenix may have to trim nearly 1,000 jobs.
Could there be a worse time to be handing out zillions to a wealthy Chicago developer?
I've been stunned over the course of reporting on CityNorth just how flippant city officials are when confronted with the audacity of their giveaway. They act as though anyone questioning the purchase is in desperate need of Economics 101 and start lecturing about how this is revenue the city never had, so it's all gravy. As if we're too dumb to realize that, even in flush times, the retail market is finite — CityNorth shoppers are not people flying in from Las Vegas. They're former Paradise Valley Mall and Biltmore shoppers.
