Arizona Governor Doug Ducey Signs Law Killing the Roosevelt Business Improvement District

On Friday, March 11, Arizona Governor Doug Ducey signed HB 2440, which killed the Roosevelt business improvement district created by the Phoenix City Council on January 20. The district would have taxed property owners in a specified area to fund services beyond those already provided by the City. Ducey had not issued a formal written statement regarding his decision to sign HB 2440 as of Sunday, March 13.

The bill, first read in the Arizona House of Representatives on January 26, was introduced by Representative Warren Petersen of Gilbert at the behest of Marcus Dell'Artino, a lobbyist who lives and works in Roosevelt Row. Petersen claimed the City Council had acted improperly — possibly illegally — in creating the district. But several of the bill's opponents — including Phoenix Mayor Greg Stanton and Representative Ken Clark, whose district includes Roosevelt Row, say the state broke the law by enacting HB 2440. (More on that later.)

By signing the bill into law, Ducey undermined more than two years of work by a group of district organizers that includes many small business owners in the affected area. And Ducey's timing was a doozy.

According to Greg Esser, a Roosevelt Row artist and advocate who was instrumental in helping to create the business improvement district, Ducey signed the bill right after speaking at an event called Entrepreneurs' Office Hours, which the Governor's Office hosted at DeSoto Central Market. Ducey billed the event as "an open Q&A session for those working to build their businesses in Arizona" and a chance to talk about rules and regulations affecting entrepreneurs, as well as "tools and policy changes in Arizona designed to help grow budding businesses."

Ironically, Esser says, the Governor thanked Local First Arizona during that event. Local First Arizona, headed by founder Kimber Lanning, strongly opposed HB 2440. "It doesn't get any better," Esser says of Ducey's apparent hypocrisy. 

The bill changed the way business improvement districts (or BIDs) can be formed in Arizona. Previously, those who opposed forming a district needed to file a formal protest, and BID organizers needed to show that at least 51 percent of property owners who'd be taxed to pay for district services hadn't filed such protests. Under the new law, creating a district requires a petition process with signatures showing support by at least 51 percent of property owners subject to the BID tax.

And the changes apply retroactively, to districts formed after December 21, 2015.

Only one district, the Roosevelt BID, fits that category. That's why Stanton, Clark, and others consider HB 2440 a piece of "special legislation," which is prohibited by the Arizona constitution. Simply put, special legislation is a law designed to benefit or harm a specific person or group. "Obviously this is special legislation intended to undo the Roosevelt business improvement district," Stanton told New Times by phone on March 11.

Even Senator Kimberly Yee, who voted in favor of HB 2440, expressed concerns that it was a piece of special legislation when the Senate Finance Committee considered the bill on February 24. Clark, whose district includes Roosevelt Row, agrees that legal action is a viable option. "There may be grounds for a lawsuit," Clark told New Times on March 11. "This seems very much like special legislation."

Mayor Stanton says he has already called for the City Council to meet in executive session to discuss legal options and expects that meeting to happen within the next couple of weeks. It's entirely possible, Stanton says, that the City could sue the State, charging that the retroactivity portion of HB 2440 is special legislation, and therefore unconstitutional. If successful, the Roosevelt BID created by the City Council on January 20 could move forward. But it's too early to tell whether or when the City will actually take legal action.

Not everyone on the City Council shares Stanton's support for the Roosevelt BID. Councilman Sal DiCiccio voted against forming the district and spoke in support of HB 2440 in both House and Senate committees. DiCiccio claims the City doesn't really support the Roosevelt BID, citing the fact that the City Council didn't vote to oppose HB 2440 until its policy meeting on March 1.

"That's a silly accusation," Stanton says. "We passed the business improvement district," he says. "The purpose of the bill was to undo the business improvement district, so of course we opposed it." For Stanton, the bill that killed the Roosevelt BID for now represents the legislature's ongoing attempts to erode local control. "Local control matters," Stanton says.

The Roosevelt BID would have tangible benefits far beyond Roosevelt Row, according to Stanton. "What happens in Roosevelt Row is critical to all of Arizona." As evidence, Stanton points to the success of Downtown Phoenix Partnership, a BID created in 1990 that's worked with the City on important events such as the Super Bowl. "That business improvement district has been great for downtown Phoenix," he says. "The Roosevelt business improvement district is massively important to building the arts district."

Stanton credits district proponents and small business owners Esser, Cindy Dach, Lanning, and Wayne Rainey with helping to create one of the country's best neighborhoods. "Don't take my word for it," he says. Instead, consider the fact the American Planning Association named Roosevelt Row one of the country's top neighborhoods in 2015. "These people have worked hard to create one of the best cities," Stanton says. "The least we could do is support those fighters."

But district opponents don't see it that way.

Roosevelt Row property owner Erick Baer submitted a public comment to the Senate Finance Committee describing Roosevelt Row artists as "parasites that think everything is free." Michael 23 (he uses the number as his last name), an artist who operates the Firehouse art and music venue with his wife, Joanna Lee, fears the district will further the area's gentrification. And Theodore Matz, who co-owns and plans to sell the Firehouse building, opposes the BID because it would increase his taxes. 

The controversy is likely to continue, because neither side is poised to call it quits. Roosevelt BID organizers are still working to formulate a specific strategy for moving a district forward, Esser says. But in the meantime, he says, they're working on various elements of district governance. And they're engaging leaders in other parts of the state concerned that the newly signed legislation could have unintended consequences for them as well, perhaps by requiring petitions each time a BID comes up for renewal. 

Esser is hoping the Roosevelt BID will be fully operational, as in collecting assessments and providing initial services, by this time next year.

One option is starting the BID process over again, using the petition process required by HB 2440. But that could be harder this time around because the petition requires signatures supporting the bill from more than half the property owners, and owners who together hold more than half the property that would be subject to the BID tax. The new procedure favors those who own large lots over those who own smaller ones, and makes it easier for large commercial entities to outweigh small business owners. 

District organizers may need to work with their opponents to try and craft a district that a majority of property owners can agree on, according to J. Charles Coughlin, president of the Phoenix public affairs firm HighGround, who says he's part of the group that's worked for years to create the Roosevelt BID. Coughlin sees these districts as useful tools for "building a bridge between neighborhood associations and big property owners. In the absence of a BID, Coughlin says the area will likely see "larger and larger fights about bigger things" involving historic preservation, zoning, and entitlements for large commercial properties. 

Whatever strategy or strategies come into play, Esser hopes the district can become operational sooner rather than later. Citing increased damage to public property in the area and a recent homicide at Third Avenue and Roosevelt Street, Esser says that public safety is one of several services BID organizers plan to fund through BID taxes. 

The time to act is now, Esser says. But he's prepared to keep working for the long haul. "The supporters of HB 2440 ran a very nice sprint," Esser told New Times by e-mail on March 12. "But they fundamentally fail to understand that here in Roosevelt Row and downtown Phoenix we are running a marathon."