Stephen Lemons Column

Commentary: After Omni Ruling, Brnovich Stands a Chance to Rein in Cap'n Crow

Brnovich flashes a V for victory sign, 'cause when it comes to ASU, a peace sign it is not.
Brnovich flashes a V for victory sign, 'cause when it comes to ASU, a peace sign it is not. Gage Skidmore

Brnovich flashes a V for victory sign, 'cause when it comes to ASU, a peace sign it is not. - GAGE SKIDMORE
Brnovich flashes a V for victory sign, 'cause when it comes to ASU, a peace sign it is not.
Gage Skidmore

Consider the cunning of the Crow.

According to a recent ranking of the country's public university pooh-bahs by The Chronicle of Higher Education, Arizona State University president Michael Crow is the 10th-best-compensated of 269 top college kahunas.

And yet, Crow's more than $1 million per year in taxpayer-paid compensation does nada for ASU's academic performance. ASU tied three other schools to come in number 115 out of 312 universities in U.S. News and World Report's 2019 listing.

Okay, so no one will ever mistake ASU for Princeton. Still, at $10,822 per year for in-state fees and tuition, ASU must be a smokin' deal compared to other colleges.

Bzzzt. Wrong again, Starbucks-breath. U.S. News also ranks national universities for "best value," and Ol' Sparky meanders in toward the bottom of that roll call, at 119 out of 145.

But how could this be? Crow's been at ASU's helm since 2002. One local news outlet recently referred to him as a "genius" who attends 90 meetings per week as he presides over a $4 billion empire that he refers to as the "New American University."

Perhaps it's because this wily 63-year-old emperor of higher ed has no clothes, though he's definitely convinced others that he's sporting a robe and a crown.

Go Crazy With the Cheez Whiz

Much of Crow's image is borne from marketing. U.S. News has awarded ASU the title of "Most Innovative School" for the four years the category's existed, and Crow's vast army of PR flacks have plastered news of that consolation prize everywhere but on the copper dome of the Arizona State Capitol.

Crow also relies on the raging provincialism of local thought leaders — politicians, businessmen, reporters — many of whom rely on ASU's Big Poppa for a job at the university, teaching part time, or full time when they retire or get laid off.

Then there's ASU's status as an economic powerhouse, one that doles out tax dodges as part of multimillion-dollar real estate deals, like the gleaming Marina Heights office complex or the proposed four-diamond, luxury Omni Hotel and conference center, planned for a "golden corner" at University Drive and Mill Avenue in Tempe.

One of the few in this burg willing to buck Crow has been Attorney General Mark Brnovich, who has brought two legal actions against ASU and the Crow-subservient Regents, seeking to rein them in.

The first complaint argued that the Regents were in violation of the state constitution, which dictates that a college education "shall be as nearly free as possible." The second suit challenged these land transactions wherein the university basically rents out its tax-free status to big corporations.

Though ASU, the Regents' largest school, is not "nearly free" or anything close to it, a Maricopa County Superior Court judge dismissed the tuition suit last year for lack of standing. Brnovich has appealed.

A few weeks ago, in late June, Arizona Tax Court Judge Christopher Whitten ruled on the second suit, awarding Brnovich a partial win.

Regarding ASU's misuse of its tax-exempt status, Whitten, incredibly, gave Crow carte blanche to go crazy with the Cheez Whiz, to borrow a phrase from Beck, and use the college's tax-exempt land as he and the Regents see fit.

Whitten ruled that Arizona law allows ASU to purchase, sell, and lease real estate, and that ASU's property is "constitutionally exempt from taxation."

In his complaint, Brnovich had relied on a conditional phrase from the same law, which states such land deals must be "for the benefit of this state and for use of the institutions under its jurisdiction."

But as long as proceeds from these transactions are used by the universities, "that provision is satisfied," Whitten concluded.

The judge left open the possibility that the state Legislature might one day offer "a definitive instruction" regarding what's for the benefit of the state and what is not.

Till then, or till Whitten's decision is overturned, the Regents' rules reign.

Sledgehammer, Meet Geode

Brnovich also argued, albeit not until April of this year in an amended complaint, that the Omni deal also violated the Arizona Constitution's gift clause, which bars any subdivision of the state from giving a donation or grant, "by subsidy or otherwise, to any individual, association, or corporation."

The AG says the Omni deal includes nearly $37 million in sweeteners, such as:

• ASU's building the hotel for Omni at a cost of $19.5 million — though ASU only gets to use it for free seven days a year.
• The college's throwing in $8.5 million worth of parking spaces for Omni's use.
• And, according to Brnovich, ASU's undervaluing of the property to the tune of $8.9 million.

These financial incentives are in addition to the $21 million in tax breaks that Omni scored from Tempe. Omni also retains the right to purchase the property for a nominal $10 fee after the 60-year lease runs its course.

ASU denies the land was undervalued, and it insists that the other $28 million in building costs and parking amenities is an investment that will guarantee a $140 million revenue stream for the university over time.

Critics say that's hooey and that the real estate scheme robs K-12 schools of tax money.

Whitten didn't buy the argument about K-12 getting screwed out of local taxes, but he did allow Brnovich's claims on the gift clause to go forward. The AG's office ultimately will have to prove that its lawyers found out about the sweeteners within the one-year statute of limitations.

The AG added the gift clause part of his complaint in early April. Apparently, the AG's bloodhounds discovered the details of the alleged gifts in March, one month prior to submitting the amended complaint.

Which makes sense. Why would Brno otherwise have held back on what ended up being the strongest part of his claim?

After Whitten's decision, Brnovich's spokesperson and ASU's communications office each issued press releases declaring victory.

But ASU has reason to sweat. As the complaint moves forward, there will be discovery; documents will be subpoenaed and depositions will be taken, opening up a potential Pandora's box of embarrassing details for ASU and Crow, not just about the Omni deal, but about deals unknown to us at present.

Discovery could also lay bare the inner workings of ASU's secretive foundation, which boasts a $665 million endowment as of 2017, and which no one at ASU, and certainly not Michael Crow, wishes to discuss under oath.

For years, Crow has accumulated power for himself, creating a seemingly impenetrable facade.

Brnovich may now get to crack that facade, like taking a sledgehammer to a geode.

Though the aftermath will not be nearly as pretty.
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Stephen is a former staff writer and columnist at Phoenix New Times.
Contact: Stephen Lemons