Stephen Lemons Column

Mark Brnovich Aims to End Michael Crow’s Crony Capitalism, and That’s a Good Thing

Friend to fat cats, ASU president Michael Crow, flips ASU property like an HGTV star.
Friend to fat cats, ASU president Michael Crow, flips ASU property like an HGTV star. Gage Skidmore

Robert Rowling doesn’t need your money. In 2018, Forbes magazine ranked the owner of TRT Holdings, which in turn owns the Gold's Gym and Omni Hotels chains, at number 107 on its 2018 list of the 400 wealthiest Americans, with an estimated net worth of $5.8 billion. Over the years, he’s doled out mega-millions to conservative causes, including $6 million to Karl Rove’s super PAC, American Crossroads.

And yet, Arizona State University president Michael Crow is intent on indirectly gifting the Republican hotelier $21 million in tax breaks as part of a deal allowing Rowling to build a 30,000-square-foot conference center on university land at the southeast corner of University Drive and Mill Avenue.

The deal, which both the Tempe City Council and the Arizona Board of Regents have signed off on, allows Omni to take advantage of ASU’s tax-exempt status and rake in the cash. It’s money that might otherwise have gone to fund K-12 and community colleges.

Ever the spin-peddler, Crow has argued that since the property was never on the tax rolls to begin with, local schools are not losing out. At a forum in Phoenix this January with other state university presidents, Crow justified his crony capitalism by noting that Omni would make “payment in lieu of taxes” to ASU, and so the transaction was perfectly copacetic.

“Payment in lieu of taxes” has a particularly arrogant ring to it. I would prefer that payment of taxes go to institutions directly accountable to the people, not personal fiefdoms such as what Crow has crafted for himself at ASU, where much financial activity takes place behind the screen of ASU’s non-profit foundation. Any journalist in town can tell you how you’re more likely to get a tulip to talk than get ASU to fork over public records in a timely manner, if at all.

The Omni hornswoggle isn’t a one-off. Indeed, Crow’s been flipping so much ASU land of late that HGTV should consider giving him his own reality show, Crow’s Campus Tax-Dodge. A whole episode could be dedicated to the gleaming, glass-fronted Marina Heights complex on Tempe Town Lake, which sold in 2017 for $928 million, the biggest real-estate transaction in Valley history.

Marina Heights sits on ASU-owned land, and so its owners will pay no property taxes for 99 years, sidestepping as much as $120 million that should go to government coffers.

In a 2017 op-ed in the Arizona Republic, Crow rationalized that K-12 schools won’t suffer from the deal because local governments weren’t getting any money from these properties to start with — specious logic, as it makes sense that between property where they would have to shell out tens of millions of dollars each year in taxes and property where ASU shields them from taxation, developers would choose the latter.

Crow claims he needs these sorts of deals to keep ASU afloat financially because the legislature has steadily cut its funding of state universities over the years.

I can’t swallow that whopper, either. ASU’s budget is in the black, with total assets of $4 billion, according to its 2018 comprehensive financial report. Also, Crow has an expensive “expand or die” mentality, and so ASU can boast an outpost in Washington, D.C., and a new one in Los Angeles, where Crow is leasing the historic and recently renovated Herald Examiner building.

Nor is Crow, who makes more than $1 million in salary and compensation, cutting ASU’s students a break. He recently proposed a tuition increase for in-state undergrads of 2.8 percent, on top of the $10,822 they already pay for tuition and fees.

Which brings us to Arizona Attorney General Mark Brnovich’s two lawsuits against the Arizona Board of Regents. Taxpayers across the political spectrum should support both of them.

The most recent of these, filed in early January, goes after the regents-approved real-estate racket. In it, Brnovich argues that under Arizona law, the board of regents and ASU cannot use their tax-exempt status to “facilitate special property deals for favored businesses,” as, “property conveyed to avoid taxation cannot be exempt.”

After this suit hit, Crow and his allies threw out the red herring that the AG was suing his own client. Poppycock. The AG is the chief law enforcement officer of the state. If there is wrongdoing at any state institution, it is his duty to act.

(Note: The AG recently lodged an amended complaint on the Omni deal, alleging that ASU and the board of regents coughed up $28 million in incentives to Omni, on top of the $21 million in tax breaks the chain had already scored.)

As for the other lawsuit, brought in 2017, it maintains that ASU and other universities have violated the Arizona Constitution’s dictate that in-state tuition should be “as nearly free as possible.” Brnovich argues that in determining tuition rates, the board of regents does not give primary weight to the actual cost of instruction and instead pays more attention to what other similarly situated universities charge.

A Maricopa County Superior Court judge tossed Brnovich’s tuition complaint in 2018 for lack of standing. Brnovich has appealed and is asking the state Supreme Court to intervene.

There is a sort of cult that has grown up around Crow, one based largely on his expansion of the school and the fact that U.S. News and World Report ranks ASU “No. 1 in innovation.”

However, the very same publication has ASU tied with Alabama’s Auburn University for a ranking of 115 out of 312 national universities. Out of 145 “best value schools,” ASU ranks 119. The University of Arizona comes in at 97.

Viewed in this light, the “No. 1”  innovative school (out of 58) looks a lot like a participation trophy. Also, what good is all this innovation if ASU can’t move past its current, middling status?

Brnovich’s lawsuits threaten to puncture the cult of Crow, make college more affordable for Arizonans, and end ASU’s real estate shenanigans.

Though Brnovich is a Republican — hey, no one’s perfect — progressives should cheer him on the last two goals, while they simultaneously bash him, deservedly, on throwing in with other Republican AGs on what could be a successful attempt to overturn Obamacare.
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Stephen is a former staff writer and columnist at Phoenix New Times.
Contact: Stephen Lemons