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Revolting Development

At last week's mayoral debate, the only one we'll have in this year's lopsided race, Mayor Phil Gordon was asked a very good question — and gave a very disappointing answer.

Knowing what we know now, the moderator asked, did Gordon regret the city's promise to hand over $97 million in tax revenue to the developers of City North?

CityNorth, you may recall, is the development under construction at the nexus of the 51 and Loop 101. It has prime access to two highways in a schmancy part of town — and yet, earlier this year, the city agreed to bequeath up to $97 million in sales tax to the project's Chicago-based developer, just for building it.

In its aftermath, the deal has become so unpopular that even the council candidates whom Gordon is endorsing, including Laura Pastor and Maria Baier, are swearing up and down that they would never have voted for it. We may be in an era of rampant corporate welfare, but this bit of entitlement was so over the top, it earned a story in the Wall Street Journal. It also inspired our state legislators to do what they should have done years ago: ban cities in Maricopa and Pinal counties from offering such massive giveaways in the future. (Supporters hope to approve a statewide ban this coming session.)

You know you've made a bum deal when our wildly divided legislature manages to unite against it. Bipartisan outrage is never a good sign.

And it gets even worse.

Last month, the Goldwater Institute, the influential libertarian think tank, sued the city. The institute argued that Phoenix's fat gift to the Thomas J. Klutznick Company is unconstitutional. The city has hired the blue-chip firm of Fennemore Craig, and its managing partner, Tim Berg, to handle its defense.

The institute's suit is a noble one. It's definitely past time that someone stood up to unchecked corporate welfare, and it's nice to see well-connected conservatives taking on big business. But the fact that we taxpayers will ultimately get stuck defending the suit is a sad irony: We're not just getting raped for $97 million. We're also stuck paying Fennemore Craig major bucks to defend the people violating us!

If there ever was a deal Gordon ought to regret, this is it.

But instead of expressing sorrow over the jam his government has got us in, the mayor did a karaoke version of Sinatra.

Regrets? He's had way too few to mention.

"I don't regret the decision," Gordon said. "I regret that we weren't able, as a community, to level the playing field so all the cities that have investments like this can share the revenue."

Obviously, it would be bad legal strategy to admit that Phoenix screwed up. But I would have loved to see at least some feigned sadness at the fallout. Maybe, "I regret that, in order to beat out Scottsdale, we had to give heaps of your tax dollars to a bunch of rich Chicago developers who don't really need it." Or, "I regret that, even though we had good intentions, we were such lousy negotiators that we gave away more than we should have, and now we're going to spend more to defend it. Sorry about that, folks."

The fact is, the CityNorth deal was ludicrous from the get-go. I've got a report from the city's own consultants that makes it clear: Even they knew we were getting hosed.

I also recently learned that, at the time the city approved the special tax gift for Klutznick, another group controlled by Klutznick and his family was actually suing the city. The Klutznicks were peeved that the city had approved a rival developer's plan for apartments near their project — even though that rival, locally owned Gray Development, wasn't getting a tax subsidy. The Klutznicks thought that Gray had been given permission to build at too high a density.

The claim was so silly that a Maricopa County Superior Court judge recently rejected it without a trial. Naturally, we taxpayers get to cover the city's defense for that one, too.

I'm beginning to see a bit of a pattern here, a pattern that seems to end, continually, with working stiffs like us and not developers like the Thomas J. Klutznick Company footing the bill.

Gordon may not regret that. But I most certainly do.


Here's another bit of irony. In next week's election, we're facing a ballot proposition to increase sales tax in Phoenix by two cents for every 10 dollars we spend. It's nothing big for small-ticket items, but collectively, it would raise nearly $60 million a year for police and fire protection.

The Goldwater Institute has been criticizing the increase by pointing out that if the city had only opted not to underwrite high-end shopping at CityNorth, we could have had that sum, in full, for nearly two years without a tax increase.

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Sarah Fenske
Contact: Sarah Fenske