Supreme Court to Hear Phoenix Appeal in CityNorth Case

This just in: The Arizona Supreme Court will revisit the appellate decision that struck down the city of Phoenix's $97 million subsidy of the CityNorth development.

Today's decision to grant review is a victory for the city, which had fought for the right to give the project's developers half of all sales tax generated at the northeast Phoenix shopping center -- and the Thomas J. Klutznick Company, which could now regain the millions in revenue stripped away by the appeals court decision.

The ongoing litigation was triggered by a lawsuit from the libertarian Goldwater Institute, which argued that the giant sales-tax giveaway violated the Arizona Constitution's "gift clause." That clause forbids tax dollars from going to private interests -- like, arguably, this project, which includes such wealthy backers as Michael Dell and the government of Abu Dhabi

In December, a three-judge panel in the Arizona Court of Appeals agreed with Goldwater that the massive subsidy, while ostensibly to pay for a parking garage used by public-transit riders, really was an unconstitutional gift to a private party. The city, and developer Klutznick, then appealed to the state Supreme Court.

The Supreme Court's decision today does not speak to the issues -- it only agrees to give the case a hearing and revisit the issues.

Clint Bolick, director of the Goldwater Institute's Scharf-Norton Center for Constitutional Litigation, says his team is ready to fight on.

"We're confident that the Arizona Supreme Court will give full meaning to the Constitution's gift clause and strike down this ill-conceived example of corporate welfare," he told New Times in an e-mail.

Regardless of what the court decides, there are some indications the project is in trouble. Nordstrom, the big kahuna that the city was desperate to land, has pulled out of the project. In this economy, that's no big surprise -- but it does throw CityNorth's second phase into question, regardless of what happens in court.

The Arizona Republic recently concluded that, based on sales figures from other shopping centers, the supposed $97 million tax giveaway is probably only worth about $62 million. That's still a pretty big kitty, but definitely less than originally promised... 

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Sarah Fenske
Contact: Sarah Fenske