Two years ago, through a complex deal involving the rebate of anticipated sales taxes, a shopping mall developer was promised nearly $100 million from Phoenix to build a high-end mega-mall named CityNorth.
When local business man Meyer Turken caught wind of it, he was outraged. Turken had spent decades building his property maintenance company from nothing to more than 40 employees, without one dime from the government.
Turken’s belief in fair play, not favoritism, wouldn’t allow him to stand by while Phoenix taxed away the fruits of his labor just to hand it over to an another business owner. The Goldwater Institute took his case, eventually winning a ruling in the Court of Appeals that declared the CityNorth subsidy a violation of the Arizona Constitution’s “Gift Clause.”
But the battle wages on.
An Oro Valley economic development agency has placed five similar subsidy deals on hold while Phoenix appeals the CityNorth decision to the Arizona Supreme Court. And Mesa is rushing to build a convention center and hotel with tens of millions of dollars in public financing.
Even though the Arizona Constitution bans taxpayer-funded giveaways to private businesses, cities have been creatively skirting the law for decades. To stop the unfair practice of taxing some businesses and entrepreneurs in order to subsidize others, a fundamental reform needs to happen at the city level where most subsidies are handed out. The foundation of local law, the charter or statute that organizes a city or county, must be amended to eliminate favoritism. This means adopting a policy that prohibits all local subsidies, without exception.
Reforming local government to ban subsidies would not only vindicate basic fairness, it is a practical necessity. Local government fee and tax revenues are plummeting and we just can’t afford to have our cities giving away the tax money that should be spent on vital public services like law enforcement.
That’s why the Goldwater Institute published “A New Charter for American Cities: 10 Rights to Restrain Government and Protect Freedom.” It urges adoption of a “Local Liberty Charter,” a local constitution meant to secure individual freedom and fiscal responsibility. If adopted, the “Local Liberty Charter” and its ban on subsidies would stop local officials from gambling public money on private ventures.
All business owners deserve the chance to make it, but they need to make it fair and square. Taxpayers shouldn’t be asked to pick up the tab so a business can open its doors. It’s time for cities to step back and let local entrepreneurs – the force that makes America great – get to work risking their own capital and rebuilding our broken economy, one idea and one hard-earned dollar at a time.
Nick Dranias is an attorney and director of constitutional policy at the Goldwater Institute.