Arizona Court of Appeals Division One Holds That City Funding of a Private Parking Structure Violates Constitution’s Gift Clause.

The City of Phoenix agreed to provide funding for a parking space development for a private shopping center in the planned CityNorth development.  The city believed aiding the construction of a private shopping center would serve public purposes by adding free public parking, stimulating the economy, and generating substantial additional sales tax revenues.  Meyer Turkin and several other taxpayers and business owners challenged the expenditure on the ground that it violated the Arizona Constitution’s “gift clause” along with several other provisions.  The superior court granted summary judgment in favor of the City. 

The Arizona Appeals Court reversed, holding that the City’s expenditure violated the “gift clause.”  The Court expanded upon its previous interpretation of the “gift clause” and held that in deciding whether the clause was violated, the Court must examine not only (1) whether the expenditure is for a valid public purpose; and (2) whether there is proper consideration; but also (3) the extent to which private interests are implicated. 

The Court held that providing free public parking directly promoted the private interests of the shopping center because the “public” that would use the parking would be the private customers of the shopping center. The Court held that the City’s other stated: “public purposes” of stimulating the economy and generating sales tax revenue were too indirect to satisfy the gift clause. 

Judge Irvine authored the opinion with Presiding Judge Winthrop and Judge Hall concurring.