Fountain Hills is the latest battlefield in the war over corporate subsidies.
A developer, as part of its proposal to build a large mixed-use complex, is asking the town for $9 million in incentives.
For that money, Fountain Hills would receive a jolt of energy to its sleepy downtown, with nine acres of shopping, restaurants, offices, loft condominiums and the town’s first movie theater.
Although the developer — Conrad Properties West and Kasnoff Investments — insists that no money would come directly from the town’s coffers, the amount being discussed is sure to give many pause. For perspective, consider that Fountain Hills’ total expected revenue for this fiscal year is $27 million.
Without these incentives, can ground be broken for Fountain Hills Town Square?
“Not as it’s presently put together,” project planner Dave Fackler said.
This request comes at a time when such public-to-private financial aid has become a contentious issue in the state.
As opponents of these subsides see matters, there is an “arms race” among municipalities vying to land shopping malls, theme parks and corporate headquarters.
The quest to pump up tax revenue has cities paying out millions of the same following bidding wars.
When the Goldwater Institute, a libertarian think tank in Phoenix, learned of what might happen in Fountain Hills, the reaction was one of vehement opposition.
“The taxpayers and biz competitors of this developer should not be picking up tab for a profitable enterprise coming into a very desirable community,” said Clint Bolick, director of the institute’s Center for Constitutional Litigation.
Earlier this month, the Goldwater Institute sued Phoenix over a proposed $97.4 million subsidy to the developer of a planned mall, CityNorth. For legal backing, the lawsuit is relying on Arizona’s Constitution, with its prohibition against granting special rights to corporations and giving away public money for private gain.
What’s been proposed in Fountain Hills, Bolick said, is exactly why the Goldwater Institute has gone to court.
“Certainly, we hope to establish a statewide precedent,” Bolick said. ”Were taxpayers to be alarmed that a third of (Fountain Hills’) revenue was to be routed into corporate welfare and challenged it, I think they’d have a very strong case.”
The Legislature also addressed subsidies during its recent session, passing a bill that does not ban incentives but ensures cities that offer them will lose shared state revenue.
For Town Square, the financial compensation to the developer would come in the forms of sales tax rebates, waived permit and development fees, and dropping the requirement that the builder make infrastructure improvements.
Bolick said the last incentive — for the town, and not the developer, to rebuild Avenue of the Fountains — probably is allowed.
But the developer believes all of its requests are allowed.
“We’re not asking for tax subsidies, because we’re going to front the money,” George Kasnoff said.
Under the current proposal, the developer would build a two-story parking garage and then the town would “buy” the structure by only taking half of the sales tax generated by Town Square’s retail sales.
“Once you look into it, you’re going to find there’s still that opening that you can do that with infrastructure,” Kasnoff said. “But you can’t build a building and get reimbursed.”
Added Fackler: “What (the Goldwater Institute) is missing is the fact this is not an economic development incentive. It’s a public improvement the town is putting in and will have full control of.”