Lawyer reviewing tax deals for Mesa projects

A recent court ruling declaring that Phoenix’s nearly $100 million tax break for CityNorth developers was unconstitutional has prompted the attorney who filed that lawsuit to take a closer look at Mesa’s incentive package for two resort projects at the GM Desert Proving Ground site.

Court: Phoenix's deal with CityNorth illegal

In the CityNorth case, Phoenix’s deal includes a sales tax rebate in return for 8,000 free public parking spaces.

But backers of the Mesa deal, which is a combination of property tax and bed tax incentives, have maintained that the deal with DMB Associates of Scottsdale, and Gaylord Entertainment Co. of Nashville, is completely different and does not run counter to the state’s gift clause, primarily because there are no sales tax dollars being given away.

Clint Bolick of the Goldwater Institute, a conservative think tank, believes otherwise.

“The purpose of the gift clause was to prevent government from putting its finger on the scale, no matter how you slice it,” Bolick said.

Mesa’s deal includes $85.5 million in property tax incentives under which the city takes title to the land and then leases it to the developer.

By the city taking ownership, the developer can pay significantly lower taxes for the use of the property.

The bed taxes collected from the Gaylord property and a portion collected from a second resort will be given to the developers instead of the Mesa Convention and Visitors Bureau.

The bureau would normally use that money collected to promote the city. Under the agreement, the developers have to promote their properties and the surrounding area.

Voters will be asked to approve the $51 million bed tax incentive on March 10. The property tax abatement is not subject to voter approval.

Gaylord officials have plans to build a huge resort and convention center billed as a destination hot spot. DMB owns 3,200 acres of the 5-square-mile Proving Ground near Elliot and Ellsworth roads, on which the Gaylord resort and convention center and the other resort are planned.

Bolick said the institute, at this point, may not challenge the deal, but that he would look at the agreement details and give an analysis.

DMB’s attorney Grady Gammage Jr., whose firm defended the CityNorth subsidy, said the implications of the Mesa deal under the development agreement are totally different.

In the CityNorth case, the sales tax deal was held unconstitutional, Gammage said. But in Mesa’s case, the bed tax incentive markets the general Phoenix-Mesa Gateway area, not just the two properties, and “not just for their own specific purposes,” Gammage said.

Meanwhile, Mesa Mayor Scott Smith said city leaders feel pretty comfortable that the two cases are an “apples and oranges situation.” “Our attorneys looked at the deal carefully and we checked to make sure it complies with the law.”

Bolick said based on the CityNorth decision, the crucial determinant for other deals is whether city funds end up in the developer’s pocket.

“As far as I can tell, in the Mesa case too, the answer is 'yes.’”