What part of 'no gifts' do Arizona officials not understand?

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The state of Arizona urgently needs a procedure to analyze future public expenditures going to private parties.

As The Arizona Republic reported in late December, state Treasurer Kimberly Yee sent a Request for Information to two organizations that previously received funding from the Legislature — Lowell Observatory in Flagstaff and International Dark Sky Discovery Center in Fountain Hills.

Our state constitution has a gift clause that prohibits the granting of gifts to private parties, and in 2021 the Arizona Supreme Court defined what a gift is in the Schires decision. Any recipient of public funds must provide public services of a value not grossly less than the amount of public funds received.

Schires clearly stated that neither increased tax receipts nor general economic development can be considered as public services in the computation of value received by the public.

However, even since Schires it has been common for promoters of subsidies to claim those two potential financial results justify the granting of public funds.

What value did each entity provide?

In the past, many jurisdictions in the state have ignored the gift clause. Often when handing out public funds (commonly in the form of subsidies to profit-making businesses, such as the millions of dollars the state has given to Turf Paradise racetrack), there were no contracts spelling out the estimated value of what the public would receive in return.

The treasurer sending out the information requests gave the appearance of the state providing some due diligence — but it was too little, too late. One of the questions basically asked whether the organizations would comply with the Arizona Constitution’s gift clause, by asking what value the public would receive.

Republic reporter Ray Stern filed a public records request, asking the Treasurer’s Office for a copy of the responses  from Dark Sky and Lowell, but the responses have not been provided.

State Treasurer Kimberly Yee should immediately release the responses received from the two organizations.

Furthermore, since she issued at least one check after sending out the request, Yee should release to the public the details of her determination showing why she thought the expenditures complied with the gift clause — especially specific descriptions and dollar amounts of public services to be provided.

Expenses must follow the gift clause

I’m not opposed to the work of Lowell or Dark Sky. Nor do I oppose the work of the Prescott Rodeo, even though I’m the lead plaintiff in the lawsuit challenging the constitutionality of the state’s rodeo appropriation.

My efforts primarily are to try to get future state expenditures to comply with our constitution’s gift clause.

Commerce Authority will pay: For gifts to CEOs

In 2021, the well-respected local legal firm Snell & Wilmer released an advisory after the Schires decision:

“Going forward, companies and government economic development departments may want to consider working closely to clearly identify the ‘consideration’ from both parties and memorialize that consideration into definite terms to support the agreement.

“As reflected by the trial court ... objective analysis … may be necessary to alleviate a Gift Clause concern. Based on the risks associated with miscalculating the Gift Clause (to both individuals involved and the city, county or state agency), clarity will likely need to be provided by the parties to development transactions.”

While that advisory dealt with “economic development” agreements, it also applies to most other public appropriations to private parties.

Clarify the procedure for these funds

Treasurer Yee’s ad lib procedure is woefully insufficient.

I suggest the state develop a procedure assuring the public and Legislature will clearly understand exactly what is being promised in return for funding private entities.

The procedure should apply to both appropriations directed by legislation and spending directed by state agencies.

The procedure also should be made a requirement for all Arizona jurisdictions, including counties, cities and towns.

By establishing such a regular procedure, the state will provide maximum transparency and promote more public trust in government, and will assure there will be less litigation regarding individual expenditures.

Howard Mechanic helped write and pass three citizen initiatives, including the Arizona Citizens Clean Elections Initiative in 1998, for which he served as chair of the steering committee. Reach him at howard@capsuleconnection.com.

This article originally appeared on Arizona Republic: Arizona has a gift clause for a reason. Officials need to use it