Golf Subsidy Apologists

In her recently published September McDowell Mountain Ranch Real Estate News, Realtor Helene Cass takes Mark Stuart and me to task for our efforts to stop the City of Scottsdale from subsidizing private golf ventures. Her comments:

With all the positive things happening at MMGC [McDowell Mountain Golf Club], it’s unfortunate to have to report that a lawsuit has been filed against the city of Scottsdale that might eventually create some concerns.

Although the club is not actually named in the suit, former Mayoral candidate John Washington and Scottsdale Investment Manager Mark Stuart are alleging that the city contributed inappropriately to the cost of the clubhouse’s construction. It’s their contention that the gift clauses in both the state constitution and the city’s charter preclude their giving money to private parties without getting a fair return.

It’s hard to discern their actual intent in bringing the suit but this is precisely the sort of action that helped stall the CityNorth project in Phoenix and turned the effort to keep the Coyotes Hockey Club in the valley into a marathon-like process. In this particular case, nothing is really clear-cut.

After all, the construction bonds that funded the project are being repaid via course fees and the clubhouse, which belongs to the city, may have already returned value to the city (courtesy of the improving real estate market). It’s also possible that, had the city not been willing to help out as they did, they might not have been able to find a new lessee at all and, as a result, would have lost substantial tax revenues. And that doesn’t even address the impact that an abandoned course might have had on the property values of surrounding communities.

The legislation on which the plaintiff’s case is based was primarily intended to prevent communities from getting involved in bidding wars to attract new businesses. However, subsequent court cases have ruled that the original legislation was a little too black-and-white and have allowed for a great deal more flexibility in deciding what constitutes a fair return.

Unfortunately, adjudicating this case could be time-consuming and costly for all concerned and there really seems little to be gained beyond proving a point.

Now, I don’t know Ms. Cass, and she may be a perfectly nice person. However, her comments are pretty typical of someone who is fairly bright and articulate, yet who doesn’t pay attention to what’s happening in government (except to the extent that it affects her), and doesn’t take time to understand the law. She has prejudged this situation because of her inherent loyalties and the degree to which she benefits directly from it. Psychologists call this, “confirmation bias.”

To that point, Ms. Cass says,

It’s their [plaintiff’s] contention that the gift clauses in both the state constitution and the city’s charter preclude their giving money to private parties without getting a fair return.

Actually, that’s not our “contention.” That’s what the law SAYS. The Arizona State Constitution, says in Article 9, Section 7:

7. Gift or loan of credit; subsidies; stock ownership; joint ownership

Section 7. Neither the state, nor any county, city, town, municipality, or other subdivision of the state shall ever give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation, or become a subscriber to, or a shareholder in, any company or corporation, or become a joint owner with any person, company, or corporation, except as to such ownerships as may accrue to the state by operation or provision of law or as authorized by law solely for investment of the monies in the various funds of the state.

The Scottsdale City Charter (our ‘constitution,’ if you will) is even more restrictive in Article 1, Section 3O:

The city shall not give or loan its credit in aid of, nor make any donation, grant or payment of any public funds, by subsidy or otherwise, to any individual, association, or corporation, except where there is a clearly identified public purpose and the city either receives direct consideration substantially equal to its expenditure or provides direct assistance to those in need.

Ms. Cass says,

It’s hard to discern their [Plaintiff’s] actual intent in bringing the suit…

Why can’t my “actual intent” be to stop public subsidies to private businesses? And if you question that, look at my track record. Or call me and let’s have a conversation about it.

As far as the CityNorth and Coyotes arena debacles, they were bad business deals that attempted to skirt the law. They were “stalled” by their own contrivance, not by those who opposed them.

Using taxpayer-backed construction bonds is EXACTLY ‘loaning the credit’ of the city to benefit a private business. And whether they are backed by fees rather than general taxes doesn’t change that fact. It also doesn’t change the fact that the city DID chip in general fund money to make the deal happen, regardless of the fact that the general fund money was repaid.

There is no factual support for Ms. Cass’s assertion that the bonds have “returned value” to the city. The general economy is what is responsible for the “improving real estate market,” not Phil Mickelson’s nicer clubhouse and restaurant.

Ms. Cass just plain has her calendar wrong when she asserts that this improvement was responsible for Mickelson leasing MMGC. He and his partner, Steve Loy, bought out an existing lease a couple of years ago. The City subsequently performed over a million dollars’ worth of improvements to the course (which I believe was also illegal, but that’s not the subject of our complaint).

The clubhouse and restaurant were a completely separate $2 million subsidy a year ago. The MMGC lease was amended to shift cost and risk onto the taxpayers for only a token increase in rent and fees. If these improvements were packaged with the lease and offered for bid to the general public, we might well have had a raft of other operators willing to step up in place of Mickelson, contrary to Ms. Cass’s contention.

Ms. Cass’s analysis of the “legislation” regarding subsidies is completely wrong and her conclusions are the opposite of reality.

First, we are not talking about legislation. The state Constitution and the City Charter are the organic law of the state and the city. They were ratified by the citizens, not just voted into law by the legislature.

Second, the Supreme Court of Arizona in the CityNorth case identified that previous cases provided inadequate interpretations; NOT that Constitution and the Charter were too “black-and-white.” And the Court took great pains to clarify and strengthen the interpretations of the law.

Ms. Cass concludes by saying,

Unfortunately, adjudicating this case could be time-consuming and costly for all concerned and there really seems little to be gained beyond proving a point.

The Constitution and Charter would not have been written the way that they are if the public treasury had not been abused before in the direct enrichment of private businesses and individuals, with no direct benefit to the citizens. What is to be gained here is not merely proving a point. It’s enforcing the law.

As my good friend Chris Schaffner has pointed out many times before, if public subsidy to a private business without direct benefit to the public is good, then every private concern that conducts business in Arizona and in Scottsdale deserves the same subsidy. Unfortunately for the lessees of the McDowell Mountain Golf Club, that’s contrary to the law.