Economics

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Funding Gambit Could Cost AZ Sports Tourism

25 Aug, 2015

By: Mary Helen Sprecher

Sometimes, cities get new and creative ideas to finance sports facilities and sports tourism.

But when they don’t pan out, things can get pretty ugly.

A judge has ordered Arizona to refund millions of dollars collected through a rental car tax, meant to fund stadiums and tourism in Maricopa County, declaring the tax unconstitutional.

However, according to an article in The State, the decision handed down by Maricopa County Superior Court Judge Christopher Whitten is far from the last one the sports tourism industry will see.

Lawyers for the Arizona Sports and Tourism Authority and the rental car companies that sued over the tax expect Whitten’s ruling (as well as one in 2014 that declared the tax unconstitutional) to be appealed. The state Department of Revenue also plans to appeal, according to spokesman Sean Laux.

If the current decision were to be upheld, the ruling could cost the Arizona Department of Revenue tens of millions of dollars in refunds   – and reduce funding for the Arizona Sports and Tourism Authority, says The Arizona Republic. That’s about half the authority’s tax revenues – enough to blow a huge hole in its finances.

The public agency would still bring in enough cash to pay bondholders who financed University of Phoenix Stadium where the Arizona Cardinals play and where the Fiesta Bowl takes place. But spring training Cactus League stadiums, tourism promotions and youth sports programs would likely lose major funding that the Sports and Tourism Authority had been relying on.

Shawn Aiken, an attorney representing 115 car rental agencies who sued over the tax, said that he estimated the state Department of Revenue owes his clients about $150 million, including interest, for taxes it has collected since the suit was filed.

The ruling says the state is on the hook, even though it passed on the taxes to the sports and tourism authority, and that it can recover the money over three years from that agency.

Maricopa County voters approved the tax in 2000, and in doing so, shifted much of the stadium funding costs to tourists. Aiken challenged it on grounds that the state Constitution says taxes on vehicles must be directed to roads projects.

"We're diverting perfectly good revenues that are supposed to go to those roads, to NFL team owners," Aiken said. "Just from a public safety and fairness point of view, it's important to challenge the tax. And number two, it's unconstitutional."

The article in The Republic noted an appeal could take about two years to resolve and could still be subject to a review by the Arizona Supreme Court. If it stands, the ruling could force state lawmakers to come up with a new tax to pay the stadium debt over the next 20 years.

The rental car tax will remain in place until the issue is resolved.

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