Turken v. Gordon

The City of Phoenix (Phoenix) (defendant), authorized by the Phoenix City Council, entered into an agreement (Agreement) with developer NPP CityNorth L.L.C. (NPP) (defendant). Under the Parking Agreement, NPP would set aside, for 45 years, 2,980 parking spaces for the non-exclusive use of the public, with 200 spaces for the exclusive use of those participating in commuting programs. In exchange, Phoenix would pay NPP $97,400,000 over a period of up to 11 years and three months. Meyer Turken and other Phoenix taxpayers (plaintiffs) sued Phoenix to enjoin payments to NPP under the Agreement, arguing that the Agreement violated the Gift Clause of the Arizona Constitution, which bars gifts from municipalities to private entities. The plaintiffs also made other constitutional arguments. The superior court granted summary judgment to Phoenix and NPP, holding that an expenditure is permissible if (1) the expenditure has a public purpose and (2) the consideration received by the municipality is not so inequitable and unreasonable that the expenditure amounts to a subsidy to the private entity. The court of appeals reversed the superior court’s decision and applied a different test under which an expenditure was forbidden if the primary beneficiary was a private entity and the municipality only incidentally benefited, finding that NPP was the primary beneficiary of the Agreement and that the public of Phoenix was only an incidental beneficiary. The Supreme Court of Arizona granted Phoenix and NPP’s petition for review, en banc.