The Arizona Court of Appeals ruled in favor of the Arizona Board of Regents Tuesday in a challenge over the construction and tax payments of a new hotel and conference center on state property near campus.
The 330-room hotel and 30,000-square-foot conference room being constructed are a part of "strategic development of university property (that) provides a smart and entrepreneurial opportunity to help fund university operations and provide needed capital assets all while generating jobs and economic activity," a statement from ABOR said.
ABOR owns about 10 acres of land on the southeast corner of Mill Avenue and University Drive and first discussed its intent to develop the land in June 2016. It is exempt from property taxes because it is state-owned.
READ MORE: Updates on construction projects near Tempe, Downtown Phoenix campuses
"The board appreciates this ruling of the Arizona Court of Appeals, which rejects the state Attorney General's original claims of 'ABOR-approved tax evasion,'" said ABOR Chair Larry E. Penley in the statement. "As the court recognized, there are no taxes to evade because ABOR property is tax exempt."
The Omni Hotel will be located near campus, serving as a conference center and hotel that will generate more than $100 million in rent payments to the school, according to Penley's statement.
In January 2018, the city of Tempe reached a final agreement with Omni to develop a conference center and hotel on the property, which included $21 million in sales tax relief.
Attorneys from Arizona Attorney General Mark Brnovich's office internally discussed concern and about a year later filed a three-count complaint that alleged the lease was illegal, "improperly exempted the hotel and conference center from property taxes," and sought to "void the transaction because it constituted an improper exercise of ABOR's power to enter into leases for public purposes," according to the ruling's procedural background.
A tax court granted ABOR's motion to dismiss the three counts and ruled the Attorney General's Office lacked the authority to bring them in the first place.
An amended complaint was then filed, adding a fourth item that said ABOR had violated the state constitution's gift clause. This clause states that public expenditures must have a public purpose, and prevents public institutions from giving public gifts to other institutions in the private sector.
The tax court again decided in ABOR's favor, saying then that the claim was untimely, and awarding ABOR and Omni more than $970,000 in attorneys' fees and over $2,300 in taxable costs.
Brnovich has been legally butting heads with ABOR and the state's universities for years; his past suits alleging the school's tuition rates violate the state's constitution were dismissed by the Maricopa County Superior Court in 2018, the state's Court of Appeals in 2019 and partially by the state’s Supreme Court in 2020.
More recently, Brnovich has attempted to overturn precedent in order to sue ABOR and he has been vocal about the public university response to COVID-19.
Editor's Note: This story was updated on May 7 at 9:50 a.m. to include additional information regarding the Arizona Supreme Court's ruling on Brnovich's lawsuit regarding tuition rates.
Reach the reporters at pjhanse1@asu.edu and follow @piperjhansen on Twitter.
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Piper Hansen is the digital editor-in-chief at The State Press, overseeing all digital content. Joining SP in Spring 2020, she has covered student government, housing and COVID-19. She has previously written about state politics for The Arizona Republic and the Arizona Capitol Times and covers social justice for Cronkite News.
