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AZ Commerce Authority agrees to spend mostly private money to woo CEOs at the Waste Management Open

By Howard Fischer/Capitol Media Services
Published: Saturday, February 3, 2024 - 8:52am
Updated: Saturday, February 3, 2024 - 8:53am

The Arizona Commerce Authority has agreed to use mostly private funds to entertain corporate executives at the upcoming Waste Management Open.

And that's apparently enough to satisfy Attorney General Kris Mayes and get her to back off threats to bring charges against the agency.

In a letter to Mayes on Friday, Scott Rooney, the authority's legal counsel, outlined plans to spend more than $123,000 at the five-day event that begins Monday.

But of that total, only $42,000 will come from taxpayer dollars under control of the authority.

Instead, the tab for the big-ticket item — $65,000 for tickets to the event and sponsoring a suite — will be picked up by Greater Phoenix Leadership. That organization of 150 business leaders bills itself as a CEO roundtable promoting public policy initiatives.

Another $14,000 for hotel rooms at the downtown Phoenix Hyatt Regency are being paid for by the Arizona Tourism & Lodging Association, made up of statewide hotels and resorts, tourism attractions, sports teams, airlines and related business partners. And Horizon Strategies, a lobbying and consulting firm, will shell out $2,500 for "hospitality items" ranging from snacks and sunscreen to hats and hand sanitizer.

What that leaves for taxpayers to pick up is $25,000 to rent room space, catering and audio-visual equipment for "informational sessions" with the invited guests, $12,000 to get them not only from the airport but to the event from the hotel, and another $5,000 for marketing materials which Rooney said including everything from mailings to those invited to items "highlighting Arizona's value proposition."

All this comes in response to a letter Mayes sent to the authority last month declaring that their taxpayer-financed expenses for entertaining corporate CEOs are unconstitutional.

The attorney general said the law allows state agencies to spend on anything that has a "public purpose." And Mayes said that could be seen through the lens that part of the authority's responsibility is to market the state and get companies to expand or relocate here.

But she said the amount of  money spent on what were called "CEO Forums" — $2.4 million at the 2023 Super Bowl and Waste Management Open over the past six years — violates a constitutional provision that makes it illegal to make gifts of public money.

"They give valuable benefits to a limited class of private persons without receiving any legally cognizable benefit in return," she wrote. More to the point, Mayes warned the ACA against future violations.

What Rooney sent on Friday apparently satisfies the attorney general.

"These changes will save taxpayers tens of thousands of dollars," Mayes said in a prepared statement.

She also was pleased that the authority promised to "follow a similar approach" when it hosts executives in April when the Men's Final Four tournament is held in Arizona. And Rooney promised to provide a breakdown of its spending — and who will absorb what costs — closer to the event.

Mayes said she will be watching.

"I intent to closely scrutinize the ACA's activities during the Final Four events to ensure compliance with state law," she said Friday. "Arizona taxpayers deserve a state government that doesn't waste money hosting lavish parties for wealthy out-of-state CEOs."

Mayes' original threats drew a decidedly negative reaction from Gov. Katie Hobbs, to whom ACA CEO Sandra Watson reports.

"The ACA plays a critical role in Arizona's booming economy, attracting businesses from around the world and creating good-paying jobs for working Arizonans," said gubernatorial press aide Christian Slater at the time. "Gov. Hobbs will not let Texas and California beat Arizona in attracting jobs and businesses."

On Friday, though, Slater said his boss with happy with the result.

All this stems from a report last year by state Auditor General Lindsay Perry.

Her staff raised questions about what the state was getting for its money. It said that of 118 companies who attended these private forums, 23 had proposed "potential nonbinding investments and job commitments in Arizona."

According to the report, the cost of "social and entertainment events" for just the 2023 Super Bowl came close to $2.1 million.

"The biggest piece of that was $1.85 million for the Commerce Authority to be a sponsor. That netted 140 tickets to the Super Bowl itself, a VIP tailgate party and the "Super Bow Experience" at the Phoenix Convention Center which included everything from a 4-D immersive theater, and equipment room where fan could "suit open," and a post-bowl "immersive celebration."

There also were 70 rooms at the Arizona Biltmore with a hospitality lounge, planned dinners, a welcome event with Hobbs and panel discussions with Arizona businesses. And there were gift package with everything from hats and tumblers to sunglasses.

Watson, in her initial response to the audit, defended the expenditures.

"The CEO program really gives us an opportunity to really educate decision makers on the value proposition that we offer for businesses," she said.

"What we want to do is position Arizona in the best possible way," Watson said. "Utilizing the Super Bowl and other major events gives us an opportunity not only to talk about the business climate in Arizona but our quality of life."

Mayes, however, said the problem with all of that is it is illegal and runs afoul of a constitutional provision which prohibits making gifts of government resources to private entities and individuals.

"The Gift Clause generally requires that the government receive proportional consideration for its expenditures," she wrote. And she said the mere fact that businesses might relocate here is insufficient.

"Paying taxes applicable to all is not consideration," Mayes said. "Businesses inherently generate taxes and stimulate the economy, so permitting such impacts to justify public funds of private ventures would eviscerate the Gift Clause, even if the private ventures would not exist without public funds."

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