Court Opinion

ID: 4494428
Source: CourtListenerOpinion
Date Created: 2020-01-23 17:02:23.786488+00
Date Added: 2024-06-11T14:54:11.274068
License: Public Domain

NOTICE: NOT FOR OFFICIAL PUBLICATION.
  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
                  AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

                                     IN THE
              ARIZONA COURT OF APPEALS
                                 DIVISION ONE

                DARCIE SCHIRES, et al., Plaintiffs/Appellants,

                                         v.

                CATHY CARLAT, et al., Defendants/Appellees.

                              No. 1 CA-CV 18-0379
                                FILED 1-23-2020

            Appeal from the Superior Court in Maricopa County
                           No. CV2016-013699
                The Honorable Sherry K. Stephens, Judge

                                   AFFIRMED

                                    COUNSEL

Scharf-Norton Center for Constitutional Litigation, Phoenix
By Christina Sandefur, Veronica Thorson
Counsel for Plaintiffs/Appellants
Office of the City Attorney, Peoria
By Vanessa Hickman, Melinda A. Bird
Co-counsel for Defendants/Appellees

Osborn Maledon, P.A., Phoenix
By Mary R. O’Grady, Shane M. Ham, Nathan T. Arrowsmith
Co-counsel for Defendants/Appellees

Christina Estes-Werther, Phoenix
Counsel for Amici Curae League of Arizona Cities and Towns and City of
Phoenix

                      MEMORANDUM DECISION

Judge Randall M. Howe delivered the decision of the Court, in which Chief
Judge Peter B. Swann joined. Presiding Judge James B. Morse Jr. dissented.

H O W E, Judge:

¶1             Darcie Schires, Andrew Akers, and Gary Whitman
(collectively “Taxpayers”) appeal from the trial court’s grant of the City of
Peoria’s motion for summary judgment and denial of their motion for
summary judgment. The trial court ruled that Peoria’s payments to
Huntington University (“HU”) and Arrowhead Equities LLC
(“Arrowhead”) pursuant to agreements Peoria entered into with those
entities did not violate the Gift Clause of the Arizona Constitution because
the expenditures were for a public purpose and because Taxpayers failed
to meet their burden of establishing gross disproportionality. For the
following reasons, we affirm.

                 FACTS AND PROCEDURAL HISTORY

¶2             In 1994, the Arizona Legislature enacted legislation that
allows cities and towns to utilize financial incentives to promote economic
development within their boundaries. See A.R.S § 9–500.11(A) (2019).1 In

1      There are two versions of A.R.S. § 9–500.11. The shorter version of
the statute is entitled “Expenditures for economic development;
definitions,” and has four sections, A–D. This version applies to economic
development activities generally. Throughout this litigation the parties

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2010, pursuant to section 9–500.11, the Peoria City Council adopted an
Economic Development Implementation Strategy (“EDIS”), which
identified “business activities and industries desirable to the City,” and
authorized the “creation and implementation of an economic development
incentive and investment program that sets forth in detail the types of
public incentives and investments that the City is authorized and willing to
make . . . in furtherance of retaining existing businesses and attracting
certain targeted businesses and industries identified in the EDIS as
desirable to Peoria.”

¶3            Following the creation of an Economic Development
Incentive and Investment Policy (“EDIIP”), the City Council adopted the
EDIIP, which identified the targeted industries that Peoria wished to
attract. Those industries included industries involving “the utilization of
high technology or innovative new technologies” and “higher education.”
The EDIIP set out minimum project qualifications for projects Peoria would
invest in. For instance, to be considered for incentives under the EDIIP, a
project must have a minimum capital investment of $250,000, create at least
ten full-time jobs with average salaries of $50,000 per year with benefits,
and “economically reposition unused or underutilized properties.”

¶4            Peoria was also interested in attracting development of the
area between Loop 101 and Bell Road, “the P83 District.” In addition to
adopting an EDIS and EDIIP, Peoria adopted the P83 Program, a program
designed to “encourage a more diverse use of existing vacant buildings in
the (P83) District . . . .” Under the P83 Program, eligible property owners
could apply for a matching funds grant from Peoria for interior tenant
improvements “upon acceptable performance.” Any property owner who
failed to comply with the program’s terms would forfeit the outstanding
grant balance, and any property owner who failed to remain in full
operation for the term of the grant would be required to repay Peoria all
funds received under the program.

¶5            In 2012, Peoria began negotiating with HU, a “fully
accredited, nationally recognized” four-year private Christian university in

have referred to this version of § 9–500.11. The longer version of § 9–500.11,
entitled “Expenditures for economic development; requirements;
definitions,” has thirteen sections, (A)–(M). This version establishes
requirements for retail tax incentive agreements and is not applicable to this
case, which involves direct payments (rather than tax incentives) to two
businesses not engaged in retail sales.

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                     SCHIRES, et al. v. CARLAT, et al.
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Indiana, to persuade it to open a branch campus in Peoria. In 2015, HU
proposed bringing an undergraduate digital media arts program to Peoria.
Peoria retained an economic and real estate consulting firm to analyze how
a branch campus would economically and fiscally affect Peoria. The study
concluded that an agreement with HU would have an economic impact of
$15,663,860 on Peoria and its surrounding areas over the first five years of
the agreement.

¶6             The City Council approved entering into an agreement with
HU in July of 2015, which was amended in 2016. Under the HU agreement,
Peoria agreed to provide financial incentives to HU over a three-year period
after HU opened and operated a campus in Peoria. The agreement required
HU to achieve detailed performance thresholds before receiving any
payments. The performance thresholds required, among other things,
obtaining approvals from various regulatory agencies, entering into a
long-term lease with Arrowhead for a facility owned by Arrowhead in the
P83 district, and enrolling a minimum number of students for in-person
(not online) coursework in the digital media arts program. The first
performance threshold (to be achieved in the first academic year), required
HU to appoint campus leadership and submit to Peoria “a University-
approved and funded faculty and staff plan.” The agreement also required
HU not to engage in any similar project with any other Arizona
municipality for seven years and to participate in “economic development
activities” with Peoria. The agreement required HU to contribute $2.5
million to the development of the Peoria campus in the first three years. The
maximum amount of reimbursements available to HU under the agreement
if it met the performance thresholds was $1,875,000.

¶7            The HU agreement stated that “[the] City has concluded that
the Project [developing the HU Peoria campus] will benefit the public
interest and promote the public welfare of the citizens in the City and that
the City and its residents will receive an equitable or proportional economic
return in exchange for the incentives that will be provided by the City under
this Agreement . . . .”

¶8            HU then entered into a lease with Arrowhead for a facility in
the P83 district. As a result, Arrowhead applied for a grant under the P83
program in 2016. Peoria approved the grant request and entered into an
agreement with Arrowhead. Under the agreement, Peoria agreed to
reimburse Arrowhead over several years for the tenant improvement
expenses it would incur in converting its property for HU’s use. The
maximum amount Peoria agreed to reimburse Arrowhead was $737,596.
HU opened its doors in Peoria in fall of 2016. The parties do not dispute

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                      SCHIRES, et al. v. CARLAT, et al.
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that HU would not have opened a campus in Peoria if not for the HU
agreement. HU “ultimately received the full amount of the funding [from
Peoria] to develop and operate the HU campus.”

¶9            This litigation began in October 2016 when Taxpayers filed a
complaint against Peoria, its mayor, and members of its City Council
seeking to enjoin Peoria from making any payments to HU and Arrowhead.
After Taxpayers filed their complaint, Peoria hired a second expert, Bryce
Cook, who concluded that the economic impact of the Arrowhead and HU
agreements “on zip codes within the City of Peoria” was $11.3 million.
Taxpayers’ expert opined that the value of the agreements was zero.

¶10         The parties filed cross motions for summary judgment. After
oral argument, the court granted Peoria’s motion and denied Taxpayers’
motion. Taxpayers timely appealed.

                                DISCUSSION

¶11           Taxpayers argue that the HU and Arrowhead agreements
violate the Gift Clause of the Arizona Constitution because the
expenditures Peoria was obligated to make under the agreements do not
serve a public purpose and the consideration Peoria will receive in
exchange for its payments is grossly disproportionate. We review the
interpretation and application of constitutional provisions de novo.
Cheatham v. DiCiccio, 240 Ariz. 314, 318 ¶ 8 (2016). We review the trial court’s
grant of summary judgment de novo “to determine whether any genuine
issues of material fact exist and whether the trial court correctly applied the
law.” Urias v. PCS Health Sys., Inc., 211 Ariz. 81, 85 ¶ 20 (2005). We review
the facts and inferences drawn from the facts in the light most favorable to
the party against whom judgment was entered. Korwin v. Cotton, 234 Ariz.
549, 554 ¶ 8 (App. 2014).

¶12            The Gift Clause of the Arizona Constitution provides in
relevant part that “[n]either the state, nor any county, city, town,
municipality, or other subdivision of the state shall ever . . . make any
donation or grant, by subsidy or otherwise, to any individual, association,
or corporation . . . .” Ariz. Const. art. 9, § 7. The Gift Clause’s purpose is “to
prevent governmental bodies from depleting the public treasury by giving
advantages to special interests or by engaging in non-public enterprises.”
Wistuber v. Paradise Valley Unified Sch. Dist., 141 Ariz. 346, 349 (1984)
(internal citations omitted). A government expenditure will be upheld if
(1) it has a public purpose and (2) the consideration the governmental entity
receives “is not grossly disproportionate to the amounts paid to the private

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entity.” Cheatham, 240 Ariz. at 318 ¶ 10 (citing Turken v. Gordon, 223 Ariz.
342, 345, 348 ¶¶ 7, 22 (2010)).

¶13           “In evaluating Gift Clause challenges, ‘a panoptic view of the
facts of each transaction is required,’ and ‘courts must not be overly
technical and must give appropriate deference to the findings of the
governmental body.’” Id. (quoting Wistuber, 141 Ariz. at 349). “[A]lthough
determining whether governmental expenditures serve a public purpose is
ultimately the province of the judiciary, courts owe significant deference to
the judgments of elected officials.” Turken, 223 Ariz. at 346 ¶ 14. We will
“find a public purpose absent only in those rare cases in which the
governmental body’s discretion has been ‘unquestionably abused.’” Id. at
349 ¶ 28.

              1. Public Purpose

¶14           Taxpayers argue that the trial court erred in concluding that
the agreements had a valid public purpose. They argue that the agreements
primarily benefit HU and Arrowhead, both private businesses, and that
“the public receives nothing from their operation.” They further argue that
Peoria’s economic development efforts cannot have a public purpose
because economic development is not a tangible public benefit. Taxpayers
assert that the agreements do not guarantee even an indirect benefit to
Peoria, noting that a similar venture Peoria entered into with another
university failed in 2017 when that university closed down.

¶15           Peoria argues that the agreements do serve a valid public
purpose because A.R.S. § 9–500.11(A) expressly allows municipal
governments to “appropriate and spend public monies for and in
connection with economic development activities.” Peoria argues that it did
not pay HU and Arrowhead just to operate their businesses, but rather it
offered incentives to get HU and Arrowhead to take actions they otherwise
would not take that would benefit Peoria’s economy. Peoria further argues
that economic development efforts have a public purpose regardless of
their ultimate success or failure because they are intended to benefit the
public and that Arizona law does not require that it receive a tangible,
physical benefit from the agreements.

¶16          Arizona courts have taken an expansive view of public
purpose. See Turken, 223 Ariz. at 348 ¶ 23 (purchase of parking spaces was
a public purpose); Indus. Dev. Auth. v. Nelson, 109 Ariz. 368 (1973) (rejecting
Gift Clause attack on public agency’s issuance of industrial development
bonds); Town of Gila Bend v. Walled Lake Door Co., 107 Ariz. 545 (1971)

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                      SCHIRES, et al. v. CARLAT, et al.
                          Decision of the Court

(finding public purpose in constructing a water line serving just one
factory)); City of Glendale v. White, 67 Ariz. 231, 238 (1948) (city acted with a
public purpose when joining municipal league); Humphrey v. City of
Phoenix, 55 Ariz. 374, 387 (1940) (slum clearance program served a public
purpose). “[T]he term ‘public purpose’ . . . changes to meet new
developments and conditions of times[.]” City of Glendale, 67 Ariz. at 236.
“Our cases therefore find public purposes in many contexts that might not
have been familiar to our Constitution’s framers.” Turken, 223 Ariz. at 346
¶ 13.

¶17            Peoria determined that bringing HU to Peoria would be “of
great value to the city,” and that the agreements here would serve multiple
public purposes. Both agreements were entered into in accordance with
Peoria’s EDIS and EDIIP. See supra ¶¶ 3–4. Peoria cited public purposes for
the agreements including promoting economic development and job
growth, promoting educational opportunities in the STEM field, and
repurposing an “unused or underutilized propert[y]” in the P83 District.
The Arizona legislature expressly permits municipalities to spend public
monies “for and in connection with economic development activities.”
A.R.S. § 9–500.11(A). Moreover, a public expenditure is not illegal just
because a private entity will benefit from the expenditure. Town of Gila Bend,
107 Ariz. at 550. We cannot conclude that Peoria “unquestionably abused”
its discretion in determining that the agreements had a public purpose.

              2. Adequacy of Consideration

¶18           Taxpayers next argue that the agreements violate the Gift
Clause because Peoria does not receive adequate consideration under the
agreements. Even if an expenditure has a public purpose, the Gift Clause
requires government entities to receive adequate consideration. Turken, 223
Ariz. at 345 ¶ 7. We do not normally scrutinize the adequacy of
consideration between parties contracting at arm’s length but we examine
consideration when analyzing a contract challenged under the Gift Clause
“because paying far too much for something effectively creates a subsidy
from the public . . . .” Id. at 350 ¶ 32. “Consideration” is a “performance or
return promise . . . bargained for . . . in exchange for the promise of the other
party.” Schade v. Diethrich, 158 Ariz. 1, 8 (1988) (citing Restatement (Second)
of Contracts § 71 (2) (1981)). “Monetary gain is not always required as
consideration.” Id. (citation omitted). Any performance is consideration
bargained for, but not the performance of a legal duty undisputedly owed.
Restatement (Second) of Contracts §§ 72, 73 (1981).

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                     SCHIRES, et al. v. CARLAT, et al.
                         Decision of the Court

¶19            In assessing the adequacy of consideration in the Gift Clause
context, courts look at the fair market value of a private party’s promise in
return for a public entity’s payment. Turken, 223 Ariz. at 350 ¶ 33. “When
government payment is grossly disproportionate to what is received in
return, the payment violates the Gift Clause.” Id. at 348 ¶ 22. In applying
the consideration prong of the Gift Clause analysis, just as in assessing
public purpose, courts must give due deference to the decisions of elected
officials. Cheatham, 240 Ariz. at 322 ¶ 35. We must also take a panoptic view
of the transaction in assessing consideration rather than an overly technical
view. Id. at 321–22 ¶ 30. “The Gift Clause is violated when the consideration,
compared to the expenditure, is ‘so inequitable and unreasonable that it
amounts to an abuse of discretion.’” Id. at 322 ¶ 35 (quoting Turken, 223
Ariz. at 349 ¶ 35; Wistuber, 141 Ariz. at 349). Taxpayers have the burden of
proving that consideration is grossly disproportionate. See Cheatham, 240
Ariz. at 322–23 ¶ 35 (citation omitted).

¶20           Taxpayers argue that the value of the HU contract is zero, not
$11.3 million, because economic impact and “anticipated, indirect benefits”
cannot be consideration under the Gift Clause. Taxpayers assert that Peoria
receives nothing tangible from the Arrowhead agreement, so the value of
that agreement is also zero.2 Taxpayers point out that Peoria does not own
the HU campus and its residents do not have open access to the campus or
receive any services or other benefits from HU, unless they are accepted to
HU and pay the full price of admission. At best, Taxpayers argue, any
economic impact Peoria will receive because of the agreements would be
an indirect benefit and therefore cannot constitute consideration.

¶21           Peoria argues that it received adequate consideration under
the agreements because the value of what was promised—the HU campus
in Peoria—is greater than the maximum potential amount owed under the
agreements. Peoria argues that the economic impact of the HU campus will
be a direct result of the promises made in the agreements rather than an
indirect benefit. See Turken, 223 Ariz. at 350 ¶ 33 (stating that indirect
benefits that are not bargained for are not consideration under contract
law).

2      Taxpayers also argue that the estimated fiscal impact of the HU
agreement ($206,630) is not consideration because fiscal impact was neither
promised nor bargained for and would nevertheless be an amount grossly
disproportionate to Peoria’s expenditures. Peoria, however, does not argue
that the projected fiscal impact of the agreements is adequate consideration.

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                     SCHIRES, et al. v. CARLAT, et al.
                         Decision of the Court

¶22           The value of the HU contract is not an indirect benefit,
however, as Arrowhead and HU promised to open a Peoria campus of HU
in the P83 district in exchange for reimbursements of up to $1,875,000 for
the HU agreement and $737,596 for the Arrowhead agreement. Peoria’s
expert, Bryce Cook, opined that the appropriate way to measure the fair
market value Peoria received from the agreements was to measure the
economic impact of the campus within the Peoria’s limits. Cook concluded
that “the economic value of the promise to operate a branch campus of HU
in the City of Peoria, including the promises to repurpose the building for
the campus, is $11.3 million.”

¶23           Taxpayers argue that “economic impact” is not a proper
measurement of the consideration Peoria will receive. Even if we do not
accept that the value of the agreements was $11.3 million, however, the
consideration Peoria received here for its $2.6 million payment was not
indirect, nor was it grossly disproportionate. See Cheatham, 240 Ariz. at 324
¶ 42. HU had the substantial obligation to develop and open a new campus
in Peoria at a minimum cost of $2.5 million and to help Peoria with
economic development activities; Arrowhead was obligated to convert a
building in the P83 district into the campus. HU was also obligated to
forbear from engaging in a similar project with any other Arizona
municipality for seven years. Cheatham instructs that we must give due
deference to the decision of Peoria’s elected officials in assessing the
adequacy of consideration and take a “panoptic view” of the agreements.
See Cheatham, 240 Ariz. at 321–22 ¶¶ 30, 35. Here, Peoria determined that it
would receive “an equitable or proportional economic return” in exchange
for its payments pursuant to the agreements, which were the culmination
of Peoria’s EDIS, EDIIP, and P83 incentive programs outlined supra ¶¶ 2–4.
We agree with the trial court’s conclusion that Taxpayers have not met their
burden of showing that the consideration here is grossly disproportionate.

¶24           Because we find that the agreements have a public purpose
and the consideration Peoria received was not grossly disproportionate, we
hold that the agreements do not violate the Gift Clause.

              3. Attorneys’ Fees

¶25           Taxpayers request costs and attorneys’ fees pursuant to A.R.S.
§ 12–341, –348, and the private attorney general doctrine. See Ariz. Ctr. for
Law in the Pub. Interest v. Hassell, 172 Ariz. 356, 371 (App. 1991). Because we
affirm the decision of the trial court, we deny the request for attorneys’ fees
and costs.

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                    SCHIRES, et al. v. CARLAT, et al.
                        Decision of the Court

                            CONCLUSION

¶26          For the foregoing reason, we affirm the decision of the trial
court granting Peoria’s motion for summary judgment and denying
Taxpayers’ motion for summary judgment.

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                     SCHIRES, et al. v. CARLAT, et al.
                          Morse, J., dissenting

M O R S E, Presiding Judge, dissenting:

¶27             I respectfully dissent. The superior court erred when it
considered indirect economic impact to determine adequate consideration
under the Gift Clause. Appellees concede that (i) "[t]he only evidence in the
record assigning a value to what HU and Arrowhead promised under the
agreements is the report of Bryce Cook," and (ii) Mr. Cook's analysis only
"assess[ed] the potential economic impact of such a campus." Perhaps
implicitly recognizing the superior court's error, the majority pivots and
argues that HU's obligation under the agreements to expend a minimum of
$2.5 million on their campus provided sufficient consideration. Supra ¶ 23.
But this argument also fails because the amount spent by HU on its own
facilities is not equal to the value of what Peoria receives, if anything, under
the agreement. Because neither the indirect economic benefits nor the
amounts expended by HU or Arrowhead provide evidence of the direct
benefits received by Peoria, the proper result would be to vacate and
remand.

¶28           The Gift Clause of the Arizona Constitution is comprehensive
and explicit. Public entities are prohibited from making "any donation or
grant, by subsidy or otherwise, to any individual, association, or
corporation." Ariz. Const. art. 9, § 7 (emphasis added). The Gift Clause
"was designed primarily to prevent the use of public funds raised by
general taxation in aid of enterprises apparently devoted to quasi[-]public
purposes, but actually engaged in private business." Turken, 223 Ariz. at
346, ¶ 10 (quoting Day v. Buckeye Water Conservation & Drainage Dist., 28
Ariz. 466, 473 (1925)).

¶29            Under the Gift Clause, payments from public entities to
individuals, associations, or corporations are allowed only when the
payment promotes a public purpose and the payment is not "grossly
disproportionate to what is received in return." Turken, 223 Ariz. at 348,
¶ 22. Evaluation of adequacy of the consideration is necessary to
distinguish between permissible payments made by a government for
goods and services (e.g., wages to government employees or fair market
payments for gasoline to operate government vehicle) and impermissible
donations and subsidies (e.g., paying $97 million for parking spaces). See
id. at 351, ¶¶ 42-43.

¶30          Often, a government payment will generate extensive indirect
benefits beyond the fair market value of the direct consideration received
in exchange. For example, repairing a sewage line may only cost $5,000 in
parts and labor and may generate millions of dollars in improved health

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                     SCHIRES, et al. v. CARLAT, et al.
                          Morse, J., dissenting

and sanitation, but "paying far more than the fair market value for the
repair plainly would be a subsidy," and the "potential for a subsidy is
heightened when, as occurred here, a public entity enters into the contract
without the benefit of competitive proposals." Id. at 350, ¶¶ 32, 34-35. This
case is no different and the value of consideration given by HU and
Arrowhead cannot be based on the only evidence presented to the superior
court—the anticipated economic impact of the university. "Although
anticipated indirect benefits may well be relevant in evaluating whether
spending serves a public purpose, when not bargained for as part of the
contracting party's promised performance, such benefits are not
consideration." Id. at 350, ¶ 33.

¶31            As noted above, Appellees concede that Mr. Cook's report
only assessed the economic impact of the campus and is the only evidence
of value in the record below. Because our Supreme Court has held that
potential economic impact is not consideration for purposes of the Gift
Clause, Id. at 350, ¶ 33, Mr. Cook's report provides no relevant evidence of
the value for a Gift-Clause analysis.

¶32            The majority attempts to address the problem of indirect
benefits by finding that the promise of HU and Arrowhead to develop and
open a Peoria campus is proper consideration and is sufficient for Peoria's
payment of $2.6 million. The majority finds the value of this consideration
to be adequate because HU promised to invest $2.5 million to develop and
open the new campus and Arrowhead promised to make improvements to
its property. Supra ¶¶ 22-23. Admittedly, under traditional contract
principles, consideration is any promise that is bargained for, and therefore
these promises to develop one's own property are consideration. See
Cheatham, 240 Ariz. at 321, ¶ 29 ("Consideration is a 'performance or return
promise' that is bargained for in exchange for the other party's promise.")
(quoting Schade, 158 Ariz. at 8). However, the value of these promises under
the Gift Clause cannot be determined based on the amount expended by
HU and Arrowhead—the value of that consideration for Gift Clause
purposes is "what the government receives under the contract." Turken, 223
Ariz. at 348, ¶ 22; see also Cheatham, 240 Ariz. 314, at ¶ 10 (providing that an
expenditure will be upheld if "the consideration received by the
government is not grossly disproportionate to the amounts paid to the
private entity" (internal quotation marks omitted)); Wistuber, 141 Ariz. at
349 (referring to consideration alternatively as the "public benefit" and the
"value to be received by the public").

¶33         Thus, the majority's analysis fails because HU's $2.5 million
investment and the amount spent by Arrowhead on improvements to its

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                     SCHIRES, et al. v. CARLAT, et al.
                          Morse, J., dissenting

property do not equate to the direct benefits received by Peoria or the public
from those expenditures.3 A simple example illustrates this point. If the
value of the consideration to Peoria could be measured solely by the value
of the expenditure, then a city government could give $1,000,000 to a
private entity in exchange for the entity's promise to pay $1,000,000 to its
chief executive officer ("CEO"). Technically, this may be "consideration"
under contract law because it is a bargained-for obligation, but the value of
that consideration for purposes of the Gift Clause is limited to the value
received by the city government, if any. The Gift Clause value of that
consideration is not measured by the amount paid to the CEO.

¶34           The majority correctly notes that the agreements provide that
HU will participate in economic development activities with Peoria and
forgo similar deals with other Arizona municipalities.4 Supra ¶ 23. These
promises may also be consideration for the agreements, but no evidence
was introduced below as to the fair market value of these promises to
Peoria. It may be "difficult to believe" that value of the direct benefit to
Peoria from HU's and Arrowhead's promises to develop and improve their
own business interests, only deal with Peoria, and assist with economic
development activity have a value to Peoria worth anything near the $2.5
million paid by Peoria. See Turken, 223 Ariz. at 351, ¶ 43. However, Peoria
did not introduce any evidence below as to the fair market value of the
direct benefits to be received by Peoria, if any, from these promises, and I
would vacate and remand to allow the factfinder to apply the correct

3       It is notable that the agreements in this case do not provide that
Peoria will receive ownership of the properties or improvements at the
conclusion of the agreements. Thus, unlike other Gift-Clause cases, HU and
Arrowhead will spend money on their own property and facilities, receive
reimbursement from Peoria, and keep all ownership after the arrangement
is complete. Contra City of Tempe v. Pilot Properties, Inc., 22 Ariz. App. 356,
363 (1974) (noting that the city would receive title to the improvements built
on the property at the conclusion of the lease); Stuart v. Lane, 1 CA-CV 15-
0746, 2017 WL 3765499 at *4, ¶ 24 (Ariz. App. Aug. 31, 2017) (mem. decision)
(finding adequate consideration where the city contributed $2.1 million for
capital improvements, in exchange for increased fees, payments, and title
to the improvements on expiration of the agreement).

4       This last promise was somewhat reciprocal as Peoria agreed for three
years "to engage and/or financially support only those universities willing
to collaborate and not compete with HU."

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                    SCHIRES, et al. v. CARLAT, et al.
                         Morse, J., dissenting

analysis and determine whether $2.5 million is grossly disproportionate to
the direct public benefits received.

                       AMY M. WOOD • Clerk of the Court
                       FILED: AA

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