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University statement on Superior Court ruling on Omni Hotel and Conference Center Project

July 2, 2019

“We welcome the Arizona Superior Court’s ruling in the latest lawsuit against the Arizona Board of Regents and Arizona State University and applaud the fact that the judge has, with regard to motion number one, rejected all of the Attorney General’s arguments on this matter.  This is the second time the courts have ruled that the Attorney General does not have the authority to insert himself into decision-making that has been definitively granted to ABOR and the universities. The court ruling affirms that ABOR, and only the Board, has the authority over real estate held for the benefit of the institutions under its jurisdiction and that the Board is “expressly empowered” to enter into leases like the Omni Hotel and Conference Center.

“Furthermore, as to the Attorney General’s claim that he can enforce tax statutes and that we are depriving K-12 of property tax benefits, the judge confirms that the property is tax exempt, there are no taxes owed and there is nothing for the Attorney General to enforce. The judge in his ruling specifically states that the “tax roll is therefore unaffected by the use to which the Board puts this property.”

“The Attorney General’s gift clause claim barely survived a statute of limitations argument and we look forward to a favorable resolution.

“As always, ASU remains committed to our mission of providing a world-class education to Arizonans at the lowest possible cost.”

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Background from the Arizona Board of Regents and Arizona State University

This is the second time in two years that Arizona courts have rejected the Attorney General’s attempts to interject his opinions in the operations of Arizona’s university system. In September 2017, the Attorney General targeted the board’s tuition setting authority, claiming that the Board of Regents had violated the Arizona Constitution.

Last year, Superior Court Judge Connie Contes dismissed the Attorney General’s claim regarding tuition on the grounds that the Attorney General did not have authority to bring that claim. That decision is now on appeal to the Arizona Court of Appeals.

In January 2019, the Attorney General challenged the board’s decision to lease property adjacent to the ASU campus for the purpose of building a hotel and conference center. Judge Christopher Whitten has now ruled that the Attorney General did not have the authority to micromanage the utilization of university property.

The court noted that “the Omni Deal is a lease, and the Board is expressly empowered to enter into leases.” In addressing the Attorney General’s argument that he was nevertheless entitled to second guess the board, Judge Whitten stated, “This logic is dubious,” and held, “whether a transaction is ‘for the benefit of this state’ is a matter of discretion left to the body authorized to enter into the transaction, here, the Board of Regents.”

Also before Judge Whitten was the board’s request to dismiss the Attorney General’s claim that the proposed transaction violated the Arizona Constitution’s gift clause, which ensures that the public is adequately benefitting from economic development projects.

Although Judge Whitten denied the Regents’ request, he did so only on the very limited basis that it was not barred by the one-year statute of limitations. (The court rejected the Attorney General’s argument that the applicable statute of limitations was five years.) The court made clear that the AG will be able to proceed only if he can prove that he did not know or should not have known of the facts regarding a possible gift clause claim more than a year before making this claim. The Attorney General will have a hard time making such a showing given the many public hearings before the board, the City of Tempe and the state legislature, regarding this transaction.

The court did not address ABOR’s further arguments that, as a matter of law, the Omni Deal does not violate the Gift Clause. As ABOR has shown, the Attorney General’s gift clause claim is based on two false premises, the first being that ASU is “evading taxes,” thus depriving K-12 of resources. Private landowners pay property taxes and a portion of that goes to funding the K-12 system. But, the Arizona Constitution exempts all state property from taxation and that includes the land involved in this case – a fact prominently noted by the court in rejecting the AG’S argument that he had authority to sue to enforce tax statutes: “As a matter of law, the property on which the Attorney General seeks to collect tax is constitutionally exempt from taxation. There is thus no tax owing, and nothing for the Attorney General to enforce.”

In short, regardless of whether the lease transaction proceeds, this property has been and will continue to be state property that is exempt from taxation. There are no property taxes to “evade,” and there never will be so long as the board owns this property.

In addition, there is no gift clause violation because in return for a $25 million investment, ASU will receive a much needed hotel and conference center and $124 million in lease payments. ASU is not in the real estate business. It is in the education business and the $99 million that ASU will net will be used to further its mission of educating the students of Arizona.

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