Arizona AG Silent as Deadline Nears to Respond to Allegations of Misappropriation of Phoenix Taxpayer Funds

Arizona Attorney General Kris Mayes faces a July 20 deadline to respond to the Goldwater Institute’s demand for action regarding a series of allegations that the City of Phoenix illegally distributed at least $28.5 million in taxpayer funds to over 100 private organizations with minimal oversight, according to a recent letter from the institute. If Mayes does not act by the deadline, the Goldwater Institute will gain the statutory right to file a lawsuit to recover the funds, which were allegedly given to groups like Phoenix Pride Inc. and Latino Pride Alliance under questionable labels such as “Sponsorships” and “Grants and Subsidies.”

“This effectively turns large portions of the city’s budget into a patchwork of slush funds that special interests can access in the sole discretion of a single city employee,” GI said in an article about the subsidies.

GI, which said the city had no lawful authority to issue the handouts, said the giveaways were under “questionable labels” like “Sponsorships,” “Grants and Subsidies,” “Emerg[ency] Assist[ance],” or “Miscellaneous.” They went to groups like Phoenix Pride Inc. and Latino Pride Alliance.

GI said the city tries to justify the spending by citing “an outdated ordinance that allows the city manager to settle claims against the city — an insufficient justification for these discretionary giveaways.” GI said the City claims this authorizes department directors to hand out up to $32,000 to any organization. Phoenix at first claimed they did not keep a record of the giveaways.

Marshall’s initial letter to the City was sent in February, asking for details about over $10,000 that was provided to the Arizona Science Center’s “Galaxy Gala.” City Attorney Julie M. Kriegh responded and said Public Works paid $5,000 of taxpayers’ money for one table, and the Aviation and Water Departments split the other table. She admitted that at least 13 city employees attended.

In response to Marshall’s question about how Phoenix selects organizations to donate taxpayers’ money to, she responded, “Organizations are selected based on the alignment of their goals with those of the City department’s goals and initiatives.” She said donations under $32,000 do not require the approval of the city council.

Marshall asked how many giveaways the City has issued, and Kriegh responded, “The City does not track donations by nonprofit status. To gather detailed information on nonprofit donations we would need the vendor’s names.”

Kriegh said the City’s charter requires city council approval of expenditures of $5,000 or more, but that amount “has been adjusted for inflation and is currently $32,000.”

Marshall wrote her back and asked to see “copies of all relevant Ordinances passed by the Phoenix City Council that increased the payment ordinance threshold from $5,000 to $32,000.”

Kriegh replied with copies of updated ordinances. One of them, Section 2-4(B), referenced a $32,000 threshold, “The City Manager of the City of Phoenix shall be authorized to appropriate and expend any public money for the City of Phoenix to settle all claims against the City which sum is less than THIRTY TWO THOUSAND dollars.” It said nothing about providing grants or subsidies to private organizations.

Kriegh provided a list of organizations that were given money, for a total of 634 giveaways. They included Diversity Leadership Alliance, Airport Minority Advisory Council, Phoenix Film Foundation, and Mexican Baseball Fiesta LLC.

Other groups included the National Forum for Black Public Administrators, which describes itself as “the principal and most progressive organization dedicated to the advancement of public leadership in local and state governments.” Funding to Local First Arizona was described as “Environmental Programs.” That group states that its agenda includes, “Helping businesses identify solutions and funding to reduce their environmental impacts.” Arizona Women Leading Government, another grantee, is led by a president who is a director of Diversity & Engagement for the City of Mesa.

There were no conservative organizations in the list.

The state constitution prohibits the government from subsidizing private organizations. GI has actively gone after unconstitutional handouts by Arizona governments, including suing over subsidies to Hollywood and successfully getting the Arizona Supreme Court to unanimously strike down the City of Phoenix’s union release time on the taxpayers’ dime.

GI published an article last year analyzing how the Arizona Constitution’s gift clause prohibits the handouts. The group said that “the Grand Canyon State’s founders crafted the strongest prohibition on subsidies that had ever been written. Arizona’s Constitution forbids any kind of aid to private companies, whether it be outright cash payments, or more subtle forms of assistance such as loan guarantees or schemes to exempt private developers from property taxes.”

Article 9, Section 7 provides, “Neither the state, nor any county, city, town, municipality, or other subdivision of the state shall ever give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation, or become a subscriber to, or a shareholder in, any company or corporation, or become a joint owner with any person, company, or corporation, except as to such ownerships as may accrue to the state by operation or provision of law or as authorized by law solely for investment of the monies in the various funds of the state.”

GI said in its letter to Mayes, “[M]unicipalities may exercise only those powers that are expressly granted by the Legislature, or that are necessarily implied by such express grants of power.” The group added, “Not only is it doubtful that these allocations serve a legitimate public purpose, but there also appears to be no direct or measurable consideration received in return for this use of public resources.”

The group asked Mayes to initiate an action under A.R.S. 35-212, which states that “[t]he attorney general may bring an action to recover illegally paid public monies.” GI said if Mayes doesn’t take any action, “our client reserves the right to bring an action pursuant to A.R.S. § 35-213(B), which shall have ‘the same effect as if brought by the attorney general.’” That statute authorizes a private party to bring a lawsuit to recover illegally paid public monies if the party has requested the attorney general bring an action, but the attorney general fails to after 60 days, which ends on July 20.

GI compared the handouts to the U.S. Agency for International Development (USAID) grants, money that the Trump administration halted.

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Rachel Alexander is a reporter at The Arizona Sun Times and The Star News Network. Follow Rachel on Twitter / X. Email tips to [email protected].
Photo “Phoenix City Hall” by Azwatchdog. CC BY-SA 3.0.

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