A few weeks ago I wrote a short post about a deal that Phoenix had cut with the developer of a rather large mixed use project on the North side of Phoenix. The gist of the post was that at the same time that Phoenix had agreed to this deal at a cost in foregone sales tax revenues of around a hundred million dollars, the city was lobbying for financial assistance from the feds.

The deal the city cut with the developer was so close to violating Arizona’s constitution which prohibits granting money or credit to private entities, that the Goldwater Foundation sued. They lost in the original trial but that decision was reversed by the Appellate Court. The city is now debating as to whether or not pursue the case with the Arizona Supreme Court.

Coincidentally, the city announced today that its budget deficit which had originally been estimated at around $250 million for the fiscal year may be understated by at least $20 million. This number still relies on sales tax revenue projections which are likely shot to hell by the recent Christmas sales season. Hardly an environment in which to be giving away $100 million tax breaks, if indeed there ever is such an environment.

The reality is that the development is probably going to be much smaller and take much longer to complete than originally planned. In fact, the land surrounding the first phase (just opened) may retain its desert characteristics for some years. The city should thank its lucky stars that the Goldwater Institute prevailed and drop any thoughts of pursuing the case.