IN the SUPREME COURT STATE of ARIZONA STATE of ARIZONA, Ex Rel. MARK BRNOVICH, Attorney General, Petitioner, V. CITY of PHOENIX
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IN THE SUPREME COURT STATE OF ARIZONA STATE OF ARIZONA, ex rel. Supreme Court No. CV–20–0019 MARK BRNOVICH, Attorney General, Petitioner, v. CITY OF PHOENIX, Arizona, Respondent. CITY OF PHOENIX’S RESPONSE TO PETITION FOR SPECIAL ACTION Jean-Jacques Cabou (#022835) [email protected] Alexis E. Danneman (#030478) [email protected] Matthew R. Koerner (#035018) [email protected] Margo R. Casselman (#034963) [email protected] PERKINS COIE LLP 2901 North Central Avenue, Suite 2000 Phoenix, Arizona 85012-2788 Telephone: 602.351.8000 Facsimile: 602.648.7000 Attorneys for Respondent City of Phoenix February 18, 2020 TABLE OF CONTENTS Page Introduction .............................................................................................. 1 Statement of Facts ................................................................................... 3 The City Operates the Airport as a Self-Sustaining Enterprise ........................................................................................ 3 All Businesses Pay for Their Use of Airport Property ................... 5 Like Other Businesses, Ridesharing Services Pay to Use Airport Property .............................................................................. 6 The Ordinance Ties Fees to the Use of Airport Property and Curb Space ...................................................................................... 7 This Action Under A.R.S. § 41-194.01 ............................................ 9 Statement of the Issue ........................................................................... 10 Argument ................................................................................................ 11 I. The Fees Are for Use of Airport Property............................ 11 II. The Arizona Constitution Does Not Prohibit the Fees. ...... 12 A. The Fees Are Not “Transaction-Based.” ..................... 14 1. “Transaction-Based” Means Founded on a Commercial Agreement. .................................... 14 2. The Attorney General’s Preferred Definition Is Not the Commonly Understood Meaning. ..... 17 3. The Fees Are Not “Transaction-Based” Because They Are Triggered by Use of Airport Property. ................................................ 20 B. The Fees Are Not “on the Privilege to Engage in” Any Service Performed in This State. ........................ 23 C. Article IX, § 25 Prohibits Only Certain Taxes on Services, and the Fees Are Not Taxes. ....................... 26 -i- TABLE OF CONTENTS (continued) Page 1. The Text of Article IX, § 25 Demonstrates that It Applies Only to Taxes. ........................... 27 2. The History and Purpose of Prop. 126 Further Confirm that Article IX, § 25 Applies Only to Certain Taxes. .......................... 29 3. The Fees are not Taxes. ..................................... 32 III. The Attorney General’s Proposed Construction Would Conflict with Other Provisions of the Arizona Constitution. ......................................................................... 35 A. The Attorney General’s Proposed Construction Would Conflict with Article XIII, Section 5. ............... 35 B. The Attorney General’s Proposed Construction Would Conflict with Article XXI, Section 1. ............... 37 IV. The Bond Provision Is Unconstitutional and Unenforceable. ...................................................................... 39 A. The Bond Provision Is Unconstitutional. ................... 40 B. The Bond Provision Is Unenforceable. ....................... 41 Conclusion .............................................................................................. 42 Attorney Fees ......................................................................................... 42 -ii- TABLE OF CITATIONS Page(s) CASES Ariz. Citizens Clean Elections Comm’n v. Brain, 234 Ariz. 322 (2014) ............................................................................ 12 Ariz. Dep’t of Revenue v. Action Marine, Inc., 218 Ariz. 141 (2008) ............................................................................ 25 Ariz. Pub. Serv. Co. v. Town of Paradise Valley, 125 Ariz. 447 (1980) ...................................................................... 27, 28 Ariz. State Liquor Bd. v. Poulos, 112 Ariz. 119 (1975) ............................................................................ 24 Ariz. Together v. Brewer, 214 Ariz. 118 (2007) ............................................................................ 37 Bidart Bros. v. Cal. Apple Comm’n, 73 F.3d 925 (9th Cir. 1996) ................................................................. 33 Biggs v. Betlach, 243 Ariz. 256 (2017) ...................................................................... 33, 34 Bilke v. State, 206 Ariz. 462 (2003) ...................................................................... 13, 19 Bolser Enters., Inc. v. Ariz. Registrar of Contractors, 213 Ariz. 110 (App. 2006) ................................................................... 24 BSI Holdings, LLC v. Ariz. Dep’t of Transp., 244 Ariz. 17 (2018) .............................................................................. 25 Citizens for Orderly Dev. & Env’t v. City of Phoenix, 112 Ariz. 258 (1975) ............................................................................ 41 City of Phoenix v. Orbitz Worldwide, Inc., 247 Ariz. 234, -- ¶ 10 (2019) (citation omitted) .................................. 16 -iii- TABLE OF CITATIONS (continued) Page(s) City of Surprise v. Ariz. Corp. Comm’n, 246 Ariz. 206 (2019) ...................................................................... 16, 18 Glazer v. State, 244 Ariz. 612 (2018) ...................................................................... 13, 16 Jachimek v. State, 205 Ariz. 632 (App. 2003) ................................................................... 34 Jett v. City of Tucson, 180 Ariz. 115 (1994) ............................................................................ 29 Kaiser Aetna v. United States, 444 U.S. 164 (1979) ............................................................................... 1 Kerby v. Luhrs, 44 Ariz. 208 (1934) .............................................................................. 37 Local 266, Int’l Bhd. Of Elec. Workers v. Salt River Project Agr. Imp. & Power Dist., 78 Ariz. 30 (1954) ................................................................................ 36 Marbury v. Madison, 5 U.S. 137 (1803) ................................................................................. 41 May v. McNally, 203 Ariz. 425 (2002) ............................................................................ 33 McLaughlin v. Bennett, 225 Ariz. 351 (2010) ............................................................................ 38 New v. Ariz. Bd. of Regents, 127 Ariz. 68 (App. 1980) ..................................................................... 41 People of Faith Inc. v. Ariz. Dep’t of Revenue, 161 Ariz. 514 (Ariz. Tax Ct. 1989) ................................................ 16, 28 -iv- TABLE OF CITATIONS (continued) Page(s) Roseland v. City of Phoenix, 14 Ariz. App. 117 (1971) ..................................................................... 28 Saban Rent-a-Car LLC v. Ariz. Dep’t of Revenue, 246 Ariz. 89 (2019) ............................................................ 13, 27, 29, 31 San Juan Cellular Tel. Co. v. Pub. Serv. Comm’n, 967 F.2d 683 (1st Cir. 1992) ............................................................... 33 Scheehle v. Justices of the Sup. Ct. of the State of Ariz., 211 Ariz. 282 (2005) ............................................................................ 35 Slayton v. Shumway, 166 Ariz. 87 (1990), partially abrogated on other grounds by Ariz. Together, 214 Ariz. 118 ......................................................... 39 SolarCity Corp. v. Ariz. Dep’t of Revenue, 243 Ariz. 477 (2018) ............................................................................ 13 Stambaugh v. Killian, 242 Ariz. 508 (2017) .................................................................... passim State ex rel. Brnovich v. City of Tucson, 242 Ariz. 588 (2017) .......................................................... 11, 40, 41, 43 State ex rel. Morrison v. Nabours, 79 Ariz. 240 (1955) .............................................................................. 24 State ex rel. Nelson v. Jordan, 104 Ariz. 193 (1969) ............................................................................ 39 State v. Burbey, 243 Ariz. 145 (2017) ............................................................................ 13 State v. Chabolla-Hinojosa, 192 Ariz. 360 (App. 1998) ................................................................... 19 -v- TABLE OF CITATIONS (continued) Page(s) Taxpayer Prot. All. v. Arizonans Against Unfair Tax Schemes, 199 Ariz. 180 (2001) ............................................................................ 38 United States v. Elliott, 62 F.3d 1304 (11th Cir. 1995) ............................................................. 17 US W. Commc’ns, Inc. v. City of Tucson, 198 Ariz. 515 (App. 2000) ............................................................. 25, 28 Vilas v. City of Manila, 220 U.S. 345 (1911) ............................................................................. 36 Watkins Cigarette Serv., Inc. v. Ariz. State Tax Comm’n, 111 Ariz. 169 (1974) ...................................................................... 17, 28 Wilderness World, Inc. v. Dep’t of Revenue, 182 Ariz. 196 (1995) ...........................................................................