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CityNorth case has cities rethinking grants

by Rebekah L. Sanders - Apr. 19, 2009 12:00 AM

The Arizona Republic

Valley neighborhoods are facing a double blow to grant funding that they once used to combat blight, promote public safety and revitalize aging areas.

Not only are most cities freezing their neighborhood grant budgets, some are looking to narrow the list of eligible improvement projects and, in rare cases, revoking thousands of dollars already promised.

The problem stems from a recent legal battle in Phoenix over that city's offer of $97.4 million in sales-tax subsidies to a developer building parking garages for the upscale CityNorth shopping center. The state Court of Appeals recently ruled against Phoenix's subsidies, calling into question any future use of public money for private developers, private property or even neighborhood homeowners. The case has been appealed to the Arizona Supreme Court.

The lawsuit originally targeted the big-ticket subsidies that cities' economic-development departments have used to attract shopping malls, car dealers and retailers.

Cities such as Phoenix, Tempe and Peoria offer grants for neighborhood projects that enhance appearances and benefit the community, including installing park playgrounds or painting perimeter walls. Some programs even allow certain home improvements, such as new address numbers or exterior painting, that are coordinated throughout the neighborhood.

Since the court decision, municipalities must rethink those relatively small neighborhood grant programs.

"We invite cities to evaluate all of their spending," said Carrie Ann Sitren, an attorney for the Goldwater Institute, the conservative think tank that filed the CityNorth suit.

"When we have taxpayer dollars going to benefit a single private individual with no other public purpose, then in our eyes and the framers of the Arizona state Constitution, a subsidy is a subsidy. Even a small amount of money can be a subsidy."

If the decision isn't overturned, "we will have to be changing the way we do business in many, many ways," said Ken Strobeck, executive director of the League of Arizona Cities and Towns, which lobbies for the state's 90 municipalities.

One neighborhood in Glendale already has been told it is losing $42,000 in grant money intended for flood control. The Maryland Heights II community planned to fix street drainage to prevent rainfall from submerging its roads. But since the roads are technically owned by a homeowners association, not the city, Glendale says it can no longer approve the grant. Such street repairs to private property could be considered a subsidy. Only improvements to city-owned land are now allowed.

"We were really counting on this," said Maryland Heights HOA President Susan Snyder.Another neighborhood, East Catlin Court, had planned to use a part of its $81,625 grant to trim trees, repair fences, pave driveways and put in energy-efficient porch lighting.

None of that is allowed anymore. The planned projects would have been on private property.

Bart Turner, an active resident, disputes the city's interpretation.

"Our program is completely different than the situation with CityNorth," he said. "We're not talking about making millionaires richer, we're talking about improving a neighborhood for the residents.

Matt Cohrs, Glendale's neighborhood partnership administrator, said he relates to neighbors' frustrations.

He points out only two of Glendale's eight neighborhood grants were affected by the rule changes this year. And neighborhoods can still apply for federal grants that fund certain improvements to private property based on homeowners' income, such as roof repairs.

Tempe, which has more restrictive neighborhood grant requirements, doesn't plan to alter its rules, Neighborhood Services Director Shauna Warner said. But in a departure from Glendale's interpretation, Tempe still plans to make grants eligible for improvements to homeowner associations' common areas.

Scottsdale is one of many cities that, as a result of budget cuts, won't be funding neighborhood grants next fiscal year.

In the meantime, though, Neighborhood Education Manager Joanie Mead said city attorneys and staff will be reviewing grant guidelines, including how the CityNorth case may affect future grants.