Phoenix responds to AG’s rideshare probe: Fee is legal

Arren Kimbel-Sannit//January 10, 2020

Phoenix responds to AG’s rideshare probe: Fee is legal

Arren Kimbel-Sannit//January 10, 2020

Flanked by staffers, Attorney General Mark Brnovich explains Tuesday his decision to use state consumer fraud laws to sue two companies that manufacture and sell vaping devices. (Capitol Media Services photo by Howard Fischer)
Attorney General Mark Brnovich  (Capitol Media Services photo by Howard Fischer)

The city of Phoenix filed its official response to Arizona Attorney General Mark Brnovich’s investigation into whether a recent hike of rideshare fees at Sky Harbor International Airport violates the state Constitution.

The response January 8 reiterates the city’s position: The increase of the pickup fee and the addition of a drop-off fee do not constitute an increased tax on services, which would violate the Constitution. By January 17, Brnovich will decide whether the city’s rideshare ordinance violates the Constitution — a decision that legal analysts say will be grounded not just in the law, but in the public sentiment.

Brnovich’s investigation was initiated by a complaint filed by Rep. Nancy Barto, R-Phoenix, under SB1487, which allows lawmakers to compel the attorney general to investigate whether a local government is violating the Constitution. She filed the complaint in December after the Phoenix City Council voted to increase the rideshare fees, which it said was necessary to support operational costs at the airport.

“Arizona’s Constitution has always protected the rights of cities like Phoenix to own and manage property,” says a statement from the city of Phoenix. “The airport is city property, and trip fees are charged to commercial businesses to use the city’s property to conduct business for profit using Sky Harbor.”

Barto and conservative legal groups like the Goldwater Institute contended that the rideshare fee increase violated Proposition 126, a constitutional amendment that voters approved in 2018 prohibiting new or increased taxes on services.

“That the Ordinance and article IX, [section] 25 (Prop. 126 as chaptered) do not conflict is … especially clear considering the history and purpose of article IX, [section] 25, which was never intended to bar municipalities from collecting reasonable charges for the use of government property,” Barto’s complaint read.

In essence, the city interprets Proposition 126 as prohibiting the imposition of a “transaction-based” fee on “the privilege to engage” in a service. As such, the city’s response says that the ordinance it passed doesn’t require fees for the privilege of operating a rideshare business in the city, just for the usage of a specific selection of city-owned property.

Additionally, it says the fees are not transaction-based because they are not assessed each time a rideshare driver initiates a ride, only when they pass through the geofence around the airport.

“For instance, if customers decided to split the cost of the ride, or multiple, separately paying customers were picked up or dropped off at the same time, only one Fee would apply,” the response says.

How convincing that is depends largely on which side of the issue you’d fall on regardless.

“If you’re a gambling man, you’d bet against the city right now,” said Kory Langhofer, a conservative lawyer well versed in state constitutional matters.

He’s not convinced by any of the city’s arguments, and told the Arizona Capitol Times that the power of semantic acrobatics won’t override the plain reality that this certainly looks like a service tax — one the public seems to dislike strongly.

On the other hand, Chuck Coughlin, a lobbyist with HighGround Public Affairs Consultants, which has represented the interests of city hall and off-airport parking firms, said that the SB1487 complaint fails “some elementary tests.”

“The airport is an entity unto itself, it has to derive revenues from the people who use it,” Coughlin said. “The bottom line is they’ve been doing this for a long time. This is not a new fee in the sense of access to the airport.”

From here, Brnovich can either agree with the complaint, which will almost certainly spur a lengthy appeal from the city; rule in favor of the ordinance or essentially punt the case to the Arizona Supreme Court by ruling that the ordinance “may” violate the state Constitution. This has the added benefit of getting quick precedent and clarity on both Proposition 126 and SB1487.

“There is certainly an argument to be made that even if it is a clear ‘yes’, a ‘maybe’ is the most expedient and resolute way to get a determination by a court and provide clarity for all parties involved,” said Brnovich spokesman Ryan Anderson.

But, Coughlin said, that course of action “presupposes that Brnovich is not into sticking his neck out.” Even though he supports the city’s cause, he said that its messaging on the fee increase was “awful” and that he’s nervous about how Brnovich will rule.

Langhofer agrees. He said that ruling against the ordinance is a win-win for Brnovich — even if the city appeals and a years-long court battle ensues, Brnovich, who is likely planning a gubernatorial run, gets some extra months in the limelight as a lawyer who’s “on the side of the taxpayers,” which is how he described himself on KTAR in December.

“You aggregate the odds that the AG will lick his finger, stick it in the air and see which way the public blows,” Langhofer said.