Key Points:

• Lawmakers allege the city of Phoenix violated state’s Gift Clause

• Allegations center on city employees making more than 600 donations to NGOs without City Council approval

• Contributions under review were categorized as sponsorships, grants or subsidies

Three Republican state representatives are calling on the Attorney General’s Office to investigate the city of Phoenix after alleging city officials broke the state’s Gift Clause by giving millions of dollars to non-governmental organizations.

Reps. David Marshall, R-Snowflake; Walt Blackman, R-Snowflake; and Quang Nguyen, R-Prescott Valley, filed a SB1487 complaint against the city over its gift policy, which, by statute, requires Democratic Attorney General Kris Mayes to investigate and issue a report within 30 days. 

The representatives allege 41 city employees violated the state’s Gift Clause and other laws by making more than 600 donations of up to $32,000 to non-governmental organizations without City Council approval. 

On May 21, Goldwater Institute also jumped in with a letter to Mayes threatening litigation if her office finds the city didn’t violate the law, representing Phoenix taxpayer Bramley Paulin. 

Goldwater Institute is asking Mayes to take action to stop the city’s non-governmental organization expenditure policy and to recover the alleged illegally paid public money.

“If the Attorney General declines to enforce the law, the Institute may pursue other legal protections in court. Goldwater will continue to defend taxpayers from public officials bent on dishing out public funds to private special interests,” Goldwater Institute Staff Attorney Parker Jackson wrote in a May 21 news release.

Marshall began looking into the city’s gift policy in February after learning that three separate city departments donated at least $10,000 to the Arizona Science Center’s “Galaxy Gala” on Feb. 1, according to a Feb. 25 letter he sent to the Phoenix City Council.

“I do not dispute that it is a worthy cause to support the Science Center’s STEM educational programs. But I do question whether it is appropriate for any government body to donate such large sums of taxpayer money to nonprofit organizations outside of a legislatively-authorized grant program,” Marshall wrote.

Phoenix City Attorney Julie Kriegh informed Marshall on March 14 that Phoenix city policy does not require the City Council to approve donations from department directors under $32,000. 

Using city financial data, the representatives compiled a list of at least 634 expenditures department directors have made to individuals and organizations under $32,000 since April 15, 2020. The total amount donated exceeds more than $28 million combined. State representatives say the list may still be incomplete and have accused the city of inaccurately reporting department expenditures.

In its defense, the city cited an ordinance which allows the city manager authority to distribute department work and administrative divisions, appropriate and expend public money to settle claims against the city less than $32,000, and attend City Council meetings, but the three representatives argue no city policy gives department directors authority to expend those contributions. 

“For months, Phoenix officials have stonewalled legislative oversight and refused to provide any lawful justification for allowing unelected bureaucrats to hand out taxpayer dollars as they see fit,” Marshall said in a House GOP news release. “Dozens of City officials and staff have been operating under the radar with no accountability, and it’s time for the attorney general to step in.”

Most contributions were categorized as either sponsorships, grants and subsidies, advertising or miscellaneous, and the recipients ranged from the state universities, nonprofits, the Arizona Commerce Authority, a government relations firm and media companies. 

One contribution specifically highlighted in the SB1487 complaint was a sponsorship contribution of $10,000 on Aug. 20, 2024, to Alliance for Regenerative Medicine, an international advocacy organization based in Washington, D.C. The representatives said some contributions appeared to be unrelated to Phoenix. 

Alliance for Regenerative Medicine has an upcoming conference about cell and gene therapy scheduled in Phoenix on Oct. 6 with more than 2,000 already registering to attend. 

The legislators also noted a $5,000 sponsorship on Sept. 14, 2022, to the Chicago-based Alzheimer’s Disease and Related Disorders, Inc, but that organization has an office located in Phoenix. 

The final group of contributions flagged by complainants was 31 contributions totaling more than $111,000 to the National Forum for Black Public Administrators, which has a chapter based in Phoenix. 

“It appears to be nothing more than an illegal slush fund for politically favored nonprofits — and that’s exactly what Arizona’s Gift Clause was written to prevent,” Blackman said in a news release. 

Kreigh wrote in an email to Marshall that organizations are selected by department directors based on the alignment of the organization’s goals with those of the city department’s goals and initiatives, which often reflect council priorities. 

“The factors considered in making these decisions include alignment with the department’s goals, Council priorities, and the potential educational or community benefits of the event or organization,” Kriegh wrote.

The city of Phoenix declined to comment due to the ongoing investigation.