While COVID-19 has stalled many important policy issues that were under discussion, the debate regarding access fees for rideshare companies at Phoenix Sky Harbor International Airport continues on. Earlier this week, the Arizona Supreme Court announced that the oral arguments scheduled for later this month have been canceled, but they will issue an opinion in due course.
The nation’s most pre-eminent business publication, The Wall Street Journal, named Phoenix Sky Harbor International Airport the top airport in the nation among large airports. Not only is it self-supporting and does not receive general tax revenue, Sky Harbor is also one of our largest economic driver. This discussion and the ultimate fate of this case, as HighGround’s own COO Doug Cole points out in the Arizona Republic, could have lasting implications on Sky Harbor’s ability to do business in the future and how a preferential subsidies may create a loophole in the gift clause.
Here’s where the case against Uber, Lyft fees at Phoenix’s airport falls apart
By: Douglas Cole
Opinion: Restricting the ability of cities to raise fees doesn’t help the small businesses that Prop. 126 claims to protect.
I believe state Attorney General Mark Brnovich is sincere in his belief that a constitutional conflict exists between Phoenix airport fees and Proposition 126, the Protect Arizona Taxpayers Act approved by Arizona voters in 2018.
I, however, agree with the Foundation for Economic Education that a user fee is not a tax.
When someone chooses to use a government facility and pays for it, they’re paying a user fee. Taxes differ in that paying them isn’t a matter of choice and what you pay is not tied directly to what you are using. It is why conservative organizations such as the Competitive Enterprise Institute, the Reason Foundation and the Heritage Foundation are frequent advocates for user fees.
Fees are for access to exclusive curb space
In the current case before the Arizona Supreme Court, Uber and Lyft riders are paying for premium access to Sky Harbor curb space exclusively set aside for their customers. Riders coming to the airport using these companies have a choice of being dropped off at the Sky Train station for a reduced fee (because they avoid using the airport’s more congested terminal roadways).
Sky Harbor is a self-sustaining enterprise that receives no general fund taxpayer monies. Its success is tied to the longtime imposition of user fees on over 1,100 businesses that profit from the business they do by accessing the airport.
The 2018 Legislative Council analysis of Prop. 126 prohibits any new, or increasing any existing, “transaction-based tax (or) fee … on the privilege to engage in … any services performed in this state.” The fee being challenged, however, is an access fee – not a tax on a transaction or on the “privilege” to do anything.
Phoenix can charge for use of its property
We know this because the fee at issue in this case doesn’t apply to Uber or Lyft rides unless those rides access the municipal property of the airport. This fee is not about any particular transaction, or about Uber or Lyft’s ability to provide its rides, in general.
Rather, this fee applies only because these companies seek to profit from their access to city property. And the city, like any person or company that owns property, has a long-established right to charge others who want to use its property.
Prop. 126 was presented to Arizona voters as a prohibition on any new or increased taxes on services. The chair of the group that sponsored the constitutional amendment, Holly Mabery, provided in the 2018 voter publicity pamphlet numerous examples of what Prop. 126 was intending to protect from future taxation, including:
- family services like child care, health care and tutoring;
- personal services such as haircuts, manicures, car repairs and funerals;
- professional services such as banking and accounting; and
- home services, such as construction, plumbing, lawn care and heating and air conditioning.
To take the attorney general’s argument related to Prop. 126 to its logical extreme, the airport itself would never be allowed to increase its parking rates ever again, perpetually locking in a price that will surely prevent the airport from expanding its services to the growing Arizona economy and market.
Curiously, restricting the ability of municipal enterprises, like the airport, to raise fees doesn’t help the poor; it doesn’t help the small local businesses that the restrictions claim to protect. In fact, they force municipal corporations to rely more heavily on taxes to fund their enterprises.
Isn’t that an illegal ‘gift’ to Uber, Lyft?
Finally, a question remains as to how AG Brnovich intends to resolve his argument with the gift clause in the Arizona Constitution. The gift clause states that “neither the state … or other subdivision of the state shall ever give or loan … by subsidy or otherwise, to any … corporation …”
A ruling in favor of the attorney general would be giving a preferential subsidy in the form of fee exemption to two private, California-based corporations. I cannot imagine anyone who voted for Prop. 126 thought that its enactment would somehow justify giving state gifts to private corporations.
Sky Harbor International Airport is one of Arizona’s greatest economic assets. Let us all hope our exemplary judicial system in Arizona sees the wisdom of these arguments and permits the airport to continue to operate as an all-star economic asset.
Douglas Cole is the chief operating officer of HighGround Public Affairs Consultants and was a top aide to two Arizona governors, an Arizona House Speaker and an Arizona congressman.