- Associated Press - Wednesday, April 2, 2014

PHOENIX (AP) - An Arizona House panel on Wednesday axed a proposed property-tax break for a Phoenix-based private Christian university after lawyers for the legislature said it was appeared to be unconstitutional.

Grand Canyon University was seeking to have its property reclassified into a much lower rate that would save it about $750,000 a year on its current Phoenix campus. Any new construction at the school or at a planned Mesa campus also would be reclassified, meaning the tax break could expand greatly over time.

But the House Rules Committee voted 5-3 to shelve the proposal because of concerns it ran afoul of constitutional requirements for uniform taxation and special legislation.

Senate Bill 1303 was drafted to only benefit Grand Canyon and drew objections from the University of Phoenix. It passed the Senate in February.

Rep. Eddie Farnsworth, R-Gilbert, agreed with the committee’s lawyer that the bill appeared to violate the state Constitution. Farnsworth is also a lawyer.

“I think that the Constitution is very, very clear in those particular articles,” Farnsworth said.

Grand Canyon lobbyist Kevin DeMenna said he believes the attorneys were wrong and said he’s confident they will revise their opinion. He called Wednesday’s vote “a bump in the road.”

“They were mistaken,” DeMenna said. “They believe that this was a class that includes universities ranging from Embry Riddle to Thunderbird. Every other regionally accredited institution in this state is either nonprofit, which means they don’t pay any taxes, or owned by the government, that means they don’t pay any taxes.”

The university has poured hundreds of millions of dollars into expanding its campus at 35th Avenue and Camelback Road in recent years and plans to start construction on a $200 million Mesa facility this year. It also has been looking at property in Tucson for a third campus and considering expanding outside Arizona.

But the expansion of the Phoenix campus came with sticker shock in the form of soaring property taxes.

The bill is opposed by a major Realtor group and the Arizona Tax Research Association because property tax cuts to one plot of land shifts those taxes to others.

“We’re opposed to the bill because of the shift, because of the increase on the homeowner’s side,” Tom Farley, a lobbyist for the Arizona Association of Realtors, testified before a House committee last month.

Kevin McCarthy of the tax association said nearby homeowners in the Alhambra Elementary School District could see property taxes rise by as much as $50 a year for a $200,000 home and business owners even more. A smaller impact would be felt in all other areas of Maricopa County.

The Apollo Education Group, parent company of the private University of Phoenix, also opposed the bill, with a company executive testifying that it could “create winners and losers in the private sector.”

Treasurer Matt Beckler said there may be state constitutional questions around the bill because it treats different private universities differently for tax purposes, a position the legislature’s lawyers took up Wednesday.

Story Continues →