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Arizona Attorney General Mark Brnovich sues over ASU real estate deals

Arizona Attorney General Mark Brnovich sues over ASU real estate deals

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The Arizona attorney general has launched another battle against the state’s public universities, this time over large Arizona State University real estate projects that he says are illegal.

Attorney General Mark Brnovich sued the Arizona Board of Regents, which oversees the state’s universities, in Arizona Tax Court Thursday.

He claims real estate deals approved by the board allow universities to boost favored companies and help them avoid paying taxes. ASU is essentially renting out its tax-exempt status to private businesses, Brnovich said.

Specifically, Brnovich calls out Arizona State University’s practice of allowing for-profit companies to build on university-owned land, which is tax-exempt. He seeks to force an unbuilt Omni Hotel to pay property taxes.

“ASU is a public university, not a commercial enterprise or an urban development authority. It is inappropriate for this educational institution to pick winners and losers in the highly competitive property development industry by negotiating for the use of ABOR’s tax shielding status,” the lawsuit says.

It’s the second lawsuit Brnovich has brought against the regents. Another lawsuit, over tuition costs the attorney general claims are too high, is on appeal.

In a lawsuit against the Arizona Board of Regents, Arizona Attorney General Mark Brnovich seeks to force an Omni Hotel slated for University Drive and Mill Avenue to pay property taxes. (Photo: Tom Tingle/The Republic)

How the real estate deals are set up

ASU has faced scrutiny by some state lawmakers and taxpayer-advocacy groups over its real estate deals. Marina Heights along Tempe Town Lake, which is the site of a massive State Farm Insurance campus, is one such deal. 

Here’s how the arrangement works: ASU rents out the land to a private company, which pays ASU but enjoys a property tax-exempt status because the university remains the landowner.

ASU has said in the past that these projects have allowed the university to make up revenue after state budget cuts.

In the lawsuit, Brnovich seeks to force one unbuilt project, an Omni Hotel slated for University Drive and Mill Avenue, to pay property taxes. Plans call for a 330-room hotel and a 30,000-square-foot conference center to be built on land owned by the regents.

But Brnovich also questions the Marina Heights project and Mirabella, an unfinished senior living facility, that use similar leasing structures. 

Brnovich said the regents don’t have the authority under the Arizona Constitution or any other state laws to use university-owned land to allow private developers to avoid paying property taxes. 

“These construction projects are therefore not included in the property tax base available to local schools and governments, even as ASU receives substantial income for its straw-man role,” the lawsuit says. 

ABOR and ASU did not immediately have comments on the lawsuit.

This is a developing story. Check back for more details.

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Read or Share this story: https://www.azcentral.com/story/news/local/arizona-education/2019/01/10/arizona-attorney-general-mark-brnovich-sues-over-asu-real-estate-deals/2537804002/

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