Parking Garage for Luxury Retailer Not Legit Use of Taxpayer Credit

by John Washington on September 1, 2016

jim-lane-231x300Embattled incumbent Scottsdale mayor Jim “Shady” Lane frequently brags about Scottsdale’s “AAA-rated bonds,” supposedly as a sign of what a good job he’s been doing. If you been reading my drivel for awhile, you know that I frequently point out that Lane is wrong, insofar as not all of Scottsdale’s bonds are actually AAA-rated.

Now a new chicken has come home to roost. A couple of decades ago, the City of Scottsdale subsidized construction of the “Nordstrom parking garage” for the owners of Fashion Square Mall.

Last year I reported:

Former Scottsdale mayor Sam Kathryn “911” Campana gets the blame for the original 1998 Nordstrom garage scam, along with her successor, Mary Manross, who was at that time a council member.

But current Scottsdale Mayor Jim Lane and his city council cronies crowed loudly about how much money the 2012 prepayment was saving the taxpayers. What they should have done is stop the payments altogether. Now they’ve REALLY created a mess, wherein bond buyers may wind up suing the city if they become liable for income tax on bond interest.

I was right, and I was wrong. As I predicted, the IRS indeed took issue with the use of the Scottsdale taxpayers’ good credit rating to borrow money for this clearly non-public purpose. But in order to save his bond-buying buds from having to pony up interest on what was supposed to be tax-free muni bonds, Lane and his cronies have voted to shift the burden back to you and I, the non-bond-buying taxpayers of Scottsdale.

As reported today:

The city of Scottsdale has agreed to pay the Internal Revenue Service more than $750,000 to settle a dispute regarding interest on a portion of Scottsdale’s bonds.

In 2013 the IRS issued a notice to the city and municipal property corp. that the allocation of a portion of the proceeds of the bonds to refinance the initial lease term of the existing municipal Scottsdale Fashion Square Partnership Parking Garage Lease Agreement causes interest on the bonds to be taxable.

The city disagrees.

“The city and MPC disagree with the position of the IRS, believing that the bonds comply fully with the applicable federal tax law requirements for interest on the bonds to be excludable from the gross income for federal tax purposes,” city documents state.

The city attorney’s office recommends that the city approve this settlement in order to eliminate the expense and risk of continuing the dispute with the IRS, and to protect the city’s bond rating, an Aug. 31 city staff report states.

The settlement to be paid by the city to the IRS is in the approximate amount of $750,853.39.

The resolution also authorizes and directs a transfer in that amount from the adopted fiscal year 2016-17 General Fund operating contingency to the city attorney’s operating budget to fund payment of the settlement.

The resolution passed on consent at the Aug. 31 regular council meeting.

{ 1 comment… read it below or add one }

Steve Lowen September 1, 2016 at 4:40 pm

More slight of hand tricks from a Mayor who constantly reminds us that he was an Accountant at one time. It is a truism that subterfuge in transferring liability to the taxpayer
for a deal benefiting private interests is not leadership, especially when you are supposed to comprehend civic responsibility, and have fiduciary responsibility. The special interests and connected win again under Lane.
I am working overtime in Far North Scottsdale to remind residents that they must vote, and vote for someone who will ‘Keep Scottsdale Special.’

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