By Howard Fischer
Capitol Media Services
PHOENIX -- The wining and dining of corporate CEOs by the Arizona Commerce Authority is unconstitutional, Attorney General Kris Mayes said Tuesday.
In a letter to the authority's lawyer, Mayes said the decision to entertain top executives could be considered to have a public purpose. She said that could be seen as part of the organization's responsibility to market the state and get companies to expand or relocate here.
But Mayes said the amount of money spent on what were called "CEO Forums'' -- $2.4 million at the 2023 Super Bowl and Waste Management Open over the past six years -- violates a constitutional provision that makes it illegal to make gifts of public money.
"They give valuable benefits to a limited class of private persons without receiving any legally cognizable benefit in return,'' she wrote.
Mayes has not yet decided whether to go after anyone who was involved in prior decisions. And she said the Commerce Authority is free to hold future forums "that confer nominal value on attendees.''
But she warned them against any expensive repeat performance as the Commerce Authority is inviting executives to come to Arizona for two upcoming events: the annual Waste Management Open set for next month and the NCAA Men's Final Four tournament in April.
"The ACA ... has not shown that its upcoming 2024 Forums come anywhere close to meeting that requirement'' of a nominal value, Mayes wrote. "The ACA should not hold future CEO Forums that violate the Gift Clause, and the attorney general will seek to enjoin any future illegal payment of public monies.''
Christian Slater, press aide to Gov. Katie Hobbs, to whom the authority reports, said his boss disagrees with Mayes' findings.
"The ACA plays a critical role in Arizona's booming economy, attracting businesses from around the world and creating good-paying jobs for working Arizonans,'' he said. "Gov. Hobbs will not let Texas and California beat Arizona in attracting jobs and businesses.''
There was no direct answer to Mayes' findings that the spending was illegal. Slater would say only that Hobbs "is evaluating all available options going forward.''
But she defended the expenditure when its legality was first raised by Auditor General Lindsey Perry last year when her staff examined the agency and its operations.
"It is absolutely one important tool that we use to attract economic development to our state,'' the governor said.
And ACA spokesman Patrick Ptak said his agency disagrees with Mayes' legal conclusion.
"From the beginning of this program, we've conferred with internal and external legal counsel to ensure it aligns with all state requirements,'' he said. And Ptak said the agency is working with lawyes "to consider next steps.''
That report by Perry's staff raised questions about what the state was getting for its money.
It said that of 118 companies who attended these private forums, 23 had proposed "potential nonbinding investments and job commitments in Arizona.''
According to the report, the cost of "social and entertainment events'' for just the 2023 Super Bowl came close to $2.1 million.
"The biggest piece of that was $1.85 million for the Commerce Authority to be a sponsor. That netted 140 tickets to the Super Bowl itself, a VIP tailgate party and the "Super Bow Experience'' at the Phoenix Convention Center which included everything from a 4-D immersive theater, and equipment room where fan could "suit open,'' and a post-bowl "immersive celebration.''
There also were 70 rooms at the Arizona Biltmore with a hospitality lounge, planned dinners, a welcome event with Hobbs and panel discussions with Arizona businesses. And there were gift package with everything from hats and tumblers to sunglasses.
All that raised such a legal concern that Perry asked Mayes' office to review.
Sandra Watson, ACA's executive director, defended the expenditure after Perry issued her report.
"The CEO program really gives us an opportunity to really educate decision makers on the value proposition that we offer for businesses,'' she said.
"What we want to do is position Arizona in the best possible way,'' Watson said. "Utilizing the Super Bowl and other major events gives us an opportunity not only to talk about the business climate in Arizona but our quality of life.''
The problem with all of that, Mayes said, is it is illegal.
"The Gift Clause generally requires that the government receive proportional consideration for its expenditures,'' she wrote. And she said the mere fact that businesses might relocate here is insufficient.
"Paying taxes applicable to all is not consideration,'' Mayes said. "Businesses inherently generate taxes and stimulate the economy, so permitting such impacts to justify public funds of private ventures would eviscerate the Gift Clause, even if the private ventures would not exist without public funds.''
Mayes said she asked the Commerce Authority for an explanation of its spending. But the attorney general made it clear what she got back was not acceptable.
"The ACA's responses to our office's inquiries demonstrate that it expends considerable funds simply achieving attendance at the CEO Forums even though there is not public benefit from an executive's private 'changing perception and increasing sentiment' about Arizona,'' Mayes said.
"Indeed, the rationale for allowing executives to bring guests unaffiliated with their company is that 'invitees are more likely to participate' and 'having an accompanying participant present improves the overall experience,' '' she continued. "But those feelings provide the state with no cognizable economic value for Gift Clause purposes.''
And she said that even if the forums get to command a CEO's time and attention, that is "valueless under the Gift Clause inquiry when the most it will result in is a company's promise to engage in its own business.''
Mayes isn't the only one who is focused on the ACA's spending.
Sen. Jake Hoffman, R-Queen Creek, introduced legislation this year to put the agency out of existence. And he cited the findings of Perry and her staff, complaining of "reckless spending of this unaccountable agency.''
That legislation, SB 1044, has not yet had a hearing.
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