ASU President Crow responds to AG lawsuit over university real estate

Jan 11, 2019, 9:28 AM | Updated: 9:29 am

PHOENIX — The battle between Arizona State University and state Attorney General Mark Brnovich is heating up, one day after Brnovich filed a lawsuit against the Arizona Board of Regents alleging the university misuses its tax-exempt status to benefit private developers.

University President Michael Crow told KTAR News 92.3 FM that he was confused over the lawsuit because the university has engaged in the practice of using private companies to build something on their property “forever.”

“If someone builds something on our property — which they’re allowed to do, working with us — they pay us in lieu of the taxes. They pay us what they would pay for taxes,” Crow said.

“We then take those resources and build things for the university. That’s the way we’ve been working forever.”

Brnovich claimed in his lawsuit that ASU has made real estate deals that “shield selected companies from property taxes while generating revenue for ABOR and ASU.”

In an interview with KTAR News on Thursday, Brnovich said ASU made several deals where property was leased to be developed by private companies, who then transferred the properties back to the university.

That back-and-forth process takes the improvements to the property off the tax rolls, he added.

“We as taxpayers lose out because someone’s not paying those taxes,” Brnovich said.

“And all the while, Arizona State University is basically picking winners and losers and giving a benefit to whoever it wants.”

One of the projects that Brnovich highlighted is the Omni Hotel chain, saying he filed the lawsuit to prevent a deal for a hotel and conference center near downtown Tempe from going forward in its current form. Tempe City Council voted last January to give a $21 million tax break for the project.

“If it does go forward, Omni Hotel should be required to pay the proper property taxes,” he said, adding that previous ASU deals followed a similar pattern.

Crow said the university was not going to use tuition dollars or public money to build the on-campus conference center and needed a partner to develop it.

“The conference center attached to the hotel, we’re building that with resources generated by this hotel company. This is the way we work. We advance our projects in a way in which we find partners,” Crow said.

Crow said the university has built its dormitory buildings using this tactic as well.

“A private company comes in and builds the dormitory, they then design their financial structure in a way where they can make money on the capital they’re investing,” he said.

Crow said Brnovich has no standing for the lawsuit because the private companies that the university is outsourcing to are not benefiting from the exchange.

“No one is getting off on taxes, the company’s not benefiting in any particular way,” Crow said. “The risk they’re taking is working with us and building something we need built.”

KTAR News 92.3 FM’s Martha Maurer and Madison Spence contributed to this report.

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