Pinal County appeals judge’s decision to strike down half-cent transportation tax

Pinal County is appealing an Arizona Tax Court judge’s decision that a half-cent transportation sales tax approved by voters in November violates state law.

Todd House

“The tax judge didn’t take into consideration the will of the people because we actually voted and very unlike a judge to overturn the will of the people,” Chairman Todd House of the Pinal County Board of Supervisors said.

“We’ll see how it turns out. We’re very optimistic that we should win in court,” he said.

Approved in November were Proposition 416, which is to create a network of new roads and freeways throughout Pinal County; and Proposition 417, which funds the projects through a half-cent increase in the sales tax.

Proposition 416 was approved 26,399-19,944. Proposition 417 was approved 23,635-22,734, according to final numbers approved by the Pinal County Board of Supervisors.

The Goldwater Institute filed a lawsuit in December on behalf of Pinal County voters.

“Voter information pamphlets led Pinal County voters to believe the tax would comply with state law,” Timothy Sandefur, vice president for litigation at the Goldwater Institute’s Scharf-Norton Center for Constitutional Litigation, said in a December release.

“But the actual proposition said the tax would only apply to retail sales of items below $10,000. That is both unfair and illegal; Arizona law specifies what must be taxed when a county creates a transportation excise tax, and it doesn’t allow counties to create their own rules,” he said.

Tax court decision

Pinal County’s transportation excise tax violates state law and must be struck down, the tax court judge decided Aug. 2, Mr. Sandefur said in a release.

“State law allows counties to adopt transportation excise taxes to pay for road improvements, but dictates precisely how such taxes are supposed to be designed,” he said.

“Pinal County disregarded those requirements, however, and tried to design a different system that exempted large items from taxation entirely. The tax did not apply to single sales of individual items that cost $10,000,” Mr. Sandefur said.

“That meant it applies to things bought at Walmart or Target, but not to new cars. This discriminatory treatment was designed to prevent politically powerful businesses from opposing the tax measure when it was put to voters,” he said in the release.

“The county initially told voters that it would tax only retail businesses, wrote Judge Christopher Whitten. But then it instructed state tax officials to collect the tax from all businesses in the county. That alone was illegal, the judge ruled. And, that meant the tax had to be barred entirely, even aside from the $10,000 exemption,” Mr. Sandefur said.

Vote to appeal

Dave Waldron

The Pinal Regional Transportation Authority Board voted to ask the Pinal County Board of Supervisors to appeal the decision, PRTA board Chairman Dave Waldron said in an e-mail.

“I am disappointed the court issued the ruling it did, but that doesn’t mean the Pinal County transportation plan is done,” he said.

“Based on the details of the court’s ruling I believe Pinal County will prevail on appeal,” PRTA Board Chairman Waldron said.

The Pinal County Board of Supervisors voted 4-1 on Aug. 8 to appeal the tax court decision. The vote came following a closed-door executive session for legal advice and litigation concerning the court’s decision and a possible appeal of TX2017-000663, Harold Vangilder vs. Arizona Department of Revenue, according to the agenda.

Voting yes in an open meeting following the executive session were Chairman House, District 5, and board members Pete Rios, District 1; Mike Goodman, District 2; and Anthony Smith, District 4. Voting no was Steve Miller, District 3.

Mr. Vangilder, a resident of Casa Grande, asked the board of supervisors to not appeal the tax court judge’s decision.
“I have the notoriety to be the Vangilder in ‘Vangilder vs. Arizona Department of Revenue,’ he said to the supervisors at the Aug. 8 meeting.

“The judge has ruled and you now have some options that you are considering and what I would ask is that you not spend any more of my money,” Mr. Vangilder said.

“So my request to you is that you not appeal, that you quit spending my money for this and that you get on with the business of figuring out how to get it done,” he said.

“I believe as a conservative that any tax increase imposed by government is an admission that the government cannot figure it out and they’re going to solve whatever problem that they are facing on my back. That’s what a tax increase is,” he said to the supervisors.

No one else spoke at the public hearing portion of the agenda item.

“He’s urging us; he didn’t want any more of his tax dollars to be put on this thing,” Chairman House said in the phone interview of Mr. Vandgilder’s comments at the Aug. 8 meeting.

“I was going to mention to him that he’s the one costing us a lot of tax dollars by putting this forward. Now it’s going to be appealed so now it’s even more tax dollars,” he said.

Chairman House said he was surprised with the tax court judge’s decision.

“I think anybody who was watching the tax trial, everybody was surprised because he didn’t reference any of the Supreme Court decisions before — he didn’t take any of them into consideration. He is a tax-law judge. I don’t know if he’s really clear on regular law,” Chairman House said.

“I think by appealing it we will get it before a law judge and then we’ll have a better chance and a better understanding. Supreme Court decisions have weight and so we have several of those on our side so we feel like we have a very good case going forward,” he said.

The appeal process is five to six months, he said.

“It goes to the Court of Appeals and then it’s got to work out there and then we’ll take it to Supreme Court, but I think the Court of Appeals will look at it and rule in our favor and I think we’ll have a lot of this behind us pretty quickly,” Chairman House said.

Sales taxes collected for Pinal County roads are being placed in an escrow account and are drawing interest, Chairman House said.

“Unfortunately, we’ll be gathering a lot of money in an account while we’re waiting to get this appealed. It won’t really stop the money collection … We won’t get behind the eight-ball as far as the money collection goes, we’ll just get behind the eight-ball as far as the planning and the actual plan itself goes,” he said.

Funds gathered so far by the tax could have been used to purchase rights-of-way for future roadways, he said.

“We were not allowed to go ahead and buy some easements which we would have probably have bought by now,” Chairman House said.

“It is being held in an account so if something were to go awry the money would actually be returned to the department of revenue to everybody who has paid the tax,” he said.

Projects to be built with the half-cent sales tax include the 36-mile North-South Parkway between Apache Junction/Gold Canyon, Florence, Coolidge, Casa Grande and Interstate 10. The estimated cost of the design and construction of the principal arterial is $326.4 million. Pinal County is slated to contribute $30 million in additional funding towards the project, according to county officials.

Jeff Serdy

“The North-South interconnect is of vital importance to the positive growth of Apache Junction to the south,” Apache Junction Mayor Jeff Serdy said.

“Since no one wants denser use of the land in the northern part of the city, this is (an) obvious answer to keeping our rural roots and lifestyle but to still move forward. It could also be the answer to providing an alternative route into Gold Canyon. I believe the lower court was wrong and that it will be favorably overturned,” he said.

Heidi A. Robinson, a Pinal County resident, said she is against the Arizona Tax Court judge’s decision.

“I can see the point of the tax imposed on small businesses creating a problem. However, I can bet you 100 percent that Goldwater would complain louder yet if his money-rich business were taxed for the transportation,” she said in an e-mail about the tax court judge’s decision.

“What do they want, more tax directly on the citizens? This is more unfair. I have taken economics and other business classes in the past. Transportation, as you probably know as much as anyone else, is important,” she said.

“Senior citizens such as myself, and many others unable to drive, are left at a great disadvantage,” Ms. Robinson said.

“I disagree that it will hurt the county. We need a transportation system for the city and county to grow. The heck with Goldwater,” she said.

Editor Richard Dyer can be reached at rdyer@newszap.com

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