Arizona’s three state university presidents presented a united front Friday after a surprise lawsuit from the state attorney general went after Arizona State University’s real-estate projects.
Attorney General Mark Brnovich filed suit in Arizona Tax Court Thursday over the university’s use of tax-exempt land for private development. Land owned by the universities is exempt from property taxes under Arizona law.
At a Greater Phoenix Chamber event Friday morning, the presidents of the University of Arizona and Northern Arizona University made clear they stood with ASU.
ASU President Michael Crow, who also spoke at the event, questioned how the attorney general’s office could sue a state body when the office also represents them in other matters.
“I’ve never been in a situation where my own lawyer would sue me. To be frank, I’m not really sure what that is about,” Crow said. Brnovich technically sued the Arizona Board of Regents, which oversees ASU.
This is a “strange moment in time,” Crow told the crowd. But one legal expert says it’s not unheard of for state attorneys general to sue other state agencies.
NAU President Rita Cheng noted that her university has used the same method as ASU to bring a Drury Inn to campus. The on-campus hotel supports the school’s mission and serves as a “unique, entrepreneurial” way to make up money as state funding for universities has fallen, she said.
While UA doesn’t have an on-campus hotel, UA President Robert Robbins said he would be interested in getting one, too. He said he doesn’t think you can have a world-class university without an on-campus hotel — they help visitors save time and productivity.
Instead of being sued for the use of real estate, “we should be getting actually extra support in (the ventures), at least if not financial, spiritual support,” Robbins said.
Crow: No advantage for private company
Brnovich wants to stop a planned deal to bring an Omni Hotel and a conference center to University Drive and Mill Avenue in Tempe.
In general, he claims real estate deals approved by the regents allow universities to boost favored companies and help them avoid paying taxes. ASU is essentially renting out its tax-exempt status to private businesses, he said.
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.
In these arrangements, ASU rents the land to a private company, which pays ASU but avoids property tax because the university remains the landowner.
Crow defended the university’s use of its land as a smart way to make up for lost state funds and to bring things to campus that would not be possible otherwise. ASU’s dorms, for instance, are built by private companies, he told The Arizona Republic.
The state is unlikely to pay to build a hotel and conference center at ASU, Crow said, and he wouldn’t use tuition money for such a project. Instead, Omni would pay ASU a “payment in lieu of taxes” of the same amount they would ordinarily pay in property taxes, he said.
With those funds, ASU would pay to build a conference center beside the hotel.
“We’re not in the business of giving anybody advantage because that would be unfair,” Crow
The lawsuit marks the second time Brnovich has sued the regents. Another lawsuit, over tuition costs, is ongoing. It was dismissed last April after a judge said Brnovich lacked the standing to sue the universities because he didn’t have permission from the governor or Legislature. Brnovich appealed the ruling.
Crow seemed confused about the purpose of the two lawsuits aimed at the universities. Brnovich had never reached out to ASU with questions or concerns over tuition or real estate deals, Crow said.
In the last conversation Crow had with Brnovich, among a group of other people over the tuition issue, “the logic was indiscernible. There was no logic,” Crow said.
Can the AG sue the universities?
ASU has repeatedly questioned how Brnovich can sue the universities when the attorney general’s office represents the regents in other matters. Crow said it was a conflict of interest akin to a divorce lawyer who works for one spouse suddenly switching sides to work for the other.
A list of cases where the attorney general’s office is currently representing the regents was not immediately available.
Some state agencies have assistant attorneys general assigned to them to handle legal work. The regents and ASU do not; they have their own in-house attorneys.
The Arizona State Bar’s Rules of Professional Conduct, which provide ethical guidance and rules for attorneys, say a lawyer can’t represent a client if there is a conflict of interest.
Lawyers for these agencies “may be authorized to represent several government agencies in intragovernmental legal controversies in circumstances where a private lawyer could not represent multiple private clients.”
These lawyers may also be able to “represent the ‘public interest’ in circumstances where a private lawyer would not be authorized to do so,” the rules say.
The attorney general’s office reiterated their position that there’s no conflict of interest in a letter to regents’ attorney Friday. The office hasn’t provided any guidance on real estate issues that are part of the lawsuit and has no confidential information on the topic, the office’s ethics counsel, Angela Paton, wrote.
Expert: Suing an agency not abnormal
Kathleen Clark, a legal ethics expert and professor of law at Washington University in St. Louis, said state attorneys general offices are more complex than a typical private law firm.
“There are situations where state attorneys general sue entities that are their clients,” she said.
In other states, courts have raised concerns in instances where the attorney general was able to learn privileged information from their client that was then used against that same client, she said.
But if that’s not the case, “it is not unheard of, it is not unprecedented for a state attorney general to sue a state agency,” Clark said.
State attorneys general play multiple roles with many different state agencies and for the general public, so what would be unusual or unethical for a private lawyer plays differently for the attorney general’s office, she said.
“In an ordinary situation, it would be outrageous. But state attorneys general turn out to be different,” Clark said.