Rental companies challenege $34 million in taxes

Posted at 2:08 PM, May 31, 2016
and last updated 2016-05-31 22:51:14-04
Rental car companies who already have won a court order for the return of about $150 million in taxes from a fund that pays for the University of Phoenix stadium are now seeking a refund of a similar tax collected by the city of Phoenix.
The companies want a refund of money they've paid in sales taxes over the past four years because a judge in the other case ruled such taxes can only be used for road maintenance and construction. Three companies are involved and paid about $200,000, but the city has collected more than $34 million from its rental car tax since 2012. The companies' lawyer said the claim could expand into a class-action case.
The city uses the money to fund its sports facilities, a medical research facility, convention center and downtown hotel, so losing it could impact discussions on building new sports facilities in downtown Phoenix.
The claim filed last week for the companies by attorney Shawn Aiken comes nearly 10 months after a Maricopa County judge ordered the state of Arizona to issue a similar refund from a rental car tax that funds the Arizona Sports and Tourism Authority. That public agency uses the money for debt service on bonds that paid for the University of Phoenix stadium where the Arizona Cardinals play, spring training venues and youth sports.
Phoenix spokeswoman Julie Watters said Tuesday the city believed the tax was legal and was evaluating the claim.
"Although the city is still evaluating the three rental-car companies' claims, we do not expect the court to certify the class action, and we expect to prevail on the merits of the companies' individual claims," Watters said in a statement.
Aiken said last year's ruling and an earlier one that declared the Arizona Sports and Tourism Authority rental car tax unconstitutional also applies to the Phoenix rental car tax. The 2014 ruling found the state Constitution says vehicle taxes must be directed to road projects.
That case is nearing a final judgment in Maricopa County Superior Court and both sides have said they expect it to be appealed. Aiken said no matter how the appeals court rules, the case won't end there.
"Win, lose or draw, somebody's going to appeal to the Arizona Supreme Court," he said.
If the city rejects the new claim, Aiken said the companies plan to sue. He said his clients can only ask for refunds of four years of back tax collections, so the claim needed to be filed to preserve their recovery rights despite the ongoing nature of the other case.
"The appeal I think is going to succeed, No. 1. And No. 2, it's been two years since that ruling, so there's no reason to wait and let the right for refunds to go by the board," Aiken said. "The longer that you wait on these things, you lose years of refunds going by, so there's really no reason to wait."
Three companies are named in the claim, but Aiken said all rental car companies in Phoenix could be affected. The previous case involved more than 100 companies. Although they may recover up to $150 million plus interest, they won't pass it on to consumers who paid the tax because legally the companies are the taxpayers, Aiken said after last year's ruling.
The Phoenix rental car tax was enacted in 1989 and helped fund construction of the downtown arena where the Phoenix Suns play. The so-called "Arena fund" also has been used as security for the city-owned Sheraton Hotel, facilities for a medical research facility known as TGen, and the convention center. The city is under pressure to build new facilities to replace the existing Suns facility.
The county tax that funds the Arizona Sports and Tourism Authority dates from 2000, when voters approved a rental car and hotel tax. An attorney for the authority has said they disagree with the 2015 ruling and plan to appeal.