PHOENIX — The Arizona Court of Appeals found the Pinal Regional Transportation Authority and Proposition 417 tax to be valid in a decision released Thursday.
The Goldwater Institute plans to appeal the ruling.
“We’re sorry that the court disagreed, and we will be asking the Arizona Supreme Court to step in to protect taxpayers and business owners in the state’s most overtaxed county against these illegal actions,” said Goldwater Vice President for Litigation Timothy Sandefur in an email statement to PinalCentral.
Sandefur said the case was a “rare one in which taxpayers and the state Department of Revenue agree: Pinal County broke the law by inventing a new kind of tax not authorized by the legislature — in fact, which the legislature expressly refused to allow two years ago when the county asked it to.”
In 2017, Pinal County voters simultaneously approved Proposition 416 to adopt a regional transportation plan and Proposition 417 to enact an excise tax to fund the plan.
“The following month (Harold) Vangilder filed a complaint to enjoin ADOR, the County and the RTA from collecting and/or enforcing the tax, alleging it was invalid and unconstitutional,” Thursday’s appeals decision reads.
In its decision the Court of Appeals wrote, “Like the tax court, we decline to consider whether Harold Vangilder, as a consumer of goods and services, has standing to challenge the validity of the tax, because the other plaintiffs who joined him in filing the complaint operate businesses clearly subject to the TPT...We disagree with both the factual premise and the legal import of Vangilder’s argument.”
In September 2019, lawyers from the RTA, the Goldwater Institute and the Arizona Department of Revenue squared off before the Arizona Court of Appeals Division 1 in Phoenix. The RTA had lost an earlier ruling in Maricopa County Superior Court.
Voters narrowly passed the initiative in 2017 by 901 votes, creating a new half-cent sales tax to generate funds for transportation projects throughout Pinal County.
Vangilder, a Casa Grande resident, teamed up with the Goldwater Institute to file a lawsuit against the proposition soon after it passed. On Nov. 15, 2018, Maricopa County Superior Court Judge Christopher Whitten ruled the proposition was “void and unenforceable.”
The RTA has been allowed to collect the tax while the legal challenges made their way through the court system. The money is collected and held in escrow.
The Arizona Department of Revenue joined Vangilder in asserting the tax was invalid but supported the idea that Prop. 417 was constitutional and opposed Vangilder’s claim for fees.
The Appeals Court found the RTA’s authorizing resolution does not change the substance of the tax question posed to and approved by the voters. The judges found the tax is a valid and constitutional modified rate as applied to the retail sales classification.
The court reversed the order invalidating the tax.
“Because Vangilder is no longer the successful party in the tax court, we affirm the denial of his request for attorneys’ fees,” the decision reads.
RTA taxes collected in Pinal County are substantial. In FY 2018-19, more than $17 million was collected and an additional $18 million is expected in the current fiscal year. Over a five-year period, the RTA expects to collect $97.5 million with the excise tax.
“I’m very happy to hear about the court ruling,” said Pinal County Supervisor Pete Rios, D-Dudleyville. “It’s sad that the Goldwater Institute took it upon themselves to challenge the voters and the will of the voters.”
Rios said the ruling means that the county will now be able to improve more of its roads and hopefully start work on a major north/south corridor that would link Route 60 in Apache Junction to Interstate 10 near Eloy and include the cities of Florence and Coolidge.
“This is good news,” said Casa Grande Mayor Craig McFarland. “It’s good for Casa Grande and good for the county.”
However, he was cautiously optimistic, pointing out that the Goldwater Institute could still file an appeal with the Arizona Supreme Court.
Coolidge City Manager Rick Miller said that the news of the court’s decision was “very welcome.”
“We are optimistic that we can (now) move forward as the voters wanted,” he told PinalCentral.
However, Miller was cautiously optimistic about what the latest development will mean for the future of the RTA tax as the Goldwater Institute confirmed it plans on appealing the ruling.
“It’s not a done deal, but we think this is a good step in moving forward for transportation in the region,” Miller said.
Among the infrastructure improvements outlined by the RTA plan, besides the north-south freeway, are widening of State Route 347 north of Maricopa and others around the county. In the Casa Grande area it would mean an east/west corridor connecting Maricopa to Casa Grande, an interchange with Interstate 10 at Kortsen Road and the widening of Thornton Road.