Arizona Supreme Court resurrects Omni resort, ASU land court battle

Both sides are declaring victory after the Arizona Supreme Court released a mixed opinion that ultimately allows Attorney General Mark Brnovich to go after a deal between hotelier Omni Hotels and the Board of Regents.

The state’s high court overturned two of four charges denied in an appellate ruling in State et al. v. Arizona Board of Regents et al.

Brnovich filed the lawsuit against the governing body of the state’s three public universities in January 2019 over a 60-year lease it struck with the hotel chain to build a new location on public land near Arizona State University’s Tempe campus. The deal entails benefits for the university at the hotel and allows the company to purchase the land at the end of the lease. In the meantime, the hotel would pay no property taxes.

The two charges revived by the Supreme Court allowed reconsideration of a private business being tax-exempt in this situation and that Omni is attempting to avoid taxation with the deal.

Brnovich called the Supreme Court opinion a win for taxpayers who would face an unlawful expense should the deal go through.

“From the very beginning, we said this lawsuit is about protecting hardworking Arizonans by ensuring that taxpayer funds are not used for private business deals,” Brnovich said.

The attorney general's office asserted the Board of Regents cannot grant tax exemptions to private businesses and development projects, such as the hotel deal.

While the opinion allows Brnovich to pursue the lawsuit, it affirmed two lower court rulings that the property in question has long been tax-exempt state land. The Board of Regents called the decision a shot to the core of Brnovich’s challenge.

“The court remanded to the trial court those portions of the Attorney General’s complaint that allege that the transaction somehow violated the gift clause provision of Arizona’s Constitution and is outside of the leasing authority granted by the Legislature to the board,” Board Chair Lyndel Manson said in a news release. “It is notable the court did not rule on the merits and the board remains confident the claims are meritless.”

Unless the challenge succeeds, the Omni Tempe Hotel at ASU is expected to be completed in spring 2023. The case now goes back to a trial court for resolution.