AZ AG: Uber-, Lyft-Debated Phoenix Law Is Likely Unconstitutional

PHOENIX, AZ — The rideshare fee hike approved by the Phoenix City Council in December that left Uber and Lyft threatening to discontinue services at Phoenix Sky Harbor Airport is now being questioned by another: Arizona Attorney General Mark Brnovich. Thursday Brnovich announced that it was “very likely” the Phoenix rideshare ordinance violates the Arizona Constitution’s Article IX, Section 25.

At the root of Brnovich’s argument is Proposition 126, which more than 64 percent of Arizona voters passed in 2018. The proposition forbids cities from raising or creating new fees or taxes to be paid by businesses or individuals rendering services in the state. Phoenix’s new rideshare ordinance, however, doesn’t appear to align with Proposition 126, Brnovich said in a statement:

"The Phoenix City Council is placing its policy preferences above the rights of the people to whom the government must always answer. Arizona voters clearly spoke when they overwhelmingly approved Proposition 126. We will now take this matter to the Arizona Supreme Court and seek an expedited ruling. This is the most definitive way to provide clarity on the law, protect Arizona taxpayers, and hold the City of Phoenix accountable.”

The Attorney General’s office reported Thursday the intention to immediately file two Arizona Supreme Court actions to stop the Phoenix city ordinance before it goes into effect Feb. 1. The Phoenix ordinance raises rideshare patrons' fees from $2.66 for a pick-up-only fee to $4 for both pickups and drop-offs at the airport. Then, starting in 2021, the fee would rise in yearly increments to $4.25, $4.50, $4.75, reaching $5 in 2024. City of Phoenix officials said the rideshare fees are needed by Sky Harbor Airport, as it doesn't receive any revenue from taxes.

Thursday Brnovich also submitted an investigative report on the constitutionality of the Phoenix rideshare ordinance to Governor Doug Ducey, President of the Arizona Senate Karen Fann, Speaker of the Arizona House Rusty Bowers, Arizona Secretary of State Katie Hobbs and Nancy Barto, the congresswoman who requested Brnovich investigate the ordinance.

Brnovich’s investigative report says, in argument against the Phoenix ordinance:

“… The Attorney General has determined that the Ordinance very likely violates Article IX, Section 25 of the Arizona Constitution, and will seek declaratory relief against the City.

"Simply put, the Ordinance violates the plain language of Article IX, Section 25. The Ordinance imposes new "trip fees" that authorized ground transportation providers must pay (and increases certain other "trip fees") for the "privilege" to provide commercial ground transportation services to and from Phoenix Sky Harbor International Airport ... These fees are encompassed within the plain text language of the constitutional prohibition against “impos[ing] or increas[ing] any sales tax, transaction privilege tax, luxury tax, excise tax, use tax, or any other transaction-based tax, fee, stamp requirement or assessment on the privilege to engage in … any service performed in this state.” (Ariz. Const. Article IX Section 25)

Brnovich’s investigative report continues, then referring to some semantic ambiguity in the Proposition 126 constitutional amendment’s language:

“While the plain-language analysis of the Ordinance and the Constitution demonstrates a clear conflict, the following circumstances are also relevant to the Office’s statutory determination … First, this conflict arises from a recent amendment to the Arizona Constitution, which is broad in scope and has yet to be judicially interpreted. Second, there are non-frivolous arguments about how to best read the chief words and phrases here, which the Constitution does not itself define. Third, the City suggests that cities’ constitutional powers, for example under Article XIII, Section 5, prevail over the language that the people of Arizona added to the Constitution in Article IX, Section 25.”

Then Brnovich in the investigative report restates his position on the ordinance and asks the Arizona Supreme Court to take action:

“For purposes of this Report … the Office therefore concludes that the Ordinance may violate the Arizona Constitution, and will expeditiously seek relief from the Arizona Supreme Court in the nature of a declaratory action against the City.”

Councilman Sal DiCiccio, a vocal opponent of the ordinance, thanked Brnovich in a Thursday statement for taking action in referring the matter to the Arizona Supreme Court:

“Attorney General Mark Brnovich has declared that Phoenix's horrible tax on rideshare may violate the Arizona State Constitution and therefore must go to the Arizona Supreme Court for review and determination. This is fantastic news for everyone who drives for or uses rideshare at the airport! I believe it is clear that this horrible tax is not only a direct attack on working- and middle-class families in Arizona, but it is also an outrageous violation of our constitution, and I am confident that the Supreme Court will throw out the horrible burden that Phoenix politicians recklessly imposed. Thank you AG Mark Brnovich for stepping in to protect Arizonans who depend on rideshare."

Not everyone agrees with DiCiccio and Brnovich, however. Phoenix Mayor Kate Gallego stands by the Phoenix rideshare ordinance, and told KTAR that Brnovich’s referring the ordinance to the Arizona Supreme Court was motivated by political pressure:

“The Phoenix approach of ensuring that companies profiting from the airport pay their fair share is smart — and legal. This fee is no different from the fee every other vendor has paid at our airport since its creation. Lyft and Uber have been paying access fees since they began operations at Sky Harbor, the same fees they pay at most every other airport of our size. As our response demonstrated, and as AG Brnovich’s report acknowledges, Arizona state law gives cities the right to condition commercial access to airports with the payment of a fee. Despite this being the law of the land, political pressure has led the AG to punt this issue to the Arizona Supreme Court. ...”

What remains to be seen is what decision the Arizona Supreme Court makes, when, and whether Uber and Lyft will pull out of Sky Harbor Airport in the meantime.

Read Brnovich’s entire investigative report here.