Is the Rio Nuevo Multipurpose Facilities District in Tucson subject to Arizona's Gift Clause when it spends money to attract private development?

Plain-English summary

Article 9, § 7 of the Arizona Constitution, known as the Gift Clause, generally bars Arizona counties, cities, and political subdivisions from giving public money or credit to private individuals, associations, or corporations. Article 13, § 7, the Exemption Clause, carves out one important class of entity: "tax levying public improvement districts" are exempt from the Gift Clause.

Senator Bob Worsley asked the AG to confirm whether the Rio Nuevo Multipurpose Facilities District falls within that exemption. The Rio Nuevo District is the redevelopment vehicle for downtown Tucson, formed under A.R.S. § 48-4202.

AG Brnovich's answer was a brief letter opinion: yes, Rio Nuevo is exempt. Section 48-4202 expressly says a multipurpose facilities district formed under it "is a tax levying public improvement district." That designation places Rio Nuevo squarely within the Exemption Clause. The AG reviewed the relevant authorizing documents (Proposition 400, the original intergovernmental agreement, and amended IGAs) and found nothing in those documents or any statute that limits Rio Nuevo's "tax levying public improvement district" status.

This is a short opinion but a consequential one for Arizona public finance: it confirms that multipurpose facilities districts can structure deals with private developers without running into the Gift Clause's strict tests for adequate consideration and public purpose.

Currency note

This opinion was issued in 2015. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

Arizona's Gift Clause is one of the strictest in the country. Under Turken v. Gordon and Cheatham v. DiCiccio, a public expenditure challenged under Art. 9, § 7 must satisfy two prongs: it must serve a public purpose, and the public must receive something of roughly equivalent value in return. Many economic-development incentives have been struck down or restructured because the consideration test is hard to meet for prospective benefits like job creation.

The Exemption Clause in Article 13, § 7 was added to address that strictness for one defined category. Tax-levying public improvement districts have a built-in tax base and a defined geographic area. The drafters concluded that such districts have a sufficient connection to the property owners and taxpayers within them that the Gift Clause's general restrictions are unnecessary.

A.R.S. § 48-4202 specifically classifies multipurpose facilities districts as tax-levying public improvement districts. Rio Nuevo was formed pursuant to that section. Once an entity meets the statutory definition, the Exemption Clause applies as a matter of constitutional text.

Common questions

Q: What is Rio Nuevo?
A: It is a downtown Tucson redevelopment district originally created under voter-approved Proposition 400 in 1999. It is governed by a board and has the authority to capture certain tax revenues and issue debt to fund downtown projects.

Q: Why does the Gift Clause matter to Rio Nuevo?
A: Redevelopment districts often subsidize private projects, infrastructure, or improvements with the expectation of broader public benefit. Without the exemption, every such transaction would have to satisfy the Turken/Cheatham consideration test, which is restrictive.

Q: Does this opinion apply to other Arizona special districts?
A: The opinion's reasoning extends to any entity formed pursuant to A.R.S. § 48-4202, since that statute defines the entire class of multipurpose facilities districts as tax-levying public improvement districts. Other Arizona special-district types should be analyzed individually under their own enabling statutes.

Q: Are there limits the AG noted?
A: The opinion noted that "tax levying public improvement district" status is "subject to any statutory limitations found elsewhere, as well as any limitations set forth in the relevant intergovernmental agreement or authorizing documents." The AG reviewed the Rio Nuevo authorizing documents and found no such limitations there.

Citations and references

Statutes and constitutional provisions:

• Ariz. Const. art. 9, § 7 (Gift Clause)
• Ariz. Const. art. 13, § 7 (Exemption Clause)
• A.R.S. § 48-4202 (multipurpose facilities district formation)

Source

• Landing page: https://www.azag.gov/opinions/i15-003-r15-006
• Original PDF: https://www.azag.gov/sites/default/files/2025-06/I15-003.pdf

Original opinion text

Senator Bob Worsley

1700 West Washington

Phoenix, Arizona 85007-2844

Re: I15-003 (R15-006)

Dear Senator Worsley:

You asked whether the Rio Nuevo Multipurpose Facilities District is subject to the restrictions of Article 9, Section 7 of the Arizona Constitution (the "Gift Clause") or is exempt from those restrictions pursuant to Article 13, Section 7 of the Arizona Constitution (the "Exemption Clause").

The Exemption Clause specifically states: "[T]ax levying public improvement districts, now or hereafter organized pursuant to law . . . shall be exempt from the provisions of [the Gift Clause]." The Rio Nuevo District is a Multipurpose Facilities District organized pursuant to Arizona Revised Statutes, Section 48-4202. That provision clarifies that a district formed pursuant to § 48-4202 "is a tax levying public improvement district." That designation is subject to any statutory limitations found elsewhere, as well as any limitations set forth in the relevant intergovernmental agreement or authorizing documents.

There is no statutory limitation, nor is there any provision in the authorizing agreements related to the Rio Nuevo District, that affect its otherwise clear status as a "tax levying public improvement district." Therefore, the Rio Nuevo District is subject to exemption from the Gift Clause pursuant to the Exemption Clause.

Sincerely,

Mark Brnovich

Arizona Attorney General

In evaluating this request, AGO staff reviewed the following relevant "authorizing" documents: Proposition 400; the original Intergovernmental Agreement (IGA) between the City of Tucson, the City of South Tucson, and the Town of Sahaurita; the subsequent IGA involving only the City of Tucson and the City of South Tucson; and the subsequent amendment to the second IGA.