'Fix it after the fact': Arizona, Prescott team up on $15M rodeo payout after lawsuit threat

Pressured by a lawsuit, Arizona state officials are working with Prescott and the city's long-running rodeo to develop contracts that spell out how the rodeo would use a $15.3 million state budget appropriation.

The collaboration could allow the money to finally be disbursed by addressing key demands in the lawsuit. But plaintiffs and their lawyer are wary the state officials, who deny any laws were broken, will use the contracts to show the appropriation was lawful, after all.

"They know this was really problematic," said lawyer Danny Adelman, the executive director of the Arizona Center for Law in the Public Interest. "I think they are trying to see if they can fix it after the fact."

Adelman and the nonprofit group are providing legal services for two Prescott residents who sued the state in June over concerns the taxpayer-funded plan would violate the state constitution.

The talks between city, state and rodeo illustrate the age-old saying that politics can make for strange bedfellows.

The conservative GOP lawmakers who designed the funding plan want the money disbursed. After previously criticizing the plan, Democratic Attorney General Kris Mayes says the Republicans hold a legally defensible position.

Treasurer Kimberly Yee, Arizona's highest-ranking statewide GOP elected official, agreed with Mayes' office in June to withhold the expenditure until the matter was resolved in court.

The plaintiffs noted in their lawsuit the state and Prescott Frontier Days, Inc., the nonprofit company that runs the "World's Oldest Rodeo," failed to sign contracts regarding how the money would be used. Plaintiffs also said they failed to provide any detail about what the state would get in return.

The state, in a Nov. 3 filing in Maricopa County Superior Court, denies the plan to subsidize the rodeo broke any law. The filing also mentions the state is negotiating the contracts.

Two lawmakers directed the budget money to the rodeo: Reps. Selina Bliss, R-Prescott and Quang Nguyen, R-Prescott Valley.

They hope the funds would be combined with private funding to move forward on a $40 million rodeo improvement plan that would include renovation of city-owned buildings and construction of a concert and convention center, covered arena, new bathrooms, and an additional grandstand. The City Council hasn't yet approved the plan, which would take up to seven years to complete.

Yee is named as a defendant, along with the state. Mayes, who's criticized the payout publicly, has recused herself from the case. She hasn't said why.

"It is generally my duty as Attorney General to defend the state when it is sued even if I disagree with a policy decision that led to a lawsuit," she said in a statement to The Arizona Republic. "And despite my policy disagreement in this instance, my office has determined the legislation is legally defensible."

Politics: Arizona hits pause on $15M for Prescott rodeo after residents file lawsuit over giveaway

Lawsuit alleges public money distributed illegally

Lawmakers authorized the rodeo payment as part of state budget negotiations that divvied up $2 billion in surplus funds for individual lawmakers' projects. Democrats directed much of their cut to education and affordable housing needs. Republicans paid for a tax break for families, roadwork across the state, and several projects that received criticism, including the plan to subsidize Prescott Frontier Days.

Prescott residents Howard Mechanic, a local activist, and Ralph Hess, a former Yavapai Superior Court judge, raised concerns about the planned rodeo payment after Democratic Gov. Katie Hobbs signed the $17.8 billion budget in May. Their subsequent lawsuit notes the appropriation "contains no instructions or limitations on when or how the appropriated funds must be used" and does not promise "sufficient direct benefits."

The lawsuit contains two overarching complaints.

Its main claim is that the state failed to adhere to two traditional criteria for a gift of taxpayer funds to be legal under the state constitution's Gift Clause: It must serve a public purpose, and it must be a good deal for taxpayers. The Arizona Supreme Court ruled in 2021 that such gifts cannot simply increase sales tax revenue.

The plaintiffs also claim the plan violated the constitution's Appropriations Clause, which allows a general appropriations bill to provide funds only for "different departments of the state, for state institutions, for public schools, and for interest on the public debt."

If the court doesn't stop the payout, the suit said "plaintiff taxpayers will sustain pecuniary loss by bearing a share of the burden for replenishing the public coffers for the State’s wrongful and illegal expenditures that are the subject of this complaint."

Allegations represent business as usual, AG's office says

Hayleigh Crawford, the state Attorney General Office's section chief counsel for special litigation, argued in the Nov. 3 filing that the rodeo gift did not violate the Gift Clause, that it did have a public purpose, and that the state would receive something of "direct benefit" because of it. The state also denies the gift broke the Appropriations Clause.

Allegations the plaintiffs believe support their claim of a violation are, in fact, the normal way of doing the state's business, according to Crawford's filing.

The appropriation didn't define how the money would be spent, didn't specify it would be spent on buildings or capital improvements, and didn't designate a time frame in which to spend it, she acknowledged. But all of that "is true for many of the appropriations" in the budget bill that contained them, Crawford wrote.

The state admits it's not aware of any contracts detailing the use and hoped-for benefit of the $15.3 million payout. But Crawford wrote "the State affirmatively alleges that PFD (Prescott Frontier Days), the City of Prescott, and the State are in negotiations regarding such an agreement."

It's unclear who at the state is doing the negotiations, or when they would be complete. Bliss and Nguyen aren't involved, nor are the Legislature's lawyers, said Andrew Wilder, spokesman for the state House Republicans.

Mayes' office wouldn't say if it was involved in negotiations on behalf of the state. Ron Owsley of Prescott Frontier Days did not return messages.

Prescott's spokesman, John Heiney, after consulting with City Attorney Joseph Young, "confirmed that the city is in discussions with Prescott Frontier Days, the state and plaintiffs, but we're not at liberty to tell you what we're discussing."

Plaintiffs say they 'haven't begun to fight'

Asked about Heiney's statement, Adelman declined to say whether he or the plaintiffs have talked to state officials about contracts. But he acknowledged his group has been in discussions with the state, rodeo and Prescott stakeholders "about the use of the money."

"As plaintiffs, we are willing to consider either proposals or discussions from those various other parties," he said. "We would consider whatever they send over, sure."

Asked if the state's negotiations could result in an acceptable compromise for the plaintiffs, Adelman said he "couldn't really answer that," but the details of any proposal would matter. Time will tell "if that will appeal to the plaintiffs in the case."

Mechanic said that, so far, "we don't think there's much merit" in Crawford's response to the lawsuit.

"We don't think they can re-legislate and try to fix the wording in the state legislation so they can make it constitutional," he said.

He pointed out that even if the state could get around the alleged Gift Clause violation, the Appropriation Clause allegation could still prevent the disbursement.

"We think we have a strong case on both grounds," Mechanic said. "We haven't begun to fight."

Losing case could affect future state budgets, lawmaker says

Nguyen said he was buoyed by Crawford's filing and Mayes' statement that her office would defend the planned rodeo funding. He believes renovating the venerable rodeo, which brings in an estimated 27,000 spectators over the course of a week each July, would be a major economic boon to the Prescott area.

"It's been around for a long time without any fix or improvements," he said. "I'm comfortable the court is going to make the right decision."

Granting public money to a nonprofit for a public good is a routine matter that can occur with or without a stipulated use for the funds in the budget, he said. He added the state relies on a multitude of nonprofits to get work done that state agencies can't do themselves.

If the state loses the rodeo lawsuit, "it will call into question just about everything we've done in the past and just about everything we're doing in the future."

"Government will get bigger," Nguyen warned.

Despite her office's position on the case, Mayes said that the budget Hobbs negotiated with Republican leaders in May contained a lot of "bad public policy."

"Underfunding our public schools and law enforcement agencies in favor of pork-laden projects was shortsighted — I still believe that," Mayes said. "And it is only more clear now that the state is facing a budget deficit in the hundreds of millions."

Reach the reporter at rstern@arizonarepublic.com or 480-276-3237. Follow him on X @raystern.

This article originally appeared on Arizona Republic: Arizona, Prescott team up on $15M rodeo payout after lawsuit threat