Emails presented in court could doom legislative funding of pet project

PHOENIX — Some newly discovered emails could undermine the bid by state lawmakers to allocate $15.3 million for the Prescott Rodeo.

Documents filed in court by those challenging the funding appear to show that the state Treasurer’s Office agreed to provide another $10 million to the International Dark Sky Discovery Center in Fountain Hills before it requested proposals from others who might have qualified for the cash. Only later, after the money already was promised, did state officials follow the law’s requirements.

That’s relevant because the two allocations were part of the same 2023 legislation entitling lawmakers to earmark some of the state’s budget surplus to pet projects.

And while the pending lawsuit challenges only the rodeo funding, those who sued say the documents about the dark sky project show the Treasurer’s Office was trying to “manufacture legal cover’’ once the lawsuit was filed to show they were following the law.

Attorneys for both sides cannot comment directly on the documents as the judge, at a Monday hearing, ordered them sealed.

But Capitol Media Services already had obtained copies. And the plaintiffs, in new legal filings, say the documents undermine claims made by the state that there was nothing improper in the process — currently on hold — to get money to Prescott Frontier Days, the private organization that operates the rodeo.

If the judge agrees, the funding for the rodeo could go away; it is too late to challenge the dark sky project as that money already was distributed.

The case, however, has broader statewide implications. A ruling in favor of challengers would put a big dent in the future ability of lawmakers to hand over state funds to private groups without getting something in return, something that would be a clear violation of the Gift Clause of the Arizona Constitution.

The background

In 2023, with state coffers flush with cash, legislative leaders gave each lawmaker a certain amount — often between $20 million to $30 million — to allocate for projects.

Some of the $2 billion total went to road improvements in their districts. Several pooled their cash to provide a one-time family tax rebate to constituents.

There were other priorities, including $15.3 million for “a nonprofit volunteer organization that operates a rodeo at the Yavapai County fairgrounds.’’ But the understanding — not stated in the legislation — was the money was supposed to go to a $40.7 million master plan to renovate the rodeo grounds, which Prescott Frontier Days leases from the city.

Those dollars came from allocations given to state Reps. Quang Nguyen of Prescott Valley and Selina Bliss of Prescott.

That provoked a lawsuit filed in June 2023 by the Arizona Center for the Law in the Public Interest on behalf of Prescott residents Howard Mechanic and Ralph Hess, the latter a retired Yavapai County Superior Court judge. They charged the funding violates the Gift Clause because it “is not supported by any consideration, let alone a promise of significant direct benefits that serves a public purpose as required by ... the Arizona Constitution.’’

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Courts generally have said the fact that a project would increase sales tax revenues is insufficient to meet the requirements of the Gift Clause.

Then there is a separate question, raised in the lawsuit, about whether the recipient actually would have to spend the money to further the rodeo.

In filing suit, challengers said the state and Prescott Frontier Days never signed a contract spelling out exactly how the money would be used. Instead, that was supposed to be worked out — later.

They also said there were no details about what the state would get in return.

‘Newly discovered evidence’

Responding to the lawsuit, state officials argued, among other things, that, as required by law, they would follow the same procedure of seeking a formal “request for information’’ for this project before actually awarding any money, as they planned to do for the dark sky project.

Only thing is, the records show the state Treasurer’s Office already had assured the International Dark Sky Discovery Center its funds were approved, even to the point of sending it information about how to have the money deposited into its bank account.

“The newly discovered evidence shows that Arizona State Treasurer’s Office came up with the RFI process to manufacture ‘legal cover’ once the suit was filed,’’ the challengers charge.

They also cite an email by Jeff Kros, an employee of the office, saying, “I just want to have as much legal cover as possible.’’

Also now part of the record is an email from Hayleigh Crawford, an attorney for the state, to Brian Bergin, an attorney for Prescott Frontier Days. It states that the Treasurer’s Office told her it believed “the treasurer’s role is just to disperse the money and as such, the treasurer does not have the authority to enforce the use of funds.’’

Attorneys for the challengers said that is “inconsistent’’ with a declaration Kros made that the scope of grant agreements handled by his office “would limit the use of funds to specific public purposes.’’

There is a potential weak spot in challengers’ ability to use the documents to sideline the appropriation.

Some of the emails are communications between the Treasurer’s Office and attorneys for the state. Generally speaking, they are protected by attorney-client privilege and cannot be used in court.

In this case, however, the Treasurer’s Office released them to an unidentified third party who had made a public records request. And if that release was voluntary, a judge could conclude the state waived any claim of privilege.