In an opinion published February 25, 2019, the Arizona Supreme Court held that Maricopa County’s surcharge on car rental agencies to fund a stadium and other sports- and tourism-related projects did not violate either the dormant Commerce Clause of the United States Constitution or the anti-diversion provision of the Arizona Constitution, art. 9, § 14. Saban Rent-a-Car LLC v. Ariz. Dep’t of Revenue.

In 2000, the Arizona Legislature created the Arizona Tourism and Sports Authority (the Authority) to build and/or operate a variety of sports-related facilities, including Major League Baseball spring training facilities, and youth and amateur sports and recreation centers. Taxes and surcharges, approved by voters, are the sole funding for the Authority’s construction projects, including the challenged surcharge in Maricopa County. This surcharge is based on the income from car rental companies leasing vehicles to customers for less than one year, and is the greater of $2.50 per rental or 3.25% of the company’s gross proceeds or income. A.R.S. § 5-839. The state treasurer deposits $2.50 per rental transaction into the Maricopa County Stadium District, as it has since 1991, and the remaining amount of the difference between $2.50 per transaction and 3.25% of the company’s gross income or proceeds is distributed to the Authority. Rental car companies often pass this surcharge on to their customers.

Plaintiff Saban Rent-a-Car, who operates in Maricopa County with mainly local residents for customers, sued the Arizona Department of Revenue (ADOR) in tax court. The Authority intervened as defendant. Saban argued that the surcharge violates both the dormant Commerce Clause of the United States Constitution, as well as the anti-diversion provision of the Arizona Constitution.

The case found its way to the Arizona Supreme Court, which determined that the surcharge did not violate the dormant Commerce Clause as a non-discriminatory law. Similarly, the Arizona Supreme Court determined that the surcharge did not violate the anti-diversion provision of the Arizona Constitution, which prohibits funds derived from “fees, excises, or license taxes relating to registration, operation, or use of vehicles on the public highways or streets” to be “expended for other than highway and street purposes.” Ariz. Const., art. 9, § 14.

The Authority’s boundaries are within any county with a population of more than two million people. A.R.S. § 5-802(A). For practical purposes, this includes only Maricopa County at this time; however, as the populations of other counties continue to grow, the statutory framework composed in part of the provisions upheld as constitutional in Saban may have application elsewhere as well.