A new $4 fee on Uber and Lyft rides to and from the Phoenix airport is “very likely” not constitutional, the state attorney general stated Thursday, upping the ante in the showdown that has led the ride-hailing giants to threaten to stop the airport service.
The fees authorized by the Phoenix City Council probably violated a 2018 ballot measure banning higher taxes on services, Attorney General Mark Brnovich stated.
The Arizona Supreme Court is going to make a final determination on the issue. According to the law, Phoenix could lose its share of state revenue, a third of its general fund budget, if the fee increase is found to be unlawful and isn’t repealed by the city.
Lawyers for the city-state the higher fees are not taxes on services, but rather permissible costs for businesses to use the city-owned Sky Harbor International Airport, among the largest U.S. airports serving some 44 million passengers annually.
The fees, the city argues, are similar to rent and landing fees charged to restaurants and airlines.
“The Phoenix approach of making sure that companies profiting from the airport pay their fair share is smart — and legal,” stated Mayor Kate Gallego, who is a Democrat. “This fee is no different from the fee every other vendor has paid at our airport since its creation.”
Phoenix airport officials state ride-hailing operators accounted for only 9.3% of the commercial traffic when they started at Sky Harbor in June 2016 but now account for 70 percent of the commercial traffic.
Last month, Uber and Lyft threatened to end their services at the airport if the fee is allowed to take effect.
Republican Rep. Nancy Barto submitted a complaint with Brnovich, also a Republican, under a 2016 Arizona law needing the attorney general to investigate if any lawmaker complains that a city or county ordinance breaches state law.
The state Supreme Court by law must prioritize the issue ahead of all others. The city is also required to post a bond equal to six months of state-shared revenue but Brnovich said his office hasn’t asked for that in earlier cases.
“They’ll have time to rescind this ordinance and if they don’t we’ll see them at the Supreme Court,” Brnovich stated.
Phoenix is increasing the fee of $2.66 per curbside pickup at Sky Harbor to $4 on February 1. It will create a drop-off fee of $4 as well. The fees to the ride-hailing companies would gradually boost to $4.25 in 2021, $4.50 in 2022, $4.75 in 2023 and $5 in 2024.
A city aviation commission had recommended the boost in fee after a study showed airports in many other cities charge ride-hailing firms more to drop off and pick up passengers.
The state constitution’s ban on new or higher fees for services has never been disputed, so courts have never had an opportunity to interpret when it applies and when it doesn’t.
“We thought the fasted and best way to resolve this issue and to create certainty is to go right to the Supreme Court,” Brnovich stated. “Otherwise it could end up in litigation for the next two or three years.”