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SCOTTSDALE, AZ-Three Scottsdale residents are trying to put the brakes on a $36.7-million, taxpayer-funded subsidy that will help developer Steve Ellman turn the long vacant Los Arcos shopping mall into a “big box” retail center.

In a lawsuit filed in recent days in Maricopa Superior Court, Dirk and Renee Moore and Pamela Domaski, claim the subsidy is an “unlawful gift” that violates the state’s constitution. “This is not seeking to stop the development” of the 42-acre site at McDowell and Scottsdale roads, John Moshier, the plaintiffs’ attorney tells GlobeSt.com. “It is seeking to stop the illegal subsidies that are part of the agreement.”

Moshier said the subsidy violates the state’s constitution prohibiting municipalities from giving gifts to private entities and will also cause the city to exceed its constitutional debt limits, which requires an override vote by taxpayers. “It’s our position as a basic matter of fairness that no developer, including a developer planning to bring in three major retailers, should be given the advantage that this agreement will give,” said Moshier. “Other businesses in Scottsdale have not received the advantage of a deal. It’s unfair to give these developers that type of subsidies. They don’t need it. They’re certainly not poor.”

But Jason Rose, spokesman for the Ellman Cos., which received approval for the controversial subsidies from Scottsdale City Council earlier this month, tells GlobeSt.com the lawsuit is an attempt to block the proposed construction of a Wal-Mart Supercenter, Lowe’s Home Improvement Warehouse and Sam’s Club by United Food and Commercial Workers Union Local 99 in Phoenix, of which Dirk Moore and Pamela Domaski are members. Both are employed by Fry’s grocery store.

“It’s just the latest tactic for unions to try and slow down good retail development in the valley,” said Rose. “It has nothing to do with Scottsdale taxpayers. It has everything to do with protecting their own economic interest in that part of the community.”

Moshier, a UFCW attorney with Morrill & Aronson law firm of Phoenix, said the suit has nothing to do with the union, however. “The suit has not been brought by the union. The union is not a party,” he said, noting that the plaintiffs filed the suit as private citizens.

City Attorney David Pennartz, who was served with the lawsuit Monday, tells GlobeSt.com that Scottsdale officials believe the subsidy is constitutional and will defend it in court. “Our position is that this is a valid agreement and a valid mechanism for cities to provide incentives for developers and that’s the position we’re going to take in court,.” he said.

Pennartz said if the court should decide the subsidy is invalid, it will be up to the developer to decide whether to continue the Los Arcos Town Center Project without financial aid from the city.

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