The state attorney general says a new $4 fee on Uber and Lyft rides to and from Phoenix airport is “very likely” unconstitutionaltaxes on services, Attorney General Mark Brnovich said.
The Arizona Supreme Court will make a final determination on the issue. By law, Phoenix could lose its share of state revenue, a third of its general fund budget, if the fee hike is found to be illegal and isn't repealed by the city.
Lawyers for the city say the higher fees are not taxes on services, but rather permissible charges for businesses to use the city-owned Sky Harbor International Airport, one of the largest U.S. airports serving some 44 million passengers a year.
The fees, the city argues, are akin to rent and landing fees charged to restaurants and airlines.
“The Phoenix approach of ensuring that companies profiting from the airport pay their fair share is smart — and legal,” Mayor Kate Gallego, a Democrat, said in a statement. “This fee is no different from the fee every other vendor has paid at our airport since its creation.”
Phoenix airport officials say ride-hailing operators represented just 9.3% of the commercial traffic when they began at Sky Harbor in June 2016 but now represent 70 percent of the commercial traffic.
Last month, Uber and Lyft threatened to stop serving the airport if the fee is allowed to take effect.
Republican Rep. Nancy Barto filed a complaint with Brnovich, also a Republican, under a 2016 Arizona law requiring the attorney general to investigate if any lawmaker complains that a city or county ordinance violates state law.
The state Supreme Court is required by law to prioritize the issue ahead of all others. The city is also required to post a bond equal to 6 months of state-shared revenue — an enormous sum — but Brnovich said his office hasn’t asked for that in previous cases.
“They’ll have time to rescind this ordinance and if they don’t we’ll see them at the Supreme Court,” Brnovich said.
Phoenix is raising the fee of $2.66 per curbside pickup at Sky Harbor to $4 on Feb. 1. It also will create a drop-off fee of $4. The fees to the ride-hailing companies would gradually increase to $4.25 in 2021, $4.50 in 2022, $4.75 in 2023 and $5 in 2024.
A city aviation commission had recommended the fee increase after a study showed airports in many other cities charge ride-hailing companies more to drop off and pick up passengers.
The state constitution's ban on new or higher fees for services has never been litigated, so courts have never had a chance to interpret when it applies and when it doesn't.
“We thought the quickest and best way to resolve this issue and to create certainty is to go right to the Supreme Court,” Brnovich said. "Otherwise it could end up in litigation for the next two or three years.”
Associated Press writers Anita Snow and Bob Christie contributed.