The fiduciary responsibility of Scottsdale City Council

SCOTTSDALE INDEPENDENT By David Smith Dec 1st, 2016

 

This past Monday evening, council considered an “abandonment request” from a property owner involving a city owned right-of-way in front of his property. The applicant had been renting the right-of-way from the city for $33,595 per year, but now wished to purchase the property outright.

 

Among its other responsibilities, city council acts as custodian of city assets that are, collectively, the property of all citizens. As long as public assets are owned, council has a duty to insure their good repair and upkeep; when public assets are disposed of, council has a duty to insure the best deal has been struck for the benefit of citizens.

 

In fact, this “duty to strike the best deal” for citizens is implicit in the “gift clause” provision of our City Charter, which governs the giving of public funds and, by logical extension, the disposition of public assets as well.

 

The actual wording in the Charter is legalese, but in a nutshell, the purpose is to insure taxpayers don’t get ripped off by folks who acquire taxpayer funds or assets in some lopsided deal.

 

Sometimes, the gift clause test is not so much a measure of the legal facts of a case as it is a measure of council’s judgment. Other than council, and by delegation, city staff, Scottsdale citizens have no other advocate on their behalf. That’s what makes Monday night’s case so interesting:

 

First — the proposed sale price for the city right-of-way was $123,363, a value that the staff presentation indicated was based on a third-party appraisal. In fact, though, the valuation came from an appraisal report provided by the buyer. The buyer named his own price!

 

Second — The proposed sale price was defended as a “reasonable value,” even though it was less than four times the annual rental income. Citizens would have the opportunity to reinvest the sale proceeds for perhaps 4 percent and earn $5,000 a year; for the buyer, however, his avoided rent would amount to a 27 percent annual return on his investment!

 

After a robust discussion, Council agreed — in a 4/3 split vote — to sell the property on the terms proposed.