High court confirms airport ride fees
The Arizona Supreme Court confirmed that Phoenix can charge Uber, Lyft and other transportation companies fees for using Phoenix Sky Harbor Airport and attempted to rein in a broad and controversial state law in a decision released on Monday.
The court issued its initial, unanimous decision in favor of the city on April 2. In its written opinion issued on Monday, the court attempted to clarify what fees local governments can impose under an amendment to the Arizona Constitution passed by voters in 2018.
The amendment prohibits the state and local governments from enacting any new taxes or fees on services.
Uber, Lyft and their supporters argued that the city’s fees for passenger pick-ups and drop-offs at the airport are prohibited under the new law.
The court disagreed and confirmed what the city had argued all along: That local governments still have the right to charge companies that want to access city property, like the airport.
How the fees ended up in court
In late 2019, after a year long study of fees assessed to ride share companies at airports nationwide, the Phoenix City Council voted 7-2 to increase trip fees on companies like Uber and
Lyft at Sky Harbor International Airport.
The fees to pick up and drop off passengers at the airport were set to increase to $4 per trip on Feb. 1., but ride share companies threatened to leave the airport if the increase went through, calling the decision unfair.
Plans to raise the fee were put on hold in late January, after Arizona Attorney General Mark Brnovich asked the Arizona Supreme Court to determine whether the increase violated the 2018 amendment to the state constitution that prohibits raising taxes on services.
By federal law, airports are required to have a rent and fee structure that allows them to be “as self-sustaining as possible” and thus receive a significant amount of their funding through fees charged to airlines, businesses and passengers for using the facilities.
The court cited the Federal Aviation Administration’s determination that “the airport receive fair market value for the provision of nonaeronautical facilities and services, to the extent practicable considering the circumstances at the airport.”
With that in mind, the court ruled the fee did not fall under the jurisdiction of that amendment because the airport is trying to recoup the cost of a business using the airport for commercial purposes.
“Fees paid for the privilege of using Airport property for commercial purposes must fairly reflect the value for that use,” wrote Vice Chief Justice Ann A. Scott Timmer on behalf of the court.
Defining which fees are OK
The opinion went beyond Uber, Lyft and the airport.
Timmer attempted to provide some clarity for local governments as to what is and is not allowed under the 2018 constitutional amendment, which is broad in its prohibition of taxes and fees.
Timmer said there is a “fine line” between constitutional and unconstitutional fees under the new law.
“But that line exists here, and the city falls on the constitutional side,” she wrote.
The 2018 amendment outlaws “transaction-based” taxes or fees.
Timmer agreed with the city that a transaction occurs between a consumer and the entity providing a good or service. In the case of the airport: A passenger and Uber, Lyft or a taxi company.
But, the city’s fee is not based on a passenger’s payment to the company providing their ride, which means it is not a “transaction-based” charge, Timmer wrote.
“Neither imposition of the fee nor its amount depends on whether a passenger takes the ride, cancels it or even pays for it. Instead, the trip fees are based on the providers’ use of airport property in picking up and dropping off passengers at designated sites,” she wrote.
Timmer likened the city’s fee to tolls, which have long been used as “mechanisms for charging commercial entities for use of government property.”
She also noted that the airport charges other companies fees based on a similar charging structure.
For instance, airlines are charged by the number of landings they make at Sky Harbor per month. Much like with Uber and Lyft, the fee is based on the number of times the company accesses the airport, not on the amount of money the company makes off of transporting people on its planes.
Essentially, the court ruled that governments still have the capability to charge fees for accessing governmentowned property, so long as the charge is based on the use of the property and not on a transaction between a customer and a company.
Blow to another state law
The court’s ruling also was a significant blow to a controversial 2016 law that allows any member of the state Legislature to require the Attorney General’s Office to investigate any county, city or town law that the lawmaker believes violates the Arizona Constitution.
If the attorney general finds that a local law runs afoul of state law, the city, town or county must repeal the law or the state will withhold state shared revenue form the jurisdiction — a substantial amount of money that local governments depend on for their budgets.
Members of the Legislature have used the law to require Brnovich to investigate local laws ranging from a ban on plastic bags in Bisbee to the destruction of confiscated firearms in Tucson.
Rep. Nancy Barto, R-Phoenix, also used the law to require Brnonivch to investigate the Sky Harbor transportation fees.
In his investigation, Brnovich found that Phoenix’s fees “may violate” state law and deferred the case to the Arizona Supreme Court for resolution.
Under the 2016 law, if the attorney general kicks the case to the supreme court, the court must require the local government in question to post a bond “equal to the amount of state shared revenue paid to the county, city or town ... in the preceding six months.”
Phoenix argued in its filings to the court that the bond requirement is unconstitutional, as it would deter local governments from defending themselves in court because those funds are essential to government operations.
The attorney general argued that the bond ensures “that a municipality or county does not benefit from receiving state-shared revenue while possibly violating state law.”
The court ruled that it would not enforce the bond provision because the law does not address the purpose of the bond, what happens if a local government does not post the bond or a number of other critical conditions.
“The list of unanswered questions goes on and on,” Timmer wrote.
However, the court did not go as far to say the bond requirement was unconstitutional.
“We simply refrain from attempting to enforce the bond requirement or pass on its constitutionality unless and until the Legislature completes it,” Timmer wrote.
What Uber and Lyft will pay
After the Arizona Supreme Court’s decision, both Lyft and Uber said they would remain at the airport for now. On May 1, the airport raised the fee to $4 per drop-off and pick-up.
In the original ordinance, the fee was scheduled to increase annually: i $4.25 in 2021. i $4.50 in 2022. i $4.75 in 2023. i $5 in 2024.
You’ll pay less if your driver picks you up or drops you off at the PHX Sky Train station at 44th and Washington streets. If you opt for that, you’ll pay $2.80 each way and ride the Sky Train shuttle to the terminals. Shuttles come every three to five minutes. The airport hopes offering this option will reduce congestion around the terminals.