Goldwater Institute sues Scottsdale over swim club

Joe Zemaitis has recruited the help of Scottsdale-based Goldwater Institute to take legal action against the city of Scottsdale after what he says is a violation of the state’s Gift Clause, which prohibits state or city entities from gifting monetary loans or grants to businesses.

A local swim club is taking legal action against the City of Scottsdale, claiming it has been repeatedly denied the ability to rent aquatic facilities. 

Swim Neptune Foundation, a private swim club that works with metro Phoenix swimmers ages 5 to high school, is getting help from the Goldwater Institute in pressing its contention that Scottsdale violates the state Constitution’s gift clause by giving a discounted rate to another swimming club.

Neptune contends Scottsdale Aquatic Club’s discount rates from the city violate a clause in the constitution that prohibits government entities from gifting businesses or organizations. 

Joe Zemaitis, who founded the Neptune Club 20 years ago, has been trying for more than 10 years to get access to Scottsdale’s facilities for its local swimmers.

He said he is repeatedly denied by the city, which lets the Scottsdale Aquatic Club pay 25 percent of the hourly rate for pool lane rentals as part of a sponsorship deal. 

“It’s been super frustrating,” Zemaitis said. “Starting back in 2006-07 we first approached the city and they, at the time, said renting to another team would be a conflict of interest, which doesn’t make sense. We applied again in 2010 and 2017. It’s been this continual issue.”

The Goldwater Institute, a conservative public policy think tank based in  Scottsdale jumped into the fray and issued a news release last week that stated it was ready to “take on those bureaucrats and defend taxpayer rights.”

The city’s most recent contract with Scottsdale Aquatic Club was signed in June 2016 and scheduled to run through June 2019.

 That contract, however, included two options for one-year renewals.

 In 2019, the contract was renewed through June 2020. City council records show in March 2020, a new scoreboard was donated to the city by Scottsdale Aquatic Club at Cactus Aquatic and Fitness Center.

The Goldwater Institute won a unanimous ruling from the state Supreme Court in February over its contention that the City of Peoria violated the gift clause when it gave away nearly $2.6 million in subsidies to Huntington University. 

Goldwater has also brought similar cases in New Mexico and Texas. 

In 2018, a representative from Goldwater’s American Freedom Network notified Scottsdale about the possible gift clause violation. 

Jon Riches, Goldwater’s Directors of National Litigation, said the city reopened the application process for renting facilities after Swim Neptune answered a city request for proposals.

Riches said Neptune’s proposal, which included the additional funds to rent the lanes, scored higher than the Scottsdale Aquatic Club but the city then said funds only accounted for 30 percent in scoring the proposals. 

The city then canceled the RFP. 

“They finally said they would do the RFP, which I thought was great because we would finally be able to make our case to get some pool time and provide a great program for the kids in Scottsdale,” Zemaitis said. 

“But in a bizarre turn after we were scored the highest by the city’s evaluation committee, they canceled the RFP,” he continued. “After we were fully qualified by the RFP committee, they came back and said we weren’t eligible to rent the space.”

Progress requests for comment from the city were  not returned.

During two council meetings in 2018, a representative from Swim Neptune shared the amount of money the city was losing by not accepting its proposal. 

Swim Neptune offered to pay $12 per hour per lane in 2018 – four times the $3 per hour rate the city charged Scottsdale Aquatic Club. 

At the current rate, the city lost $326,300 per year – which said directly violates the gift clause.

“The government can’t give out special advantages to private special interests, which is exactly what is happening here,” Riches said. “You have a situation where a city owned resource, a scarce resource that members of the public should have the ability to bid on and have access to. 

“But rather than open that process up, the city has decided to close it off entirely and grant one special privilege to one special interest.”

Riches said an opening brief has been filed with the state Court of Appeals. The city has 30 days to respond, around the middle of May. He hopes to appear before the court sometime in the summer. 

Zemaitis last heard from the City of Scottsdale in August, when he applied for pool space yet again. Sometime between September and October he was made aware of incorrect information on his application. 

Once corrected, he sent it back to the city but has not heard from representatives since then.

With several swimmers from the Scottsdale area in his club, Zemaitis said they are forced to go outside city limits for practices and lessons.

 He said as a club that thrives off the ability to help kids become interested in competitive swim, continuously being denied practice space at Scottsdale pools has hurt his program. 

Overall, he hopes a resolution for a resolution that allows him and some of the swimmers in his club to stay closer to home in the near future.

“We have a presence in many parts of the Valley and want to bring our program to Scottsdale,” Zemaitis said. “Hopefully they step back from everything that’s gone on and see that not only is it unfair but illegal and do the right thing.”