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The Arizona Supreme Court ruled against Peoria Monday, saying the city violated the state Constitution by giving a $2.6 million taxpayer subsidy to Huntington University, a private institution, The Arizona Republic reported.

Peoria, a suburb northwest of Phoenix, offered in 2015 to pay the Indiana-based university nearly $1.9 million if it opened a satellite campus in the city and increased enrollment. The city offered another $740,000 to reimburse a landlord for renovations on campus. The city also promised to spend $2.5 million over three years to expand programs at the campus.

Under the agreement, the university must enroll at least 150 students by its seventh academic year. If it fails, it will pay Peoria $2,206 for every student under that goal, the Republic reported.

In 2016, the Goldwater Institute, a conservative think tank, sued the city, arguing that it violated the gift clause of the Arizona Constitution because the private university would not benefit the public.

The Maricopa County Superior Court and Arizona Court of Appeals sided with the city. The state Supreme Court overturned the original ruling.

“[The university's] promises are no different than a hamburger chain promising to operate in Peoria in exchange for monetary incentives paid by the city in hope of stimulating the local economy,” Ann Scott Timmer, Supreme Court vice chief justice, wrote in her opinion. “A private business will usually, if not always, generate some economic impact.”

The Supreme Court ruling will have a chilling effect on development in Peoria, Kristina Perez, city spokesperson, told the Republic in a statement.

“While this disappointing ruling may have a chilling effect on economic development programs across the state, the city will continue to ensure it is promoting positive economic development efforts within the legal framework as clarified by the court,” she said.

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