courtesy of Dustin Gardiner, The Republic | azcentral.com October 6, 2014
ASU LAW SCHOOL
- The development will include about 475 apartments
- Site will include 30,000 square feet of commercial space and incorporate an existing light-rail and bus station
- As part of the deal, Phoenix would give the developer a controversial tax-abatement incentive
Last week, Phoenix City Council members approved a deal for the $82 million high-rise, mixed-use Phoenix Central Station. The development at Central Avenue and Van Buren Street will include about 475 apartments and 30,000 square feet of commercial space.
As part of the deal, Phoenix would give the developer, Smith Partners, a controversial tax-abatement incentive called a Government Property Lease Excise Tax for the tower portion of the project. The agreement allows developers to avoid paying certain taxes through deals that title their land or buildings to a government entity with an exclusive right to lease the property back.
In this case, the city already owns the land, but the developer will eventually take title over the building. The arrangement allows them to not pay property taxes for 25 years, which a city official estimates would be $600,000 to $900,000 per year based on conversations with the developer. However, the developer will make smaller lease payments back to the city, and, after eight years, pay taxes on those lease payments.
The agreement requires the developer to pay the city a portion of its revenue, which will net the city an estimated $4.4 million over the first 25 years. Central Station also is expected to generate about $9 million in city sales-tax revenue over that period, and the city will have control over ground-floor commercial space it could rent out.
Critics say these agreements shift the burden onto small businesses and homeowners. Supporters say the agreements are one of the few tools cities have to promote economic development.
Question: Do you support the continued use of this tax-abatement incentive in city agreements with developers?
Have a question for officials? Contact firstname.lastname@example.org.
“I did not vote for this item, and do not support the use of this technique. I have voted against other uses of it in the past. Shifting the burden to existing businesses, especially small businesses, and homeowners has always seemed unfair.”
— Jim Waring, vice mayor (District 2), northeast Phoenix
“Phoenix has very few tools to entice new business projects downtown. GPLET is a tool that Phoenix uses sparingly for major economic development, and the city works closely with the school district to reduce or eliminate the fiscal impact. As long as GPLET projects bring long-term worthy economic benefits to Phoenix residents, I will support their use.”
— Thelda Williams, District 1, northwest Phoenix
“GPLET is an important economic development tool, but must be used wisely. That’s our approach in Phoenix, where we use it only to spur redevelopment that otherwise would not be possible. Transforming under-utilized property into space that better contributes to our economy is good for everyone and the new downtown Phoenix Central Station is a perfect example: Land that currently generates zero revenue will turn into a commercial and residential high-rise and transit hub. This exciting project, which was approved with bipartisan support, is expected to generate more than $32 million in revenue over the next 25 years.”
— Greg Stanton, mayor
“Opposed. These types of tax giveaways help large companies but hurt small-business owners. The small-business owner is the one that ends up having to subsidize these tax breaks for the large company. A more equitable system would be to lower tax rates for everybody, which then encourages growth and job creation in our city.”
— Sal DiCiccio, District 6, Ahwatukee and east Phoenix
“The state’s GPLET program is one of few economic development tools available to Phoenix. Due to land costs and higher infrastructure costs, development in downtown is more expensive, and this tool helps offset these costs, particularly with high-density, mixed-use development. Used strategically within the past 25 years, we have approved 14 GPLETs, which has leveraged $3.5 billion in private investment, hundreds of new jobs, millions in tax revenues, and spin-off private development. Central Station currently generates no property tax revenues — approval of GPLET will create new excise tax revenues for the taxing district without shifting property taxes to other users.”
— Michael Nowakowski, District 7, southwest Phoenix and parts of downtown