Downtown Developer Offers $100,000 Before Phoenix Council Tax Vote

Published: Thursday, September 24, 2020 - 2:29pm
Updated: Friday, September 25, 2020 - 5:05pm
Hubbard Street Group
Four Phoenix City Council members were asked to recommend a tax break for a developer to build a 26-story apartment complex downtown.
Hubbard Street Group
According to a city report, the project, which would include 201 parking spaces and commercial space, would bring a capital investment of approximately $87 million, create approximately 264 construction jobs and 77 permanent jobs.

Less than 24 hours before a key city vote, a developer offered Phoenix a six-figure donation. 

The offer was presented Wednesday to Phoenix’s Economic Development Subcommittee. That’s where four City Council members were asked to recommend a tax break for a developer to build a 26-story apartment complex downtown. 

Attorney Nick Wood who represents Hubbard Street Group, the Chicago-based developer told the subcommittee: “Actually this is not even my idea, my clients are very magnanimous ... so, they brought this to me and said, you know, do you think the city would, you know, appreciate this kind of contribution? I said absolutely. I said you know, it’s a common conversation on a daily basis at city hall with the mayor, the  councilmembers, staff and everybody trying to do what they can to help that affordability factor.”

The day before the subcommittee’s vote Hubbard Street Group, via its attorney, offered $100,000 to support the city’s initiative to create or preserve 50,000 affordable housing units by 2030. 

Councilman Michael Nowakowski, whose district is part of downtown and is close to the proposed project at the southeast corner of Sixth and Garfield streets, praised the developer’s commitment to set aside 10% of the estimated 309 rental units for workforce housing. No specific rent amounts were provided.

Phoenix defines workforce housing as having a household income between 80 and 120% of the area median income. For a one-person household that ranges from about $38,000 to $48,000 annually. For a household of four people, the range is about $59,000 to almost $87,500 annually.

“I think this is a new trend that we need to start happening in downtown Phoenix is that we have a lot of apartments, a lot of condos, a lot of housing going up but it’s not workforce housing, it’s not affordable housing and I believe that if we start with this new trend where we get at least 10% plus a donation into a fund where we as the city of Phoenix can actually turn around and either have a nonprofit or ourselves build workforce housing or affordable housing, I think it’s a good trend to have,” Nowakwoski said.

Councilwoman Laura Pastor asked for clarification about the donation process, including where the money will go and how it will be spent. Economic Development Director Christine Mackay called it “new to us” and promised to get formal details before the full council votes. 

The council must approve the donation as well as the proposed deal which includes a government property lease excise tax (GPLET). A GPLET is a way for the  government to offer tax breaks to developers. It involves the city temporarily owning the land and leasing it to a developer who avoids property taxes it would have to pay as the land owner.

If the council approves, Hubbard Street Group will convey the property title to the city and the city will then lease the property back to Hubbard Street Group for up to eight years. Hubbard Street Group would pay the city $25,000 in rent in years one and two, $50,000 in years three and four, $75,000 in year five and $100,000 a year for the remaining three years of the lease.

According to a city report, the project, which would include 201 parking spaces and commercial space, would bring a capital investment of approximately $87 million, create approximately 264 construction jobs and 77 permanent jobs.

Councilwoman Debra Stark voted with Nowakowski and Pastor to recommend the council approve the deal. Councilman Jim Waring voted no as he consistently does on deals involving GPLET’s.

EDITOR'S NOTE: The story has been updated to correct the location of Councilman Michael Nowakowski's district. 

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