Does Phoenix Need To Keep Offering Tax Breaks To Developers?

Published: Wednesday, May 26, 2021 - 5:19pm
Updated: Thursday, May 27, 2021 - 7:21am

Phoenix city leaders will discuss whether to stop offering a controversial tax incentive to developers.

In 1996, state lawmakers created the government property lease excise tax program, known as GPLET. Instead of paying property taxes, developers can pay lower excise taxes. The idea is to spur needed projects while helping developers close funding gaps. In Phoenix, it’s been used 22 times, often for luxury apartments.

Christine Mackay, the city’s economic development director, said rents are getting very close to covering construction costs for residential high rises, "The market still has not tipped in the favor of not using GLET for that use, but we continue to grow very, very close on that level."

Mackay said GPLETS are an “absolute tool” for offices and without them high-rise office will not be built downtown. She said current rents on new buildings are about $29 per square foot while developers say they need to get $48 per square foot. 

Resident Brendan Walsh pushed back: “If it’s only commanding $30 a square foot, we certainly don’t need to create more inventory if there’s not the demand to have the price as high.”

During Wednesday’s economic development subcommittee meeting, several residents called for an end to GPLETs for luxury projects and urged leaders to support more housing for people with lower incomes. The full council will discuss the future of GPLETs during a work study session in June. 

According to a City Council report, the projects using GPLETs created:

  • Approximately 3,700 new multi-family and student housing units 
  • 5.2 million square feet of office space
  • 900,000 square feet of retail and restaurant space
  • 1,201 hotel rooms 
  • 679,000 square feet of higher education space
  • 8,200 structured parking spaces 

The economic development department said the projects created approximately 17,800 new jobs with an approximately $995.5 million in payroll and $3.03 billion in construction capital investment with construction sales tax revenue to Phoenix of $35.3 million.

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