Phoenix To Weigh Public Benefits Of Tax Breaks To Developers

Published: Tuesday, June 22, 2021 - 7:00pm

After providing a controversial tax incentive for 22 projects, Phoenix leaders will take a closer look into how the public benefits. 

The government property lease excise tax program, often referred to as a GPLET, can be used as an economic development tool. In Phoenix it's mostly been used to get high-rises built downtown. Rather than pay full property taxes, developers pay a much lower excise tax. While GPLETs have long been debated, Phoenix has new council members this year, including Yassamin Ansari whose district includes parts of downtown. 

“I love to see everything that’s happening downtown and I’m very excited about it and we don’t want to lose that momentum but at the same time we have to be very, very conscious about the need for affordable housing, workforce development, sustainability and everything that’s been mentioned,” she said.

During Tuesday’s council meetings, some residents asked leaders to stop offering GPLETs for luxury developments and focus on incentives for affordable and workforce housing. 

Before being elected to the council, Debra Stark was Phoenix’s Planning and Development Director, and she urged people to remember the city’s reliance on sales tax, “I think that one of the most vital issues in Phoenix is affordable housing, I do want to remind everyone commercial is important to us as well — it brings in sales tax.”

Christine Mackay, Phoenix’s Economic Development Director said GPLETs lead to redevelopment because they provide financial certainty to developers. Rather than risk large increases in property taxes, a GPLET provides a lower amount for up to 25 years.

Jim Waring, a longtime opponent of GPLETs whose district includes north Phoenix, pointed out the latest city report showed 3% of Phoenix’s population lives downtown, “We concentrate a lot of our activity on a place that the vast majority of people who live in our city, don’t live. We’re trying to incentivize something that the market has not incentivized on its own.”

Betty Guardado, whose district includes west Phoenix, said, “I also love our downtown core, but these are not the only neighborhoods that should benefit from such incentives.”

Mackay said the city has 19 redevelopment areas — including downtown — where GPLETs could be used.

By a 5-4 vote, the council directed staff to research the public purpose and community benefits of GPLETs and to draft policy options for their future use. Another council discussion is expected in September or October.

In May, Mackay told the city’s economic development subcommittee that rents are getting very close to covering construction costs for residential high rises but the “market still has not tipped in the favor of not using GPLET for that use”. She called GPLETs  an “absolute tool” for offices and said without them high-rise offices will not be built downtown.

According to a city council report, 22 GPLET projects have 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 report says downtown GPLETs have resulted in 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.

Some community benefits have included workforce housing units in residential projects, a contribution to the Phoenix Affordable Housing Trust Fund, new public infrastructure, public open space, public parking and the incorporation of public art.

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