Developers that want Phoenix tax breaks must show ‘true’ public benefit
Developers looking for tax breaks in Phoenix will need to demonstrate a "true" public benefit, based on policies amended by the City Council on Tuesday.
The policies involve the use of a GPLET, or government property lease excise tax. It’s a way for developers to pay either no property taxes for eight years or a lower tax rate (called an excise tax) for up to 25 years, depending on the location and project. GPLETs have been primarily used to build residential high-rises downtown and they can be offered to developers in 19 designated redevelopment areas across Phoenix.
During Tuesday’s council meeting, Economic Development Director Christine Mackay identified the council’s priorities: “The lion’s share of comments we got was on affordable and workforce housing and on historic preservation, being able to save these buildings that are the fabric of the city of Phoenix.”
When housing is part of a development, the policies require at least 20% of units be set aside for affordable or workforce housing or the developer must contribute to the city’s affordable housing trust fund or other city benefits fund. Based on federal guidelines, affordable housing is for household incomes below 80% of the area median income while workforce housing is for household incomes between 80% and 120% of the area median income.
The policies also emphasize pedestrian-friendly neighborhoods and “safe and thoughtful transitions” between new developments and existing homes and businesses. Sustainability and climate considerations are top goals, along with “true public open space, public art, placemaking with community amenities.” For example, open space must be clearly marked, signed and advertised to encourage public use with maintenance and management, including security provided by the private developer.
In 1996, the state legislature created GPLET as an economic development tool to help close a funding gap that would make the project unfinanceable.
Over the years, Phoenix estimates its GPLET program has generated:
- 17,800 new jobs.
- $995.5 million payroll from those jobs.
- $3.03 billion construction capital investment.
- $35.3 million in construction sales tax.
- $17 million increased annual tax impact.