Source story by Darren DaRonco for the Arizona Daily Star
Original Headline: Developers of $18M building aim to benefit from city tax incentive
A planned nearly $18M high-rise residential, retail and commercial office building – billed as the first of its kind downtown – is also on track to become the first beneficiary of a new city tax incentive aimed at spurring development. The developer’s company, Caylor Construction, is the GC. Art Wadlund and Rob Caylor, partners in One East LLC, are hoping to capitalize on the upcoming streetcar line. The two are planning a building called One East Broadway, 1 E. Broadway, Tucson, on what is now a parking lot adjacent to the Chase Bank building, and right on the future streetcar line.
Their plans call for approximately 26K SF of office space, 4K SF of retail space, 36 apartment units and a 119-space parking garage. The total cost for the seven-story building is $17.9 million. Wadlund said they plan to break ground this fall and be done on time for the opening of the streetcar in November 2013.
They already have an anchor tenant: the taxpayer-funded Pima Association of Governments. PAG has signed a lease and will relocate from the downtown Transamerica building and occupy 100 percent of the office space and pay between $21.50 and $26.50 per square foot, depending on the extent of TI.
Tax Incentive Abates Property Tax for 8 Years
How the city’s new Government Property Lease Excise Tax works is that when a qualified project is complete, the city takes over the property for up to eight years and leases it back to the owners for a minimal fee.
As a result, the owners are allowed to operate their business and establish a cash flow while not having the burden of paying property taxes, since the building is technically owned by the city. The city is exempt from property taxes.
According to city Economic Development Manager Debbie Chandler, Tucson offers 21 economic incentives to businesses. She said most are available based solely on the business location or type. But four, including [the] one being used for One East Broadway, require an extensive application and review process to qualify.
Three Step Process
In order to receive these incentives, businesses must go through a three-step process made up of a (1) pre-proposal and initial screening—passed last week by the city council for this project, (2) an independent financial analysis and, finally, (3) approval by the mayor and City Council.
Even though the company isn’t completely through the second step in the process, Chandler said the initial screening is so thorough that once a company makes it past Step 1, it’s a good indication that it will receive final approval. She said now they have to work out the dollars and cents to see exactly how much of an incentive the project will receive.
Read more at AZStarNet