The Goldwater Institute has filed a lawsuit against the City of Phoenix, alleging the City’s use of a Government Property Lease Excise Tax incentive arrangement violates the Arizona Constitution.
Under the GPLET, Phoenix will assume ownership of the $87M high-rise project known as Skye on 6th from developer Hubbard Street Group and Cresset Real Estate Partners. It would then lease the property back to the developers, allowing them to avoid paying property taxes for eight years. At the end of the term, ownership would revert back to the developer. Goldwater estimates the agreement will allow Hubbart Street Group to avoid approximately $7.9M in property taxes in exchange for a smaller amount of rent.
Arizona courts have occasionally ruled against specific GPLET arrangements when they found they were used to violate the Gift Clause of the state Constitution. One such arrangement, concerning a 19-story downtown tower, was struck down in 2020.
The Institute filed the current lawsuit on behalf of two area business and property owners claiming the arrangement forces them to “bear a disproportional tax burden.”
Arizona has few city-level economic development incentive programs in place, making GPLETs an attractive option, where applicable.
The Goldwater Institute action was filed on May 4th. As of the end of last week, Phoenix officials had not yet been served with the lawsuit. (Source)