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Sep 24, 2020 2:24 PM |
Do we know what corner this is going on?? NW/SW?
Phoenix approves controversial tax incentive for proposed downtown tower
Quote:
Phoenix City Council approved a controversial tax abatement for a developer in downtown Phoenix — the first since the city lost a lawsuit over the incentive relating to another high-rise in downtown.
On Sept.16, the city approved a Government Property Lease Excise Tax, or GPLET, transaction for the development of a 19-story, 375-unit apartment project that will include 6,000 square feet of commercial space and 144 parking spaces planned for Second Avenue and McKinley Street. According to city documents, a minimum of 10% of the units will be designated for workforce housing.
The GPLET agreement would give the city title to the project after construction for an eight-year period. With the city holding the title, the property is not subject to property taxes.
In June, Maricopa County Superior Court judge ruled against the city’s use of the incentive in a 25-year GPLET case, ruling that it violated the state’s gift clause and unfairly benefitted the developer, which was also developing an apartment complex in downtown. That project was Derby Roosevelt Row — proposed by Amstar in 2015 — that would cost about $36 million to build. The 19-story tower would include 211 micro-unit apartments and 4,500 square feet of commercial space at the corner of Second and McKinley streets.
The GPLET statute has since been amended to only allow an eight-year period for those receiving full property tax abatement.
Nick Wood, a partner at Snell & Wilmer and lawyer for the developer of the project, XSC Acquisitions LLC, said he had studied the June ruling very closely and said he had addressed all the concerns from the ruling and defined the issues within the development agreement.
$92M construction cost
According to city of Phoenix documents, the project, called X Basecamp will cost about $92 million to build and will generate one-time construction sales tax of $1.025 million and annual commercial rental tax of $170,000. X Basecamp will be developed by the same developer as Society Phoenix on Monroe Street and Third Avenue.
“Now we’ve addressed all the underlying concerns, we will pass constitutional challenges,” Wood said.
The incentive is useful when encouraging development of high-rises, he said, because they are inherently riskier than a mid-rise wood frame building and take longer to lease and stabilize from a financial perspective.
“You’ve got a construction loan, but you aren’t bringing in any revenue,” Wood said. “The usual return on a high-rise is about 5 to 6%, and the GPLET adds about 1% to that. The capital markets say that 1% makes a difference.”
The Goldwater Institute, which represented the plaintiff in the June GPLET case against the city, sent a letter to City Council after the vote on the XSC Acquisitions case urging the council to disapprove of arrangements involving GPLET. The Goldwater Institute also listed another forthcoming case by Hubbard Street Group requesting a GPLET for a 26-story apartment project.
“By approving such deals, the city is exposing itself to another round of litigation by aggrieved taxpayers, including our clients,” Jon Riches, director of national litigation for the Goldwater Institute wrote in the letter.
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https://www.bizjournals.com/phoenix/...own-tower.html |
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