Daily Archives: October 25, 2009
[Source: Mike Sunnucks, Phoenix Business Journal] — The next shoe to drop in the legal fight over special tax breaks and subsidies for developers could be over the 100 percent tax exemptions ponied up for high-profile projects such as ASU SkySong in Scottsdale and enjoyed by professional sports teams. That action could come after the Arizona Supreme Court decides whether a $97 million tax break for the CityNorth mixed-use development in northeast Phoenix is constitutional under state law. A judgment in that case isn’t expected before the end of the year, but those opposed to developer subsidies already are strategizing for future battles.
The first is a lawsuit expected to be filed over government property lease excise taxes, or GPLETs. These funding mechanisms allow government entities that own land to lease it back to private developers and businesses, which then pay lower-than-normal property taxes. The Goldwater Institute and Arizona Sen. Ken Cheuvront, D-Phoenix, said they plan to file suit to do away with GPLETs.
Cheuvront wants to sue to try to stop the tax breaks. Clint Bolick, attorney for the Goldwater Institute, said the conservative think tank also is looking at other tax arrangements to determine whether they are legal. “We’re just beginning to burrow deeply into GPLETs,” Bolick said. “To the extent that lease rates are below market after tax benefits are taken into consideration, it may represent an illegal subsidy, and also may violate equal protection of the law if similarly situated tenants are paying more in private buildings.”
As that case works its way through the courts, the same skeptics want to go after entities including SkySong, the Arizona Cardinals, the Phoenix Suns, and the Arizona Diamondbacks, which pay no property taxes because they lease their facilities from city or county governments. None of those arrangements are considered GPLETs, though that mechanism has been used extensively for downtown Phoenix developments including the Colliers Center, Arizona Center, and Renaissance office towers. The new Cancer Treatment Centers of America hospital in Goodyear also is a GPLET.
Real estate developers and business interests say striking down the CityNorth subsidy, GPLETs or other tax incentives would discourage investments and economic development. [Note: Read the full article at Property tax exemptions may be next battle in Arizona subsidy war.]