City of Phoenix Using Taxpayer Subsidies to Bargain with Developer

At first glance, it appeared taxpayers scored a major victory when A proposed 19-story tower development in the heart of the Roosevelt Row District in Phoenix was denied access to the lucrative GPLET tax break.  Unfortunately, it appears that the denial of the property tax subsidy is not about protecting taxpayers—it is really about seeing what additional concessions neighborhood groups and city hall insiders can extract from the developer.

Although the City of Phoenix has currently called an impasse, halting discussions on giving the developer a government property lease excise tax (GPLET,) it is obvious this is simply being held as a bargaining chip.  Instead of the community dialogue revolving around the viability of the “Stewart” development, it has been around what concessions the developer can offer to acquire heavy subsidization.

GPLET’s is a crony capitalist land use gimmick that allows a city to take ownership of private property in order to utilize their tax exempt status; in turn they lease their property back to the private owner.  GPLETs are often used as bait by cities to dangle in front of developers in order to dictate design specifications and create more bureaucratic centralized urban planning.

In the past Phoenix has handed GPLETs out in the downtown like candy; this has created a Swiss-cheese property tax district.  The inevitable effect has been higher property taxes for everyone except the handful of politically connected developers in the area.  In fact, the city has sheltered downtown development from more than $1.5 billion in property taxes, contracting the tax base, and shifting the tax burden on residents and small businesses.

Taxpayers in Phoenix shouldn’t hold their breath.  If the past is a predictor of the future, Phoenix has not shut the door on handing out millions in a tax carve out for the Stewart Development or others.  However, given the City Council recently approved a property tax increase for the rest of Phoenix, one would hope taxpayers would see this as an opportunity to draw a line in the sand and demand their elected leaders refuse to pick winners and losers.