The Goldwater Institute and a downtown Phoenix restaurant are suing the city of Phoenix over a tax subsidy for a soon-to-be-built 19-story apartment tower near Roosevelt Row.
The Libertarian-leaning Goldwater Institute filed suit against the city on behalf of Angel’s Trumpet owners over a government property lease excise tax — GPLET — deal that allows a developer to build a 19-story apartment high-rise on a vacant lot adjacent to Angel’s Trumpet in downtown Phoenix. A GPLET allows developers to avoid paying property taxes and has been a common practice among Valley cities.
The project in question is a proposed $36 million, micro-housing, 19-story apartment tower called The Derby Roosevelt Row. Last March, the Phoenix City Council approved the GPLET deal with the project’s developer Amstar/McKinley LLC. Units in the tower will range between 400 and 500 square feet.
The GPLET deal is projected to save the developers $8 million over 25 years.
“The Constitution mandates that all property taxes be equal among similar properties and prohibits the government from handing out gifts or special privileges to certain businesses,” said Jim Manley, a senior attorney at the Goldwater Institute representing the owners of Angel’s Trumpet. “If Arizona cities think property tax rates are too high, they should lower tax rates for everyone, not use GPLET to let the politically connected few avoid paying any property taxes at all while everyone else shoulders the burden.”
Ground work began late last month on the apartment project, which is slated for a vacant lot at the northwest corner of McKinley and Second streets. Angel’s Trumpet sits just north of the lot, which has been fenced off. Construction crews have begun clearing the lot in recent days.
Goldwater is challenging the Derby Roosevelt GPLET subsidy under four provisions in the Arizona Constitution: the Gift, Uniformity, Conveyance, and Special Law Clauses, as well as statutory limits on GPLET and competitive-bidding requirements that Goldwater claims the city did not follow.
Goldwater has won previous lawsuits enforcing the gift, uniformity, and special laws clauses, according to the group, but this will be the first time anyone has challenged a subsidy under the Conveyance Clause.
A bill in the Arizona Legislature, HB 2213, would put limits in place for future GPLET deals. The bill passed the Arizona House of Representatives last month and is in the Senate.
NAIOP-AZ worked with the sponsor of the original bill to make some changes before it passed the House.
“We are gratified that the GPLET reform bill, HB 2213, recently passed the State House by a bipartisan vote and unanimously passed the Senate Finance Committee this morning 7-0,” NAIOP-AZ said in a statement. “The reforms contained in HB 2213 related to GPLET, which we strongly support, will go a long way in both improving the program for taxpayers and protecting the users of the program in demonstrating a clear public benefit related to any moving forward litigation. Even the Goldwater Institute testified and is on record in support today of this bill.”
Proponents of GPLETs contend they are one of the only economic development tools available to Arizona cities.