The authorities of the city of Phoenix will discuss whether they should no longer offer developers a controversial tax incentive.
In 1996, lawmakers created the state excise tax program for real estate leases known as the GPLET. Instead of paying property taxes, developers can pay lower consumption taxes. The idea is to advance needed projects and help developers fill funding gaps. It has been used 22 times in Phoenix, often for luxury apartments.
Christine Mackay, the city’s director of economic development, said rents are very close to covering the cost of building high-rise apartment buildings: “The market has still not spoken out in favor of not using GLET for this use, but we are still growing a lot , very close to this level. “
According to Mackay, GPLETS are an “absolute tool” for offices, and without them, skyscrapers won’t be built in the city center. She said current rents for new buildings are around $ 29 per square foot, while developers say they need to get $ 48 per square foot.
Resident Brendan Walsh pushed back, “If it’s only $ 30 per square foot, we certainly don’t need to do more inventory unless there is a demand to keep the price that high.”
During the meeting of the Subcommittee on Economic Development on Wednesday, several residents called for an end to GPLETs for luxury projects and urged leaders to support more housing for people on lower incomes. The full council will discuss the future of GPLETs during a working study session in June.
According to a report by the city council, the projects were created using GPLETs:
- Approximately 3,700 new multi-family and student housing units
- 5.2 million square meters of office space
- 900,000 square meters of retail and restaurant space
- 1,201 hotel rooms
- 679,000 square meters of university space
- 8,200 structured parking spaces
The Department of Economic Development said the projects will generate approximately 17,800 new jobs with a payroll of approximately $ 995.5 million and a construction capital investment of $ 3.03 billion with sales tax revenues of $ 35.3 million Phoenix created.