Title
Foreign-Trade Subzone Property Tax Reclassification for Honeywell Aerospace, Inc. (Ordinance S-44823)
Description
Request to authorize the City Manager, or his designee, to support property tax reclassification on new (not existing) real and personal property for Honeywell Aerospace's activated Foreign-Trade Zone (FTZ) from property tax class 1 with a tax assessment ratio of 18 percent, to property tax class 6 with a tax assessment ratio of 5 percent pursuant to Arizona Revised Statute (A.R.S.) 42-12006. Also request authorization to amend the existing FTZ Operations Agreement with Honeywell, and to enter into all necessary and appropriate agreements and other documents.
Report
Summary
Honeywell Aerospace, Inc., headquartered in Phoenix, is a technology and service leader in three main sectors: Air Transport and Regional Aviation; Business and General Aviation; and Defense and Space. According to an independent economic impact analysis by Applied Economics in June 2017, Honeywell employs approximately 9,000 in Arizona, with almost 7,000 in the Honeywell FTZ. There are currently five sites within the Honeywell FTZ which creates an annual economic impact of $3.4 billion. Honeywell directly and indirectly supports an approximate 14,000 jobs and generates $1.03 billion in annual personal income within the FTZ with an annual payroll of $669.2 million and an estimated annual salary of $96,295.
On Dec. 19, 2012, the Phoenix City Council authorized the City Manager's designee to submit an application for a new FTZ for Honeywell Aerospace. At that time, Honeywell did not intend to seek property tax reclassification. Honeywell is continually exploring where to add new operations and the Phoenix FTZ site is one option for which a property tax reclassification on new real and personal property would make it more competitive than other states under evaluation. Adding new operations to the Phoenix FTZ site would retain jobs and increase the overall economic impact to our region. This request would not impact any real and personal property tax collected today; however, it would reduce the property tax rate for new/future real and personal property investments within the FTZ.
Pursuant to the FTZ Operations Agreement between Honeywell and the City of Phoenix, support letters have been provided to the City of Phoenix from the following applicable tax jurisdictions: Balsz School District, Central Arizona Project, City of Tempe, Kyrene School District, Maricopa Community Colleges, Maricopa County, Maricopa Integrated Health System, Tempe Union High School District, and West-MEC. Support letters are pending from the following applicable tax jurisdictions: Deer Valley Unified School District, East Valley Institute of Technology, Phoenix Union High School, and Wilson Elementary School District.
Contract Term
The term of the current contract with Honeywell Aerospace, Inc. is through May 29, 2034.
Financial Impact
Property taxes currently collected on existing real and personal property will not be impacted. The future real and personal property may be reclassified to a lower tax rate.
Concurrence/Previous Council Action
- City Council approved and adopted Ordinance S-39446 on Dec. 19, 2012, to submit an FTZ application for Honeywell Aerospace, Inc.
- City Council also approved and adopted Resolution 21479 on Sept. 21, 2016, to expand Honeywell's subzone from 275 acres to 288 acres.
Location
Site 1 (D8)
- Parcel 1: 111 S. 34th St.
- Parcel 2: 402 S. 36th St.
- Parcel 3: 3131 E. Air Lane
Site 2 (D1)
Site 3 (D8)
- 1944 E. Sky Harbor Circle.
Site 4
- 1300 W. Warner Road, Tempe, Ariz.
Site 5 (D8)
Council Districts: 1, 8, Out of City
Department
Responsible Department
This item is submitted by Deputy City Manager Deanna Jonovich and the Community and Economic Development Department.