Title
Government Property Lease Excise Tax Policy
Description
This report request the Economic Development and Equity Subcommittee recommend City Council approval of the Government Property Lease Excise Tax (GPLET) program.
THIS ITEM IS FOR DISCUSSION AND POSSIBLE ACTION.
Report
Summary
This item is a follow up to the October 26, 2022 Economic Development and Equity Subcommittee discussion on the Government Property Lease Excise Tax program. Created as an economic development tool by the Arizona State Legislature in 1996 via ARS Title 42, Chapter 6, Article 5, as a successor to the state's possessory interest tax program, GPLET provides for an excise tax option, in lieu of property tax, based on the use and square footage of a building rather than its value. Depending on the type and location of a development, the current GPLET excise tax rates can be reduced or abated for a specific period of time, which can help to close a funding gap that would otherwise make a development project not financeable.
At the June 22, 2021 City Council Policy meeting, the City Council directed staff to explore public benefit options and bring a proposed policy to a future City Council meeting. The GPLET policy was first presented to the Subcommittee on October 26, 2022 for discussion. This item will be a continuation of the discussion from that meeting, and direction towards a formal GPLET Policy. This formal Policy will provide for a definition of two separate policies; one that includes the area of the City that is covered by a Redevelopment Area (RDA) and is located within the Central Business District, and one that includes the Redevelopment Areas of the City outside of the Central Business District. Currently, there are 18 Redevelopment Areas outside of the Central Business District, or have portions of the RDA that are outside of the Central Business District.
As the City continues its revitalization efforts across all areas of the City, GPLET is a tool that can be leveraged to provide for the types of mixed-use development and workforce housing that are in-demand, and can help to cause additional private sector investment.
As part of the update to the GPLET Policy, a Development Agreement with identified public benefits, will be created with each project. The Community Benefits Agreement will include items such as:
- Affordable/Workforce Housing
- Public Open Space
- Small Business Benefit
- Historic Preservation
- Climate/Heat Readiness
- Office
- Urban Retail
- Entertainment District / Destination Entertainment
In accordance with the GPLET statute, the property is transferred to the ownership of the City for the period of the agreement. A land lease rate based on the financial analysis of the projects impacts will be paid annually by the developer to the City for the term of the agreement. This fund can be utilized by the City Council to cause additional community benefits to take place around the City.
Further, as part of the Development Agreement with identified public benefits, staff would propose an amount due from the Developer that would represent the Property Tax amount that would otherwise be paid to the City. Staff proposes the following amounts:
- An area that is fully within the Central Business District AND an RDA - an amount equal to 200% of the City's portion of Property Tax that otherwise would be collected
- An area that is within a Redevelopment Area but outside of the Central Business District - an amount equal to 150% of the City's portion of Property Tax that otherwise would be collected
This amount would be deposited either into the City's Affordable Housing Trust Fund to be used to create additional Affordable Housing or into a Public Benefits Fund to be used to cause additional community benefits to be developed in the future.
Moving forward, Staff would recommend two separate Policies for consideration of the GPLET. One for the Central Business District and one for all RDA's outside of the Central Business District.
Concurrence/Previous Council Action
City Council provided direction for staff to develop a GPLET policy at the June 22, 2021 City Council Policy meeting. Staff presented the policy for discussion at the October 26, 2022 Economic Development and Equality Subcommittee meeting.
Department
Responsible Department
This item is submitted by Deputy City Manager Ginger Spencer and the Community and Economic Development Department.