$8 million taxpayer subsidy for 400 sq ft $1,300 rentals?

Developers Amstar and Transwestern Development Co. are also seeking a controversial tax break for the roughly $36 million Derby Roosevelt Row project, which would save them about $8 million over 25 years, according to the city.

A proposed 19-story housing project in the Roosevelt Row arts district may get a huge taxpayer subsidy in the form of a “GPLET” agreement. That’s Government Property Lease Excise Tax agreement.

In short a GPLET agreement has a government entity (in this case, the City of Phoenix) take title to a piece of real estate, upon which a private developer constructs a building or buildings. Government-owned properties are exempt from property taxes, which can be a significant part of the ongoing costs of a development.

Ostensibly the government (meaning “the rest of us taxpayers”) gets some sort of benefit, like development in blighted areas that might not otherwise get development. However, in most cases a GPLET agreement simply amounts to a subsidy to a private business because the “benefits” are so nebulous as to have no objective measure.

In addition, GPLET agreements can actually hurt other developments and small businesses in the area because of their anti-competitive nature (subsidizing some and not others) and  non-intuitive tax burden shifting. This is a good example of why the Arizona State Constitution’s “Gift Clause” (Article 2, Section 7) specifically prohibits government subsidies to private business.

Source: Would you pay $1,300 to rent 400 square feet in downtown Phoenix?

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