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Thursday, 04 January 2018 00:11

City of Tempe Statement On Its Legal, Prudent Use of Development Incentives Featured

City of Tempe

The City of Tempe has responsibly, selectively and legally made use of the limited development incentive tools that are allowed by Arizona state law. 

The City of Tempe has responsibly, selectively and legally made use of the limited development incentive tools that are allowed by Arizona state law. For decades, these tools have allowed Tempe chances to compete nationally and to bring in strong commercial, residential and office projects that provide regional jobs and improve quality of life for Tempe residents.

Economic development is critically important to Tempe, the Valley and Arizona. Governor Ducey’s own “2017 Year in Review,” published late last month, highlighted Tempe’s landing of Bank of the West in Arizona. He also praised the additions of Benchmark Electronics and ZipRecruiter to Tempe. 

A GPLET is a tool authorized by state law that allows cities and counties to transfer a privately owned development to city ownership in order to vary tax rates or to exempt the project from property taxes during a limited time period that is typically eight years. Some projects pay an excise tax during this time; some projects are exempted from the excise tax for a portion of the GPLET period. Some projects never receive a tax abatement at all. 

When a given development comes back on the property tax rolls, it brings in substantially more property taxes than it previously did when the site was a vacant parcel or underdeveloped building – and it may lower the property tax bills of other property owners.

Our school districts continue to collect a level amount of property taxes during the term of a GPLET. Many projects also make cash donations to school district foundations. 

It is unfortunate that a member of the Arizona Legislature has decided to use misunderstandings about GPLET and misinformation about Tempe’s use of state statutes to employ a tactic to threaten the city revenue distribution that keeps cities and towns afloat and able to provide critical services to residents such as police and fire protection. 

Today’s statement from the City of Tempe is meant to provide some details to address the points made in a recent letter Rep. Vince Leach wrote to Tempe officials. Tempe had scheduled a Jan. 11 meeting with Rep. Leach to discuss this information, as he requested. Instead, before getting the facts, Rep. Leach made the decision to proceed with an ill-conceived request that the Arizona Attorney General’s Office investigate whether Tempe has followed state law in the use of GPLET for two particular development projects: Bank of the West and The Graduate Hotel. 

The City of Tempe will provide related documents and information to the Attorney General’s Office.

Bank of the West – one of the companies Governor Ducey heralded – decided in 2017 to grow its Arizona presence by expanding into Tempe. The bank aims to bring 1,000 new, high-paying jobs to Tempe. This was a great achievement for Tempe and for the region, thanks to the work of Tempe and the Arizona Commerce Authority. Bank of the West’s development agreement does not include the abatement of property taxes. That’s because there is more than one way in state statute that GPLET is defined – Bank of the West was granted the type of GPLET that does not involve waiving property taxes. 

Bank of the West has a contractual obligation to create and maintain high-wage jobs. It is also subject to regular reporting requirements, and the benefit will be pulled back if the company does not satisfy the legal requirements. As required, Tempe sent the Arizona Department of Revenue the required documents and the department has provided a written, preliminary determination that the city’s agreement with Bank of the West complies with state law. 

Tempe also has been in negotiations to assist a blighted property in transforming itself to become The Graduate Hotel. As it is allowed to do under state law, the Tempe City Council in 2010 passed a specific Resolution that expressly grandfathered this property for future use of GPLET. This was before the Arizona Legislature had made its latest changes to how GPLETs can be used.

Again – as with Bank of the West – The Graduate’s version of a GPLET does not include the abatement of property taxes. And it’s not a 50-year agreement by any means – 50 years in the documentation instead refers to the age of the existing building.

And the lease for The Graduate is not executed, meaning it has not been finalized. If and when there is agreement on the lease, Tempe will again seek the Department of Revenue’s input in order to comply with state statute – just as the city did with Bank of the West.

The City of Tempe acts legally and for the benefit of its community members in all matters. 

Last modified on Thursday, 04 January 2018 01:22
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Editor Lynne LaMaster

Phone:928.458.5119

Prescott, Arizona