Discussion of the Government Property Lease Excise Tax Program

This report provides City Council with information regarding the City’s use of the
Arizona Government Property Lease Excise Tax (GPLET) in addition to the results of a
recent Downtown Residential and Commercial Absorption study.

THIS ITEM IS FOR DISCUSSION AND POSSIBLE ACTION.

Summary
Created as an economic development tool by the Arizona State Legislature in 1996 via
A.R.S. Title 42, Chapter 6, Article 5, as a successor to the state's possessory interest
tax program, GPLET is an excise tax assessed on the private use of government
property, 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 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 unfinanceable.
In Phoenix, the use of GPLET for economic development purposes has resulted in 22
projects which have created:

· Approximately 3,700 new multi-family and student housing units
· 5.2 million square feet of office space
· 900,000 square feet of retail and restaurant space
· 1,201 hotel rooms
· 679,000 square feet of higher education space
· 8,200 structured parking spaces

The City's use of GPLET has had a significant development and economic impact on
Downtown Phoenix. Approximately 17,800 new jobs with an approximately $995.5
million in payroll have been created as a result of utilizing GPLET in addition to $3.03
billion in construction capital investment with construction sales tax revenue to Phoenix
of $35.3 million, and an increased annual tax impact of $17 million. Other taxing
jurisdictions have participated as well, with Maricopa County and local school districts
realizing a $99.2 million total tax impact, and the State of Arizona seeing a $250.3
million impact. At the City Council's direction, utilization of GPLET has created other



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community benefits such as the inclusion of workforce housing units in residential
projects, contributed to the Phoenix Affordable Housing Trust Fund, new public
infrastructure, public open space, public parking, and the incorporation of public art.

At the Feb. 24, 2021 Workforce and Economic Development Subcommittee meeting,
the Subcommittee instructed staff to explore options to conduct a Residential and
Commercial Absorption study to better understand the Downtown market’s ability to
absorb the significant amounts of new construction that has taken place over the past
few years. On April 7, 2021, staff received City Council approval to work with Rounds
Consulting Group Inc., through an existing contract with the City's Housing
Department, as one method to analyze available data gathered. Staff also utilized a
number of other data resources to understand the market, its viability, affordability and
growth projections. Staff presented the results of the study's findings to the Workforce
and Economic Development Subcommittee at its May 26, 2021 meeting, and is now
seeking the City Council's input and policy direction on next steps of the use of
GPLET, including the consideration of additional public benefits associated with its
use. One such benefit could be a formula contribution to the Affordable Housing Trust
Fund. Staff will provide potential calculation options for how a contribution could be
considered.

Concurrence/Previous Council Action
The City's Workforce and Economic Development Subcommittee discussed this item
at its May 26, 2021 meeting. On April 7, 2021, City Council approved to extend and
allow additional expenditures under City Contract No. 149681 with Rounds Consulting
Group Inc. for a Downtown Residential and Commercial Absorption Rate study for the
Community and Economic Development Department through Ordinance S-47462. The
Workforce and Economic Development Subcommittee provided direction for staff to
move forward with a Downtown Residential and Commercial Absorption Rate study at
its Feb. 24, 2021 meeting.

Location
Downtown Phoenix
Council Districts: 4, 7 and 8

Responsible Department
This item is submitted by Deputy City Manager Ginger Spencer and the Community
and Economic Development Department.




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Report

Construction Jobs and Compensation Eight-Hour Rule Request

Request City Council approval for City staff to spend in excess of eight hours of staff
time, per City Council Rule 15, to research construction jobs and compensation in
Phoenix. If approved by the City Council, the Law Department and City Engineer will
lead the research effort.

THIS ITEM IS FOR DISCUSSION AND POSSIBLE ACTION.

Responsible Department
This item is submitted by the Mayor's Office per City Council Rule 4a.




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