Goldwater Institute accuses Phoenix of 'property tax shell game' in lawsuit over incentive deal

Posted at 9:12 AM, May 09, 2022
and last updated 2022-05-09 12:13:41-04

PHOENIX — The Goldwater Institute sued the city of Phoenix this week, challenging the use of tax dollars to benefit the developer of a 26-story residential tower being built in downtown Phoenix.

Hubbard Street Group and Cresset Real Estate Partners — both based in Chicago — are making their Phoenix debut with the development of this $87 million project at the southeast corner of Sixth and Garfield streets expected to open in summer 2023. Cresset declined comment and Hubbard Street executives could not be reached.

But the Goldwater Institute lawsuit accuses city officials of devising a tax shell game allowing developer Hubbard Street Group to pay no property taxes on that project for eight years in violation of the Arizona Constitution and a 2020 court decision finding a similar arrangement — involving a 19-story apartment complex in downtown Phoenix— unconstitutional.

Jon Riches, director of national litigation for Goldwater Institute, said Arizona courts have made it clear that taxpayer dollars should not be used to benefit private, special interests.

Using the Government Property Lease Excise Tax, or GPLET, abatement provisions of Arizona law, the city takes over the Hubbard project so that the property technically becomes government property, excluding it from tax rolls, and then leases the property back to Hubbard.

When the eight-year lease expires, the city turns the property back over to Hubbard, relieving what Goldwater calculates as $7.9 million in property taxes in exchange for paying the city a small of amount of rent, Riches said.

Read more of this story from the Phoenix Business Journal.