Lawmakers again seek tax break for GCU

Posted at 11:34 AM, Feb 02, 2016
and last updated 2016-02-02 13:34:44-05

Lawmakers are again seeking a big property tax break for a growing private Christian university in Phoenix, reviving an effort to benefit Grand Canyon University that was derailed over constitutional concerns in 2014.

The new legislation addresses those concerns by expanding the break on property taxes to cover any regionally or nationally accredited private university in Arizona rather than just Grand Canyon.

The move would include buildings owned by the University of Phoenix and other private universities. But Grand Canyon would remain the major beneficiary because it has a large residential campus that continues to grow while other private universities lease most of their property.

Senate Bill 1402 is sponsored by Republican Sen. Steve Yarbrough and 11 co-sponsors. The legislation lowers the property tax rate from 18 percent to 5 percent, a move Yarbrough said mirrors breaks given to big companies such as Intel and Apple in so-called free trade zones in the state.

Giving tax relief to Grand Canyon will encourage the school to continue a years-long building binge that has raised its property valuation and boosted values in nearby neighborhoods as well.

"You have to ask yourselves whether the overall greater good makes this a good tax policy," Yarbrough said. "I happen to think it is good tax policy."

Critics say neighboring property owners would pay higher tax bills if the bill passes and question why a private Christian school is getting a break when other institutions and businesses have to pay the normal rate.

"If you're a business in Arizona you belong .... with all the rest of the businesses," said Arizona Tax Research Association President Kevin McCarthy. "And you shouldn't get (a break) because you've got a good lobbyist."

Like many businesses seeking legislation at the capitol, Grand Canyon hired a well-known lobbying firm to press its case in 2014. This year, it has another firm leading the effort.

Grand Canyon expects to pay $6.7 million in property tax this year at the current rate, and $3.1 million if the bill becomes law. University President Brian Mueller said the new rate is still nearly as much as the $3.4 million the school paid in 2015 because of a host of new building projects being completed this year.

Mueller said the university has invested more than it earned in net profit into new buildings at the school at 35th Avenue and Camelback Road since it became a publically traded business in 2008, an investment that's actually lowered property taxes in the neighborhood. That's primarily because of school taxes, where a fixed amount to be raised is spread among all property owners.

"The remarkable thing about this neighborhood over the last three or four years is that property owners have paid less in property taxes, because every dollar that we put in has eased their burden," Mueller said Monday.

The university currently has nine construction projects underway, including a 170,000-square-foot engineering building, three residence halls and a four-story administration building expected to be completed this year.

Grand Canyon is considering a shift to nonprofit status for part of its operations, while others would  remain privately held and pay taxes, Mueller said.

The university's goal is to keep tuition low while growing from its current 18,000 students to an expected 30,000 in four years.

Creating a nonprofit component will give it access to grants and philanthropy not now unavailable.

Grand Canyon shares trade on the Nasdaq stock exchange under the symbol LOPE and had a market capitalization of $1.72 billion on Tuesday.