Community petitions for affordable housing on micro-apartment project before vote on use of incentive

Sean Sweat started a petition to make five percent of Roosevelt Row Derby apartment units half price. (Jade Carter/DD)

A petition asking City Council require a portion of the units in a proposed 19-story micro-apartment development to be rented at half-price near Roosevelt Row has picked up significant community support ahead of a vote on the development agreement on Wednesday.

The petition has gathered more that 160 supporters as of Tuesday night.

Started by local activist Sean Sweat, the petition asks that the city require rents in 5 percent of units in the Derby Roosevelt Row, which is planned for the northwest corner of McKinley and Second streets, be halved during the eight-year period its developers won’t be paying property taxes. The rents for the 400-to-500-square-foot micro-apartment units were estimated by a representative of the complex’s developer to be at around $1,200 a month.

A Government Property Lease Excise Tax (GPLET) agreement is being sought by developer Amstar/McKinley LLC in this case because of the cost of construction, Christine Mackay, the city’s economic development director said. Amstar/McKinley didn’t respond to requests for comment on the petition.

GPLET agreements are based on a provision in Arizona’s tax code that exempts land owned by governments from property taxes. GPLET allows the city to take over the rights to a piece of land and lease it back to the developer at a significantly reduced rate that replaces the normal property tax.

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Sweat said he fears there will soon be no affordable housing in downtown Phoenix. He spoke out at a city council subcommittee meeting on Feb. 3 when the apartment project was first brought up.

Backing the petition are several other Downtown Phoenix community organizations including the Thunderdome Neighborhood Association for Non-Auto Mobility, Downtown Voices Coalition, the Phoenix branch of theLocal Initiatives Support Corporation, the Downtown Neighborhood Coalition, and the Protecting Arizona Family Coalition. Sweat said that some groups backing the petition wanted him to push for a higher percentage of the units to be made half price.

“Groups don’t necessarily sign on to things together because they don’t overlap that much, but this one does,” Sweat said. “Some groups would argue that 5 percent isn’t nearly enough.”

Sweat hopes that by requesting such a low percentage of the units be halved, the request would be more reasonable to City Council. Other groups in the coalition were pushing Sweat to ask for as much 15 percent of the units to have reduced prices.

Mackay said she looks forward to hearing input from the public about the project. However, she said one shouldn’t be focused on whether the price of the units is affordable or not.

“I think it’s important that this project isn’t looked at in a vacuum,” Mackay said. “I think all of the pieces of the project need to be looked at together to see what makes them function successfully.”

District 7 Councilman Michael Nowakowski, who represents the area where the apartments will be built, said he supported his constituents’ efforts to push for more workforce and affordable housing options downtown, but said diversity is the most important factor in improving downtown.

“Downtown Phoenix has experienced tremendous residential growth,” Nowakowski said in a statement Monday. “Although exciting, this development is increasingly higher end and leaving downtown with a shortage of workforce and affordable housing. Encouraging diversity is key to sustaining a vibrant downtown, and varied housing options is just one way to promote this environment.”

GPLET’s role in the proposed development has driven many of the calls for an affordable housing component.

“Once a company asks for public money, we need to start having public benefits,” Sweat said.

Unlike normal property taxes, which are based on a property’s value, GPLET rates are based on the size of a property and the buildings on it.

A 2014 Downtown Devil report found that non-GPLET property owners downtown had been helping subsidize the discounted tax rates that GPLET developments paid because of a change in the formula used to calculate state funding for school districts. According to the revised state law, which passed in 2009 and went into effect in recent years, GPLET properties are included in a district’s taxable value, potentially reducing the total state assistance provided for districts with many GPLET properties by a significant amount.

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The net effect was that non-GPLET property owners paid for the portion of the district’s budget that GPLET properties were not paying. The agreements between the developer and the school district are meant to address this gap and ensure that the school district is funded properly, Mackay said.

Mackay disputed claims that this GPLET agreement would drive up the property taxes of residents living in the Phoenix Elementary School District. She said the effect on surrounding property owners’ taxes was likely small, based on analysis that her office had done on other developments. She said her office was unable to do a specific analysis of the Derby development on surrounding property owners because of the location of the development.

Downtown Devil staff reporter Agnel Philip contributed to this story.

Editor’s note: Government Property Lease Excise Tax agreements are a complex topic that the Downtown Devil broke down extensively in a previous report. If you’d like to learn more about GPLET you can read the report here.