City council approves grocery store, high-rise development

Block 23, now a parking lot at First and Washington streets, will be home to a high-rise development with a Fry’s grocery store, commercial space, and parking stalls. (Jade Carter/DD)

City Council approved a tax incentive for the development of a high-rise project Wednesday that includes downtown’s much-anticipated grocery store.

Mayor Greg Stanton and council members voted 7-2 in favor of using the Government Property Lease Excise Tax incentive to help subsidize the development. RED Development LLC reached an agreement with Barron Collier Companies to acquire the development rights of Block 23 earlier this year, according to a city council report.

The company plans to build a multi-use high rise that will include approximately 300 multi-family units, an urban Fry’s grocery store, commercial space and parking stalls. The site is currently a parking lot controlled by Barron Collier Company and owned by the city.

RED Development will pay $18 million to the city in lease payments. The lease terms were originally 75 years, but the amended lease terms will be for a maximum of 50 years. The company must also pay a $3 million final purchase payment at the end of the lease.

Widely used by city government to promote development, a GPLET agreement would allow the developer to pay reduced taxes instead of traditional property taxes. The arrangements 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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CityScape, RED’s other downtown project, has a 99-year GPLET agreement on part of its development.

This development will generate an estimated $76.5 million in new retail sales tax for the city and will create approximately 1,300 new jobs, according to a city council report. Once RED begins construction on the site, it must be completed within 36 months.

“This is how you move a community forward,” District 5 Councilman Daniel Valenzuela said.

District 2 Councilman Jim Waring and District 6 Councilman Sal Diciccio were the two council members who voted against the deal.

“I don’t think it’s fair to the taxpayers,” Councilman Jim Waring said. Although this project will bring in substantial amounts of money for the city, it will cost residents money, and not all residents are in favor of the development, he said.

Block 23 had served as the original townsite of Phoenix, but was later constructed into a JCPenny store and Fox Theater. The property hasn’t generated any revenue from property tax, since it is owned by the city.

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Phoenix residents spoke in excitement about the development because there isn’t a grocery store in the downtown area. Leonard Clark, a progressive activist and U.S. Senate candidate, said the area of downtown Phoenix is a “food desert,” meaning people were forced to drive long distances for fresh produce.

Stanton said he supports the development, saying this lot will go from generating no economic activity to generating a substantial amount. The city favored the high-rise because it will bring in more families, jobs and money to the downtown area.

Stanton connected the development to an overall improvement of downtown, saying a “great downtown” is important to the whole region and state.

“I believe that this is a great investment for the city of Phoenix,” District 7 Councilman Michael Nowakowski said.

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