Historic preservationists and downtown residents are concerned about the possibility that the developer of the Circle Records and Tape building project will receive a tax break in return for promising workforce housing.
Some have said that preservation is the number one priority for the proposed 19-story development by Empire Group LLC, and they are worried that Empire will use workforce housing as a way to ward off demands for more parts of the building to be preserved.
“I’m concerned about this becoming a way for developers to get their (tax break), and then that’s all they have to do is offer up a token amount of housing,” said Jennifer Boucek, who is on the board of directors for Preserve Phoenix.
While a tax incentive, known as the Government Property Lease Excise Tax, has not currently been granted, there will most likely be some form of workforce housing for the building if negotiations with the city pan out, according to Geoffrey Jacobs, principal of developer Empire Group LLC. Workforce housing refers to units that would be available at a more affordable rate.
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“In terms of the GPLET we have really just started conversations with the city,” Jacobs said.
The developer’s current estimate of 5 percent workforce housing in return for the GPLET agreement are based on a deal struck last month between the city and Amstar/McKinley LLC, the developer of Derby Roosevelt Row. It was the most recent development to have its GPLET agreement approved.
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. The incentive has been used widely by city government to encourage development downtown, with notable developments like CityScape, the Freeport-McMoran building and Luhrs City Center all having received development agreements of various lengths.
The element of historic preservation has been amongst the biggest community concerns, and most of the opposition to the development receiving a GPLET agreement has centered around this idea. Some citizens and activists feel that there is not enough of the 69-year-old building, also known as the Stewart Motor building, being saved in the current iteration of the development plan.
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Tim Eigo, chair of the Downtown Voices Coalition Steering Committee, said while the affordable housing component of the Derby development made sense, it would be “inappropriate to trade off a piece of history” for it in this case.
“They have to save a significant portion of the building right out of the box and then we can talk about additional benefits,” Eigo said.
A 2014 Downtown Devil report found non-GPLET property owners in downtown had been helping subsidize the discounted tax rates 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, 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.
The net effect was that property owners paid for the portion of the district’s budget that GPLET properties were not paying.
No official pricing has been released for the apartments yet, but Jacobs said he expects them to be just under $2 per square foot. Unit sizes and plans are still being fine-tuned; however, under current plans there are an expected 311 units, which range from about 500 square feet to just over 1,500 square feet. The average square footage for the units is just under 810 square feet. There are no current price range estimates for the possible workforce housing.
“We’re not committing to anything as far as what the rents are,” Jacobs said. “Our goal is to try to be very competitive in the market especially for as high quality a project as we intend to deliver.”
Even without pricing, the possibility and comparison of workforce housing rates to the Derby development has raised some worry.
“I think the community’s priority is historic preservation of the building and that has to take precedent over other community concerns,” downtown resident Jeff Sherman said. “If that is addressed, then affordable or attainable housing should be brought up.”
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The inclusion of affordable housing on the Derby development was in part due to the efforts of Sean Sweat, a local activist who started the petition for 5 percent of its units to be at a lower rate.
“I think the Derby project set an informal precedent,” Sweat said, adding the historic element of the Circles development makes it a different situation.
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.
Contact the reporter at Kara.Carlson@asu.edu.
