Arizona cities give developers millions in tax breaks. Check how much your city gave

Taylor Seely, Arizona Republic
·3 min read

Cities in Arizona have the authority to offer certain tax breaks to incentivize developments that the community desires or will benefit from.

Sometimes it's property tax breaks, either in the form of a Government Property Lease Excise Tax, or GPLET, or through a Foreign Trade Zone.

In a GPLET, developers buy property, then deed it over to the city, so the city technically owns it. By doing this, the developer avoids paying property taxes and instead pays a lower-rate excise tax.

The incentive can last up to 25 years, and to further sweeten the deal, the excise tax can be abated for eight years after a certificate of occupancy is issued for the building.

Supporters of the GPLET say it's one of the few tools cities have to attract the type of development the community wants. Critics, however, point to the loss of tax revenue that affects the community, including the local school districts. Others say it creates an unfair playing field when the government gives incentives to some developers and not others.

Some cities also have Foreign Trade Zones, which are geographic areas that provide property tax breaks to companies that operate within the area's boundaries.

Similarly, cities can offer sales tax incentives through development agreements. Cities will often reimburse developers for building public infrastructure using a certain percentage of the sales tax generated on site.

Cities can only refund developers up to the cost of the public infrastructure, and in some cases reimbursements don't fund the entirety of the infrastructure. Nonetheless, these reimbursements are considered incentives because the developer's project cannot move forward without the infrastructure, and cities may not have plans to build such infrastructure until years later.

Every year, cities calculate how much tax revenue was lost to these abatements. Here's what The Arizona Republic knows, based on the cities' Annual Comprehensive Finance Reports.

Here's how much tax revenue Valley cities agreed to forego in 2022

  • Surprise - $8.65 million total:

    • $31,563 in Foreign Trade Zone property tax breaks.

    • $8,623,111 in sales tax rebates.

  • Tempe - $8.3 million total:

    • $3,191,254 in GPLET property tax breaks.

    • $5,115,780 in sales tax rebates.

  • Phoenix - $7.5 million total:

    • $5,455,000 in GPLET property tax breaks.

    • $2,169,000 in sales tax rebates.

  • Glendale - $4.36 million total:

    • $4,356,000 in sales tax rebates.

  • Buckeye - Undecipherable.

    • $3,742,165 in sales tax abatements.

    • $19,069,739 in public infrastructure reimbursements, denoted as "contract obligations" in the finance report, city spokesperson John O'Halloran said.

    • Unlike other Valley cities, Buckeye's report discloses the entire amount the city plans to reimburse developers for the life of the development agreement; so the $19 million figure is not for solely 2022. In some cases, agreements are 20 years. O'Halloran said annual figures could not be made available.

  • Goodyear - $3.5 million total:

    • $410,348 in GPLET property tax breaks.

    • $464,822.90 in Foreign Trade Zone property tax breaks.

    • $2,656,562 in sales tax rebates.

  • Chandler - $923,000 total.

    • $203,291 in GPLET property tax breaks.

    • $719,689 in sales tax rebates.

  • Scottsdale - $0 total.

    • The city has entered into an agreement to rebate a portion of the sales tax anticipated from a luxury car dealership developer, but the facility has not yet been built.

  • Peoria - $0 total.

    • The city has previously entered into tax abatement agreements, but the agreements have expired and no abatements were issued in the fiscal year 2022.

  • Gilbert - The town's finance report says it cannot disclose the information because too few developers participate in the incentive programs, so disclosure would reveal companies' private tax information.

  • Avondale - Not provided.

    • Avondale's finance report did not disclose tax abatements. A city spokesperson said there were none for the fiscal year 2022.

  • Mesa - Does not disclose because it's considered "immaterial," per a city spokesperson. The city determines materiality, but an outside auditor has to review the decision and agree, the spokesperson said.

Reporter Taylor Seely covers Phoenix for The Arizona Republic / azcentral.com. Reach her at tseely@arizonarepublic.com or by phone at 480-476-6116.

This article originally appeared on Arizona Republic: Arizona cities gave developers millions in tax breaks. Here's a list