Goldwater Institute sues Phoenix over high-rise apartment subsidy

(The Center Square) – The Goldwater Institute filed a lawsuit against the city of Phoenix.

The institute is challenging a $7 million subsidy that the city gave to a high-rise apartment development.

The institute alleges that the city has devised a “tax shell game.” It says that Phoenix will allow developer Hubbard Street Group to pay no property taxes on its Hubbard Project for eight years. It argues that Arizona taxpayers, including Phoenix taxpayers, have had to shoulder the burden and that the tax break is unconstitutional.

“Arizona courts have been clear time and again: taxpayer dollars are to be put to public use, not to benefit private, special interests,” Goldwater Director of National Litigation Jon Riches said in a press release. “The city of Phoenix is ignoring the courts, it’s ignoring the state Constitution, and the Goldwater Institute is representing taxpayers to put a stop to it.”

The institute says that the city has technically taken over the Hubbard Project as “government property.” The Goldwater Institute alleges that Phoenix uses the Government Property Lease Excise Tax (GPLET) abatement provisions of Arizona law to lease the property back to Hubbard Street Group. It says that the group then “enjoys the full power to manage the property and profit from it just like any other private business.”

At the end of the eight-year lease, the city will return the property to Hubbard. This means that the group will see $7.9 million in property taxes “in exchange for paying the city a small amount of rent,” according to the Goldwater Institute.

The Goldwater Institute says that the Arizona Constitution does not allow cities to give subsidies to preferred businesses and doesn’t allow “the conveyance of property for the purpose of evading taxation.”

Phoenix approved this tax break four months after an Arizona judge struck down a nearly identical GPLET subsidy, according to the report.

A spokesperson for the Hubbard Street Group could not be reached for comment.

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