By Rose Law Group Reporter staff
With all this talk about GPLET’s, we thought we would give you a quick GPLET 101. So what is a GPLET?
The Government Property Lease Excise Tax [GPLET] was approved by the state legislature to permit cities to entice various projects to their downtown areas by providing a way to make them more economical.
Arizona is one of two states with a strong “gift clause” in our Constitution, which prohibits government from “giving” anything to private businesses. Unlike other states that can entice private businesses to locate in their states by literally handing them a check, Arizona has few options in providing assistance to attract development.
The GPLET is a legal vehicle to permit property owners to deed over their land to a governmental entity for a period of no more than 25 years. As a government property, there would be no property tax paid for that period.
However, the developer would be required to pay that entity an excise tax each year (The calculation for that tax is outlined on the county treasurer’s Website).
Surrounding property owners conceptually should benefit because it permits a city to attract projects that would permit it and the area to thrive, attract new residents and businesses on property that would sit underutilized or even vacant.
The properties receiving a GPLET are supposed to be those that a city wants to jump start based on location or project type (This tool is often used to attract high-density, multi-family housing to increase population in a city core with the idea of building a downtown that becomes sustainable with workers and consumers, allowing more local retail business to prosper).
A project eligible for a GPLET would typically not otherwise be built at the desired scale or design or timing because of the expense of the land, cost of building massive projects downtown, and high rates of commercial property tax.
The fact the GPLET waives the property tax for a short period of time (but does collect an excise tax) does not in any way mean others pay more in taxes. It can be argued that into the future it would allow for lower tax rates as you are adding to the overall revenue base of the city coffers with more population supporting new business in the core.
Even if taxes do not lower for anyone else, they most certainly won’t be higher as a result of the GPLET. The city is providing the GPLET to land it’s not anticipating to develop soon, so they are by no means counting on the property paying taxes in the near term.
The legislature’s purpose of enacting a GPLET is for a city to promote growth and allow for population to come to a downtown sooner rather than later. It allows for a site that is important for downtown vitality, or has design or use features the city wants to promote, can be developed immediately rather than waiting for decades.
The only negative impact a GPLET might have on any community members, is if the recipient of the GPLET does not enter into an agreement to pay the school district the “would have been” received tax. In most recently approved GPLETS, the owner has entered into a legally binding agreement with the school district to continue to pay their share of money that would be owed directly to the schools–so there is no negative impact at all.
If all that was too much to understand quickly, just know that GPLET’s permit a temporary lower tax payment (Don’t pay property tax for a period of time, but pay an excise tax in its place.) so a project can be built sooner rather than later.
A GPLET recipient does not get a check from a government, and no one in the community pays more in taxes because of a GPLET being granted. The GPLET allows big projects to be built, which brings more workers and consumers to downtown areas.
