Exploring Implications of Government Property Lease Excise Tax (GPLET) Reform

Representative Travis Grantham has introduced House Bill 2309, aiming to modify a widely used tax incentive—Government Property Lease Excise Tax (GPLET). This proposal sparks a deeper examination of its potential consequences on local economic development.

The bill proposes a reduction in the duration for which a property can benefit from GPLET, a tax tool that cities employ to attract large development projects. GPLETs have faced scrutiny, prompting legal challenges such as the Goldwater Institute’s lawsuit against the City of Phoenix, alleging violations of the state constitution’s gift clause.

Delving into discussions at the House Ways and Means Committee, city representatives emphasize ongoing self-reform efforts to address past legal concerns. In contrast, Republican lawmakers express reservations about potential legal entanglements.

Kevin McCarthy, President of the Arizona Tax Research Association, supports the proposed adjustments, highlighting the need to mitigate legal risks. Recent legal opinions suggest that a shorter GPLET period could reduce the likelihood of legal challenges.

GPLETs have undergone reforms, with the latest change in 2017 shortening the benefit period. McCarthy asserts that fundamental questions persist about the policy, granting cities the authority to make discretionary economic development decisions.

City economic development leaders contend that GPLETs play a crucial role in fostering development and facilitating affordable housing. Christine Mackay, community and economic development director for the City of Phoenix, underscores the positive impact of new developments attributed to GPLETs. She emphasizes the city’s rigorous project analysis and recent reforms, particularly in promoting affordable housing.

However, Representative Grantham and other Republicans express skepticism, questioning the sustained allocation of public funds. Grantham suggests that if the proposed four-year limit proves insufficient for developers, there may be a need to consider eliminating GPLETs altogether.

Discussions also touch on concerns about GPLETs affecting school financing and the state’s general fund. Representative David Livingston inquires about mechanisms to compensate school districts for lost property taxes due to GPLETs.

Alternative solutions are proposed, such as the federal Low-Income Housing Tax Credit program, with Republicans emphasizing its competitiveness. Democrats counter, emphasizing the diverse utility of GPLETs beyond residential developments.

As lawmakers prepare to vote along party lines, the bill advances to the full House of Representatives for further consideration, shedding light on the ongoing debate surrounding GPLET reform and its broader implications.